The recent visit to the United States by the Vice President of China Xi Jinping attracted unusual world-wide attention for many reasons. It is widely assumed that on the conclusion of the 18th National Congress of the Chinese Communist Party [CPC] due to be held later this year, Xi Jinping would replace Hu Jintao and assume the top party position as also that of Chairman of the all important Military Commission. The visit was also full of symbolism in that it took place on the 40th anniversary of President Nixon’s path-breaking visit to China in February 1972. Not unsurprisingly, Xi was feted and dined by the top leadership both in the US Administration as well in Congress. And if President Obama wins re-election later this year, this visit could be a trial run of many more such encounters between the world’s two most influential leaders.
There is no doubt that Sino-US relations today stand at the cross roads. There are numerous points of convergence and at the same time important differences that might lead to strategic confrontation. The Sino-US bilateral engagement is indeed vast. Contact and discussions between top leaders takes place often and on a regular basis. Apart from a high level ‘strategic and economic’ dialogue there is also a joint commission on commerce and trade where meetings take place on an annual basis. Institutionally there are 54 bilateral mechanisms in position, under which consultations are held regularly between the two countries. Some of these bilateral arrangements are headed by cabinet level officials and meet on an annual basis. There is a US-China dialogue on South Asia also. No two countries have such a varied interaction and therefore the scope for misunderstandings should normally be minimal.
The US is one of China’s major markets with bilateral trade nearing US $400 billion. Although bilateral trade is heavily weighted in China’s favour, yet it should be remembered that nearly 40 per cent of China’s exports to the US are from US-based companies operating from China. The huge current account deficit that the US runs up each year enables China to invest its foreign exchange surplus in US government treasury bonds. China needs export growth in order to maintain job growth and preserve social stability. With some crucial industrial sectors in China such as steel, aluminium, etc. showing excess capacity, China needs the US market more than ever. Therefore it has little alternative to buying US treasury bonds with the reserves it has accumulated while managing the exchange rate. Nearly 70 per cent of China’s foreign reserves are in US dollars. With the Eurozone witnessing a further economic decline, other alternatives for China are even bleaker. On the other hand, the US will continue to need buyers of its debt issued to finance its huge budget deficits, especially if the US domestic savings rate continues to show a sluggish rate of growth. The Chinese believe that the US is confronted with a flagging economy, severe trade deficits and a national debt crisis. US politicians, on the other hand, find it convenient to lay the blame at the door of China with strident demands for ‘action’. Mitt Romney, the probable Republican candidate for President, labelled the Chinese as ‘cheaters’ and promised to designate them as ‘currency manipulators’ on his first day in office.
It is however on the question of strategic goals that the trust deficit between the two countries is widening. Xi Jinping tried his best to lower the temperature by suggesting to the Washington Post that the vast Pacific Ocean has ‘ample space’ for both China and the United States. The US was deeply upset with the position the Chinese took on Syria when they teamed up with Russia in the UN Security Council to veto the US-sponsored resolution asking President Assad to step down. Secretary of State Clinton described the Chinese action as ‘a travesty’. No doubt the US also gave a ‘wish-list’ to Xi to take back to Beijing which would have included the US demand for China to let its currency appreciate ‘faster,’ observe rules on trade and intellectual property rights and fall in line with the western position on Syria and Iran. No doubt Xi would also have received the traditional US lecture on the violation of Human Rights, particularly in Tibet. Given that this is an election year in the US, no political leader aspiring for office in the US could possibly have done otherwise.
It is in the Asia-Pacific region that the US-China mistrust is probably at its sharpest. The paranoia is mutual. Both also know that it is here that their rivalry is likely to be confrontational. While Xi did his best to allay fears and President Obama made the usual polite references to how much the US welcomed China’s ‘peaceful rise,’ yet the US is not going to give up its efforts to shore up alliances in the region, which China feels is a US attempt to ‘encircle it’. US policy is to watch very carefully how the new leadership emerging in China handles this issue and in the meanwhile it will not abandon its efforts just in case China’s rise is not so peaceful after all.
Xi Jinping therefore has his hands full and no doubt his visit would have given him a full insight into American thinking. The US too would have gauged the leadership qualities of the new Chinese leader. Xi, a ‘princeling,’ whose father Xi Zhongxun was purged during the Cultural Revolution and later rehabilitated, would therefore have to muster all the support that he can garner in the Chinese politbureau. Whether his rise to the top position in China is ‘peaceful’ or whether it is as a result of manoeuvring and political manipulation only time will tell, for secrecy shrouds the goings on in Zhongnanhai [the seat of Chinese leadership in Beijing]. Nevertheless Xi is in for some very interesting times.