With Chinese President Hu Jintao set to arrive in Washington next
week, U.S. and Chinese officials are busy laying the foundation for the
crucial economic policy discussions of the
In a speech on Wednesday, Treasury Secretary Timothy Geithner called on
the Chinese government to reduce barriers to U.S. imports, curb
intellectual property theft, and allow the value of its currency--the
renminbi--to rise more rapidly. That same day, Chinese Vice Foreign Minister Cui Tiankai raised concerns about the security of China's U.S. investments, while the state-controlled Bank of China announced
that it will allow customers to trade the renminbi in the U.S. for the
first time as part of an effort to make the renminbi an international
Commentators are equally busy dispensing advice on how the U.S. should approach its economic discussions with China during the summit. Depending on the argument, the Obama administration should:
- Recognize That Trade Is War, The Weekly Standard's Irwin M. Stelzer states
that America's policies of free
trade, petitioning the World Trade Organization to settle trade
disputes, and cautiously criticizing China's undervaluation of its
currency are "all very 20th century." China, meanwhile, "sees trade policy as merely one strategic weapon in
a war aimed at overtaking the United States as the world's preeminent
economic and military power." What's China's grand plan?
The Chinese know that at some point they will have to allow the renminbi to appreciate by more than the token amount of recent months ... But by then they will have accomplished two longstanding objectives. First, their vaults will be stuffed with an even larger hoard of American IOUs, enough to give them an important influence over U.S. foreign policy ...
Second, by the time they are forced to allow the renminbi to appreciate significantly, the Chinese will have copied enough American and Western technology to be less in need of an undervalued currency--they will have made-in-China products, subsidized if necessary, that can dominate world markets even if their currency more closely approximates its market value.
- Focus on Intellectual Property and Protectionism, Not Exchange Rate, claims
David Leonhardt at The New York Times. An undervalued Chinese currency
matters because it makes Chinese exports to the U.S. cheaper and
American exports to China more expensive, he explains, but inflation in
China is actually making Chinese goods more expensive than the exchange rate
suggests. The U.S. must recognize
that its biggest problem with China's economy is actually intellectual
property theft, Leonhardt says: "Technology companies, for example, continue to notice
Chinese government agencies downloading software updates for programs
they have never bought, at least not legally." The Obama administration
should argue that cracking down on intellectual property theft and dismantling trade barriers is in China's self-interest, he concludes.
- Focus on Chinese Political Reform, argues
Daniel Twining at The Washington Post. Reformers in China are beginning
to understand that economic modernization requires a
political opening that "fuels innovation, promotes broad-based social
welfare and strengthens the institutions that underpin the free
market," he says, adding that the Obama administration should promote universal values like human freedom and the rule of law in its China policy.
- Manage Public Expectations, suggests
Andrew Browne at The Wall Street Journal. "Americans are worried about
jobs, and China is widely perceived as stealing them, through
mercantilist trade policies, an undervalued currency and other
underhanded methods," he notes, but "a stronger yuan, and more liberal
Chinese investment rules, won’t magically restore U.S. jobs. And China
is a bright spot for U.S. exporters: A trade war would hurt both sides."
- Take What It Can Get, says David Rothkopf at Foreign Policy: "While the United States is making its points on currency and trade balances and while it will almost certainly raise human rights concerns, President Obama has thus far shown no appetite for a scrap with the Chinese or an ugly meeting. He needs China on North Korea, on Iran, and on global economic issues far too much and not only does he know it but the Chinese know he knows it and he knows they know that he knows it."