Implications of the China-US Strategic and Economic Dialogue
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China and the U.S. open a two-day strategic and economic dialogue in Washington today. President Obama will address the opening session, and Secretary of State Hillary Clinton and Treasury Secretary Timothy Geithner will represent the American side in the talks. Clinton and Chinese State Councilor Dai Bingguo will chair the "strategic track," and Geithner and Chinese vice Premier Wang Qishan will chair the "economic track."
The dialogue will focus on addressing the challenges and opportunities faced by the world's two largest economies on a wide range of bilateral, regional and global issues, including the economy, security, diplomacy and the environment.
Strategically, the two countries are eager to expand areas of consensus, decrease differences and deepen mutual trust. They will discuss not only traditional security issues, such as the Taiwan issue, South China Sea activities, the Korean Peninsula nuclear crisis, South Asia, and the Iran nuclear issue, but also non-traditional security issues such as energy and climate change.
On the economic front, recovery and helping the world out of recession will be the main topic. The two countries will try to narrow their differences and take cooperative measures to tackle the global financial crisis. Both countries are sustaining economic recovery through monetary and fiscal stimulus programs. The U.S. will once again urge China to adopt a more flexible exchange rate policy that would lead to a stronger yuan. China is looking for stability in the international financial system, especially regarding the value of the dollar, and the balance between exports and imports.
China is especially interested in U.S. economic recovery efforts, and hopes the dialogue will improve macro economic coordination between China and the U.S., promote sustainable and balanced growth, deepen bilateral trade and investment ties, strengthen cooperation on financial regulation and reform of the global financial system, and, in general, create win-win economic ties between the two countries.
China holds hundreds of billions of dollars in US Treasury securities, and is Washington's biggest creditor. It wants the U.S. to adopt policies that will protect the value of China's investments. China will ask the U.S. to adopt responsible policies to ensure the basic stability of the dollar's exchange rate.
China is also very concerned about possible trends towards trade protectionism in the U.S. The role of consumption as a major driver of the US economy is diminishing. The US recovery has been much slower than the Chinese are accustomed to, and, as a result, China's economic growth can no longer depend on exports to the U.S.
China has been assigned a role in the international crisis and recovery that is, frankly speaking, beyond its real capabilities. The recovery of the Chinese economy is, of course, a symbolic boost for the world economy and it is widely hoped that China's economic policies will be helpful in tackling the financial crisis. China is undoubtedly playing a more and more important role in the global economy, but its recovery will depend largely on domestic consumption.
The U.S. should bear the greater responsibility for mitigating the global crisis. The structure of the US economy needs to adjust. The U.S. can no longer fund excessive consumption by running up a large deficit; it needs to balance its imports and exports. The U.S. is the largest economy in the world, has vast strategic resources, and controls all major international financial and economic institutions, all of which will help the US out of the crisis. The U.S. should accept responsibility for its international behavior.
The economies of the U.S. and China are heavily interdependent and the two countries need to return to a mutually beneficial trade pattern. Timothy Geithner once called for bilateral relations to be handled "with mutual respect for the values, traditions and interests" of both countries. Now that the US economy is recovering slowly and consumers are no longer spending freely, China is faced with a new US economy and a new global economy.
The dialogue will be a positive and constructive way to engage, a good platform to exchange views, create political trust and successful collaboration. It will build a strategic relationship in various fields besides security and economy. It also demonstrates that the U.S. has come to recognize China as a more equal strategic partner in international affairs, rather than just a rising power in the international community.
