November 2010

As I indicated in an earlier blog, most US president enter office with one view of China and leave with an entirely different perspective. Despite being the only president in history to visit China in his first year in office, Obama, so far, seems to be charting a different course, which is to sustain relatively bad relations with Beijing all along.

Here is a list of the contentious issues from most offending (to China that is) to least offending:

Currency Devaluation – It is the old familiar argument. Geithner and co. accuse China of unfairly manipulating its currency, the renminbi, to artificially lower the price of, and therefore boost, exports. This issue comes up almost any time anyone closely related to the Beijing or Washington circles come into contact with each other. And it has become the corner stone of Obama’s China policy (as well as that of almost all politicians, democrat and republican). China is skeptical of both the economics (number crunching) and the politics (face-saving move for recession-riddled US?) of the US position. Chinese official state that in previous rounds of devaluing the renminbi, instead of shrinking as predictions would have it, the US-China trade imbalance grew! On top of that, the US announces it is going to print more money to ease the recession. Currency manipulation? Sure looks like it. And the Chinese are quick to point out the hypocrisy.  I am not an economist. I am just pointed out the Chinese perspective. And if one is looking at the nature of US-China relations, perspective is pretty important.

Protectionism – In September the US Steelworkers Union filed a complaint to trade authorities about Chinese subsidies for renewable energy technology. Obama announced on October 15 that he would launch a federal investigation into the complaints. (I wrote about it here). From the Chinese perspective, this is a damned-if-you-do –and-damned-if-you-don’t approach. If China doesn’t invest in a cleaner economy than US lawmakers threaten to slap a high-carbon tariff on Chinese goods coming into the US. But if China takes the environmental issue seriously and invests in renewable energy, US lawmakers still punish China for “unfair” trade practices.

Climate Change – Lots of finger pointing going on here. The US portrays China as an irresponsible, industrializing, unregulated beast, hurdling recklessly toward modernization while belching pollution and climate change causing gases into an atmosphere that doesn’t acknowledge national boundaries. We won’t sign any international agreement that doesn’t also legally bind China to GHG reductions, says both Obama and his predecessor, George W. China has cooked up its own brand of “Chinese exceptionalism” stating that it should be exempt from regulations that might impede growth until they reach developed status.  China evokes the idea that there are “luxury emissions” (from SUVs, excessive business travel, oversized houses and malls etc) and “sustenance emissions” (emissions required to move from developing to developed status) – theirs being predominantly in the latter category and ours in the former. And finally China blames US overconsumption as the culprit for environmental woes, something which Obama has refused to accept.  In the end, it is a game of Chicken – each country wants the other to take the first step toward cutting emissions and pollution. However I should add there has been some nasty remarks exchanged in this game of Chicken. As I mentioned in a previous post, top Chinese climate negotiator Xie Zhenhua called his American counterpart, Todd Stern “ignorant” at the UN climate change conference in Copenhagen last year and earlier this year at the Tianjin intercessional UN climate summit, Todd Stern and co were referred to as hypocrites, specifically “pigs preening themselves in the mirror.”

Dalai Lama/ Liu Xiaobo – It might please Human Rights Watch and the Nancy Pelosis of the world, but Obama’s support for the Dalia Lama and democracy advocate and Nobel Peace Prize winner Liu Xiaobo has not helped grease the wheels of US-China relations. The Dalia Lama is viewed as Osama bin Laden lite in China and it does must to upset trust and good feeling between the US and China when Obama has official visits with the Dalia Lama as he did in February 2010. Another elbow jab came in the form of Obama extension of congratulations and recommendation that the state free from jail Liu Xiaobo, a little-known democracy advocate who won the Nobel Peace Prize last month. Among other undertakings, Liu is responsible for drafting Charter 08, a document calling for the democratization (read: overthrow) of the Chinese Communist Party. This made the Chinese government very angry. They even questioned the political neutrality and integrity of the Nobel committee.

UN Security Council Seat to India – In his recent trip to Asia, Obama made a big announcement that he would support India’s permanent membership on the UN Security Council angering both Pakistan and China, which both view US support for India in zero-sum terms. The move indicates a broader strategy in the Obama administration to prop up India as a counter balance or trade alternative to China, which Obama officials have expressed concern over becoming to dependent on.

Skipping Over China in Recent Asia Trip — Maybe not a big deal but it looks as if Obama did in fact pass through Chinese airspace on his way to Japan from India. True, Beijing was busy hosting UK Prime Minister David Cameron, but it could still be interpreted as a slight on China’s end.

