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Sino-U.S. Economic & Trade Relations
Special> Sino-U.S. Economic & Trade Relations
UPDATED: January 14, 2008 NO.3 JAN.17, 2008
Complex Engagement
Interdependent yet sometimes at loggerheads, China and the United States seek to reshape their relationship

Stable development in general characterized China-U.S. relations in 2007. Their bilateral and global interaction kept deepening and expanding and was upgraded. Their cooperation on antiterrorism, the North Korean nuclear issue, the Darfur conflict in Sudan, climate change, bilateral economic and trade issues and the Taiwan question climaxed.

As changes take place in international and domestic situations, China and the United States will face more uncertain factors in their relations in the days to come. But the uncertainties will not shake the foundation of the two countries' relationship.

Global stakeholders

The constructive cooperation between China and the United States as "stakeholders" continued to make headway in 2007. The term "responsible stakeholder" was put forward by then-U.S. Deputy Secretary of State Robert Zoellick in a speech at the National Committee on U.S.-China Relations in September 2005. Two months later, Chinese President Hu Jintao pointed out to his visiting U.S. counterpart George W. Bush that China-U.S. relations had gone well beyond the borders of the two countries to become increasingly "globally significant."

These brand-new concepts demonstrate the common consensus of the two countries' leaders on China-U.S. strategic relations and their outlook on the future of these relations, laying the groundwork for the two countries' cooperation in regional, multilateral and global affairs.

"As stakeholders in the international system, our two nations share many strategic interests," said Bush when he met Hu at the White House on April 22, 2006. Hu responded to Bush's remarks at the luncheon on the same day by saying that China and the United States should become not only stakeholders but also constructive partners. The two countries are each other's stakeholders and constructive cooperators, Hu told Bush on September 6, 2007, on the sidelines of the economic leaders' meeting of the Asia-Pacific Economic Cooperation forum in Sydney, Australia.

The implications of China and the United States' being "stakeholders" are evident on the North Korean nuclear issue. The two countries maintained close coordination on handling North Korea's missile and nuclear tests in 2006. They made substantial progress in resolving the North Korean nuclear issue with the signing of the joint statement on February 13, 2007.

China's role in the Darfur issue was at one time misunderstood by the general public in the United States. Some human rights groups even called for boycotting the Beijing Olympics on the pretext of this issue. In fact, adhering to the principle of "non-interference in other countries' internal affairs" and adopting a diplomatic approach of patient persuasion, China paved the way for international efforts to resolve the Darfur crisis. The Sudanese Government accepted the deployment of an African Union-led international peacekeeping force, to which China also contributed troops. China's unique approach to the Darfur issue finally won wide recognition from the international community. Likewise, the United States has increasingly come to realize the importance of cooperating with China on the hotly contested issues of Myanmar, Pakistan and Iran.

Mutual interdependence

With the elections of Taiwan's "legislature" and its regional leader approaching, China-U.S. relations are confronting provocations from "Taiwan independence" forces. When Bush met with Hu on September 6, 2007, in Sydney, he reaffirmed the U.S. Government's position on the Taiwan question. He said the United States firmly adheres to the one-China policy, observes the three China-U.S. joint communiqués and opposes any unilateral act to change the status quo across the Taiwan Straits. On Taiwan's proposal of "referendum on UN membership," Bush said U.S. Deputy Secretary of State John Negroponte has promptly and clearly stated the U.S. Government's opposition to the move by the Taiwan authorities.

U.S. officials, including Stephen M. Young, Director of the Taipei Office of the American Institute in Taiwan, Raymond F. Burghardt, Chairman of the Board of the American Institute in Taiwan to Deputy Assistant Secretary of State for East Asian Affairs Thomas Christensen, Deputy Secretary of State John Negroponte and Secretary of State Condoleezza Rice, have issued eight public warnings on the situation in Taiwan since the beginning of 2007, each of which was harsher than the previous one. The communication between China and the United States on addressing the challenges from "Taiwan independence" forces had reached an unprecedented level.

The politicization of economic and trade issues posed another major challenge to China-U.S. bilateral relations. The two countries have both benefited greatly from economic globalization. The United States is China's biggest trading partner and largest overseas export market. The two countries' trade volume amounted to $262.7 billion in 2006, according to Chinese statistics. U.S. statistics show that China is America's second largest trading partner and third largest export market.

