THE TROUBLED REALITY OF THE WORLD’S BIGGEST RELATIONSHIP

As the Seoul G20 summit retreats into history, one awkward truth is becoming clear. The broad meeting really centred on the relationship between only two countries: China and the United States

Coming into the summit and an Asian trip surrounding it, President Obama was clear: he was there to talk about “global imbalances in trade” that, he insisted, start with the undervaluation of the Chinese currency. “It is undervalued and China spends enormous amounts of money intervening in the market to keep it undervalued,” he told a news conference. Accordingly, he pushed for an agreement on binding trade targets to reorient imbalanced trade and overall current accounts between surplus and deficit nations.

Obama’s diplomacy only highlighted China’s new diplomatic strength. Concerned by the implication of adopting Obama’s proposal for China’s economic development and social stability, other export-oriented economies such as Germany allied themselves with the Chinese Government – not Washington – to ensure that the summit didn’t produce any specific , binding trade targets.

And many countries joined China in denouncing the recent US Federal Reserve’s decision to stimulate the economy by adding US$600 billion into the market. That move, the chorus of nations argued, was selfish and served neither US nor global interests.
But if these China-US interactions limited the Seoul summit’s success, they also kept the summit from collapsing. During their bilateral meeting, Hu Jintao and Obama reassured one another of their willingness to address world problems together. Hu told Obama that China had already made difficult decision to allow RMB to appreciate and would continue to do so. He explained that China needed to make the process gradual because it required a good environment. He also urged President Obama to lift restrictions on high-tech exports as a way to correct the trade imbalance between the two countries. Obama, for his part, said he hopes the two countries both conduct structural reforms of their domestic economies and collaborate to unleash an earlier recovery that would benefit both countries.
With Hu Jintao’s official visit to the United States set for early next year – likely January – China and the US will try to improve relations beset by problems ranging, in the past year alone, from Google’s withdrawal from China to US arms sales to Taiwan. Collaboration between the world’s biggest developed country and the world’s largest developing country can only be good news.

But getting the relationship between China and the US right is easier said than done. Leaders of both countries are under domestic political pressures to get tough with one another. Beijing and Washington may be talking about cooperation, but a real partnership in world affairs remains unlikely.

And so if the G2 is a reality, it may be a troubled one.

By Jia Qingguo
Professor and Associate Director
School of International Studies, Peking University

 

RELATED MATERIAL FOR THE WEEK OF NOVEMBER 22

BACKGROUND

The Sino-American relationship is described as the most important bilateral relationship in the 21st century. Together, China and the United States hold 13% of the world’s land surface, a quarter of the world’s population, a third of its GDP, and half of its recent economic growth. In 2007, Niall Ferguson and Moritz Schularick coined the term “Chimerica” to describe the relationship between China and the US in the world economy over the past decade. More recently, commentators have pointed to the potential for a “G2,” or a more formalized relationship between China and the United States. Some experts see the G20 as a “thin cover” for the ongoing negotiations between Chin and the United States.

The two states also share a multi-faceted historical relationship with many ups and downs.  Following the Chinese Civil War and Mao’s establishment of the People’s Republic of China (PRC), relations soured. The United States refused to formally recognize the PRC and its maintained diplomatic relations with the Guomindang – the Nationalist Party – the rival to the Chinese Communist Party that had fled to Taiwan following its defeat in the civil war in 1949.

Through the 1950s, Sino-American relations remained mired in conflict with US and PRC forces fighting on opposing sides in the Korean War.  The PRC periodically shelled Quemoy and Matsu –two islands held by the Nationalists just offshore the Chinese mainland.  And the PRC supported the North Vietnamese through much of the war in Vietnam. Relations between the two failed to improve until 1969, when President Nixon initiated a rapprochement between the US and the PRC.  For the US this approach was a highly strategic effort to counterbalance the Soviet threat that both countries perceived. On January 1 1979, in the Joint Communiqué on the Establishment of Diplomatic Relations, the United States transferred diplomatic recognition from Taipei to Beijing while maintaining economic and cultural contacts with the Nationalists and setting out their bilateral relations with the Taiwan Relations Act.

Relations once more deteriorated after the Tiananmen Square protests and killings in 1989, after which the US imposed economic sanctions and suspended investment programs in disapproval of the PRC’s violation of human rights. Following the September 11 2001 attacks, Sino-American relations improved yet again as China lent its support to the worldwide counter-terrorism struggle.

Now, the Obama Administration is trying once again to improve co-operation, though both countries’ economic policies are muddying that goal.  There is an effort made on part of the US to “strengthen ties all on levels” with Beijing. During a meeting between the two presidents at the 2009 London G20 summit, there was an agreement to launch an annual strategic dialogue – the Security and Economic Dialogue (S&ED) ( link to the State Department website on S&ED here) on such issues as the economy, the environment and political and strategic relations with such countries as Iran, Sudan, and Zimbabwe.

RELATED MATERIAL AND SITES

  • C. Fred Bergsten, Director of the Peterson Institute, is credited for having coined the term “G2” in reference to the Asia-US relationship, particularly within the G20. His 2004 paper entitled “The G-2: A New Conceptual Basis and Operating Modality for Transatlantic Economic Relations” provides an analytical basis for the concept of the G20.
  • The January 2010 issue of Global Policy Journal, published by Wiley-Blackwell and the London School of Economics, featured an analysis of the relationship between the G2 and the larger G20.  The publication is entitled “G2 and G20: China, the United States and the World after the Global Financial Crisis.” The linked webpage includes an abstract as well as a link to the article.
  • In late November 2009, a number of Chinese dailies, including Xinhua, reported that Chinese Premier Wen Jiabao objected to the notion of the G2 grouping on the grounds that “global issues should [be] decided by all nations in the world, rather than one or two countries.”
  • In an 11 May 2010 speechat the Brookings Institution, entitled “US-China Cooperation on Global Issues,” US Deputy Secretary of State James B. Steinberg declared that the US-China relationship “is not a G2,” noting, like Premier Wen, the importance of inter-systemic cooperation on global issues.
  • One issue in which US-China cooperation is crucial is climate change, as notedby Barry Carin on CIGIonline.orgbefore the June 2010 G20 Summit. The two states are the world’s top CO2 emitters, and Carin argues that an agreement between them could bring other major emitters to the negotiating table. However, Pan Jiahun argues in a piece for East Asia Forum that “countries outside of the so-called G2 count,” because if they adopt emissions-cutting policies, their example will be followed by developing states, including China.