Google — When Google pulled its operations out of China citing a lack of security regarding issues of privacy and intellectual property, Obama supported Google’s decision. At the time it seemed like a gratuitous poke at China but the impact of the initial blow it may have worn off by now. Baidu and other Chinese search engines have filled the Google vacuum, which wasn’t even that big in China to begin with.

Next week in Cancun, Mexico, US officials will again meet with their Chinese counterparts to discuss climate change at the UN climate conference. Without domestic legislation mandating national greenhouse gas reductions, Obama won’t be able to sign any legally binding agreement. It appears that this opportunity to improve relations may again be lost. But Obama still has 2 more years. Maybe his outlook on China will change – and like his predecessors he will enter office with one view of China and leave with that view entirely turned upside down.

In a particularly divided and hostile mid-term election, China-bashing is one of the only political issues that has enjoyed genuine bi-partisan support.

According to the New York Times:

“China is emerging as a bogeyman… with candidates across the American political spectrum seizing on anxieties about the country’s growing economic might to pummel each other on trade, outsourcing and the deficit.”

And the Washington Post:

“With many Americans seized by anxiety about the country’s economic decline, candidates from both political parties have suddenly found a new villain to run against: China.”

The same Times article quotes an astonishing statistic: “at least 29 candidates have unveiled advertisements suggesting that their opponents have been too sympathetic to China and, as a result, Americans have suffered.”

In the current political landscape where there are very few bipartisan life-rafts, politicians may increasingly cling to the one issue where everyone seems to get along. China-bashing could have a snow-ball effect – becoming bigger and stronger as it passes through the campaign and election cycles. A China Threat, already exaggerated and inflated by a gossipy and sensationalist media that rewards extremism would once more be compounded by the effects of a population that doesn’t seem to know a lot about China.

Just look at the inaccuracy of common China-related predictions from the last 30 years. In the 1980s after Deng Xiaoping came to power and initiated economic liberalization, foreign investment and the great to-get-rich-is-glorious reforms, many believed political reform was inevitable and so too would be the fall of the Communist Party in China. But that didn’t happen.

In 1990, after the global collapse of communism and the crackdown in Tiananmen Square, Communist China was the most politically isolated it had ever been in its short history. Many predicted it was only months before the Communist regime would crumble, which would cause China to break apart at its ethnically-drawn fault lines resulting in an independent Tibet, Taiwan, Xinjiang, Hong Kong, Macau and perhaps other regions that are now considered semi-autonomous.  Again, this never happened.

In the early 90s China’s economic growth rate skyrocketed but few people predicted it would last longer than a couple years. Yet, the growth spurt turned out to be a sustainable trend, and has plateaued at 7%-10% for the last 20 years.

During the financial crisis in 2008, China-watchers predicted again that China’s growth rate would slow. Again, predictions were wrong.

In other words, China predictions from this side of the Pacific have been more wrong than right.

Another key point is that China bashing in American history has a consistently short-term quality about it, suggesting that it is used more for political gains than for long-term strategic or real economic gain. Presidential policy on China is like the month of March – it comes in like a lion and out like a lamb.

For example, when Bill Clinton was elected in 1992, he promised he would remain steadfast in his punitive policies toward the “butchers of Beijing.” Eight years later, he had established himself as one of the most China-friendly presidents in recent history making frequent visits to Beijing, establishing Most-Favored Nation trade status, supporting China’s acquisition to the WTO. When questioned by disapproving human rights advocates about the reason for warm relation with Beijing, he replied there were “one billion reasons” citing the economic pull of China’s vast labor market.

George W. Bush followed a similar pattern. He came to office pledging he would do “whatever it took” to defend Beijing’s rival government in Taiwan. He talked tough during the stand-off with China when a US naval spy plane collided with a Chinese fighter jet over Hainnan island in southern China in April 2001. However, by the end of his administration he had established a warm personal relationship with Chinese president Hu Jintao, negotiated many economic and strategic deals with Beijing and strongly supported the Beijing Olympic games.

So what is the point of the China bashing routine in American politics? Well, there is no point other than the game of posturing. Politicians on both sides of the aisle want to appear as if they will be tough on China. But none succeed. The lure of China’s labor market and its benefit for American businesses that invest there is just too strong.

Instead of lamenting the loss of jobs to China, (do we really want those low-end manufacturing jobs and all the pollution from the dirty factories back? We would have a much more severe environmental problem if we did…), candidates in this mid-term election should be talking about the role that American can still play – that is the role of innovation. We will never beat China in manufacturing. Being tough on China isn’t going to change that basic fact. But we can focus on rebuilding American infrastructure, creating high-tech jobs and innovating new technologies for the new green economy.  These are all issues that should feature prominently on the agenda of any politician. China-bashing  is scapegoating – a way of shifting the blame from America’s inability to create jobs at home.

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