Both President Barack Obama and Chinese president Hu Jintao lost an opportunity today by agreeing to disagree on the key issues instead of making the concessions needed to increase job creation in the US and reduce social inequality in China.
Many in Europe and around the world were relieved to see that a G-2 compact on how to manage the world remains far from view because Obama’s charismatic charm is having little effect on Hu. The tough as nails Hu sees the vital interests of his ruling Communist Party as being too different from Obama’s view of how China can act more responsibly in the bilateral relationship and the world.
Some China watchers in Beijing suggest that Hu thinks Obama is a weakened President and making concessions on his watch would shortchange the country. It is possible that he is under pressure from China’s very influential military to get tough with the US, just as Obama is under pressure from influential American voices that mistrust Beijing deeply. Both are succumbing to domestic hecklers.
Despite being beleaguered by the Republicans not least because of today’s symbolic repeal of his health-care legislation, Obama spoke frankly to Hu particularly on currency and human rights. But with typical Chinese avoidance of loss of face, Hu sidestepped both issues at a press conference. In Chinese culture, this kind of public obfuscation or tactical silence means, “Let’s agree to disagree” or a “No”.
An opportunity was lost because the rest of Obama’s first term could now be a period of stagnation in relations with Beijing. China will continue to offer sops like the $45 billion in export deals announced during Hu’s visit, which is small change by the standards of its hoarded wealth estimated at $2.5 trillion in currency reserves and $3 trillion in domestic savings.
Just like Obama’s daily tussle with partisans on both sides of the aisle, Hu is struggling to keep an upper hand over the conservatives and hawks within his own party and the powerful army. Few in those circles believe that any American administration would applaud or encourage the rise of Chinese economic and geopolitical power. They believe this opposition is visceral and unlinked to China being a one-party State. It would happen even if China were to transform suddenly into a Western-style democracy.
They think the US would welcome democracy in China not because the people would be free to express themselves and be creative but because it would lead to at least 10-15 years of robber-baron style chaos similar to that unleashed when the Soviet Union collapsed. That would set back China’s rise to power by several decades allowing the US to extend hegemony without competitors.
With Republicans and many Democrats snapping at his heels, Obama is harping on economic policy and creating jobs in the US or at least preventing them from shifting to China. He may think his reelection in 2012 depends on this rather than foreign policy issues, including the wars.
But such domestic focus may prove to be a mistake especially if debt in Chinese hands increases significantly. That is likely to happen because the US can never become a low cost economy like China. Undervalued Chinese currency will not be the main cause. It will be failure to harness China’s manufacturing economy to the needs of American consumers since imports from China enrich Americans by allowing them to spend less. So better managing the import relationship is a key element in boosting the US economy. Focus on exporting more to China cannot do the job because almost everything the US exports is high cost and high priced.
“We want to sell you all kinds of stuff,” Obama said. What he should have said is, “We want to build bridges between our two economic powerhouses to make people in both countries wealthy.” Even Europeans, who do not want G-2 cooperation between the US and China because their countries may lose influence, would applaud the idea of jointly creating wealth because they could ride on those powerful coattails.
The China-US relationship is very young and probably the most complex in today’s international community. It potential for creating jobs and reducing inequalities is mostly untapped. It deserves much more care than Obama talking tougher to posture for Congress and Hu posturing for his army and party.