At the same time, globalization has resulted in heightened competition, the outsourcing of industries and structural unemployment. In 2007, trade became the most troublesome aspect of China-U.S. relations. The U.S. Congress discussed up to 30 China-related bills on issues such as trade imbalance, the exchange rate of the Chinese currency and intellectual property protection.

The trade imbalance between China and the United States is not a numerical issue but an employment issue. Political pressure from global competition and unemployment has a great bearing on U.S. parliamentary politics. Chinese and U.S. officials held the second and third rounds of the Strategic Economic Dialogue in Washington and Beijing, respectively, in May and December 2007. Chinese Vice Premier Wu Yi, who chaired the Chinese delegation, said that China-U.S. economic and trade relations should be viewed in light of the two countries' long-term strategic cooperation and that the politicization of economic and trade issues should be opposed. Mounting trade protectionism is not in the interests of the United States in the long run. In mid-2007, hundreds of U.S. entrepreneurs and economists issued an open letter to voice opposition to the excessively rapid appreciation of the yuan, a move that exemplified the economic interdependence of the two countries. (See the related article "Issues at Stake" on page 12 for more insights on China-U.S. economic and trade relations.)

Uncertain factors

While maintaining the momentum of stable development that emerged following the September 11 terrorist attacks in 2001, China-U.S. relations were beset by a number of uncertainties in 2007. Apart from the Taiwan question and economic and trade issues, potential conflicts between the two countries on security and strategic fronts aroused severe concerns. China's anti-satellite missile test early in the year and its denial of a U.S. aircraft carrier's access to Hong Kong toward the end of 2007 sparked strong reactions in the United States. Anti-China forces took these opportunities to tout a new "China threat" theory.

The lack of exchanges between the two countries' military forces also adversely affected the improvement of their strategic mutual trust. With the Beijing Olympics just around the corner, forces advocating human rights, environmental protection, "Tibet independence" and "Xinjiang independence" became more assertive in the United States in an attempt to create problems on the occasion of the Olympics.

The external and internal political environments for China-U.S. relations are changing. First of all, the United States is about to adjust its strategic focus, which has centered on antiterrorism since the September 11 terrorist attacks. It became mired in Iraq as it focused on combating terrorism and promoting democracy in the greater Middle East. In this context, the United States had a strategic need to strengthen its cooperation with China and other major powers to stabilize its relations with these countries. Today, as radical neoconservatives lose their foothold and as the Iraq situation takes a turn for the better, the United States is poised to modify its global antiterrorism strategy. As a result, the international strategic background for China-U.S. relations will change.

Changes are also taking place in the U.S. domestic political situation. Over the past few years, the Bush administration dominated the country's foreign policy. The Republicans' dominance created a stable domestic political environment for China-U.S. relations. However, the Democrats' victory in the mid-term elections in 2006 turned Bush into a lame duck. Democrats also have gained the upper hand in the run-up to the 2008 presidential election. Against the backdrop of election politics, China-U.S. relations are likely to be affected by partisan differences, ideology and the claims of interest groups.

Breaking the cycle?

China-U.S. relations have long been under the influence of the so-called "big cycle" and "small cycle." The former refers to the impact of the U.S. presidential election every four years. A new president often changes from being unfriendly to China to being friendly to the country. The latter refers to anti-China declarations by Congress and different interest groups from March to June every year. But with the stable development of China-U.S. relations since the September 11 terrorist attacks, the cycles have been broken.

Does this mean that China-U.S. relations have moved into a new stage or is this period only an exception to the rule? Let us leave these questions open until 2008-09 when the United States undergoes a new round of political power transition to be fueled by its presidential election.

Given the stable development of the China-U.S. relations in the past six years, we have reason to be confident about the future. China and the United States have become structurally interdependent through their economic and trade relations since the 1990s. Political forces for maintaining stable relations exist in both countries. Various intergovernmental dialogues, exchanges and communication mechanisms developed in recent years are also conducive to promoting consensus, resolving conflicts and mitigating fluctuations.

Furthermore, China's mounting power and international influence is a widely recognized reality in the international community. In the past, China-U.S. relations were asymmetric with China being a dependent variable passively changing according to the U.S. independent variable. Today, the China factor has increasingly become an independent variable in international politics.

China's active choices also will shape the future of China-U.S. relations. Whether the two countries will be able to do away with the cyclical factors in their relations will hinge not only on America's political and diplomatic trends but also on the prospects for China's reform and development.

The author is an associate professor at the Center of International Strategic Studies, Peking University

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