Economic Crisis, Looming Environmental Threats, and Growing Nuclear Weapons Worries -- All in a Day's Work at the Strategic and Economic Dialogue 中美战略与经济对话

[Click here for the SED second day update.]

The first round of the Strategic and Economic Dialogue meetings opened in Washington today. As expected the focus was on economic issues, climate change, and security matters. After public speeches, U.S. Secretary of State Hillary Clinton, Treasury Secretary Timothy Geithner, Chinese Vice Premier Wang Qishan, and State Councillor Dai Bingguo took scores of officials into closed door meetings. These continue Tuesday, July 28. A joint "fact sheet" will be released at the conclusion of the meeting. It will lay out the topical agenda the two sides have agreed to follow for the next several years.

This is a high profile effort, which expands on an initiative begun by President George W. Bush and Treasury Secretary Henry Paulson in 2006. That series of meetings, labelled the Strategic Economic Dialogue was housed on the U.S. side in the Treasury Department, something that proved a bit awkward as the discussions increasingly took on environmental and other issues in addition to trade and other economic concerns. The new Strategic and Economic Dialogue has a broader mandate and on the U.S. side is jointly headed by Secretaries Clinton and Geithner.

U.S. President Barack Obama opened the session. The Chinese sent more than one hundred officials along with Dai and Wang. And Wang also read a statement by Chinese President Hu Jintao. All argued that cooperation was crucial to addressing these problems of global significance and all expressed optimism that the two sides would indeed find common ground to address these pressing issues.

Below are excerpts from the public presentations with links to the complete text, with information about the key issues on the table in Washington.

One of the most striking features of the day was how both President Obama and Secretary Clinton sought to signal their openness to working with China by drawing on well known Chinese as well as enduring proverbs.

“[A]s a new President and also as a basketball fan, I have learned from the words of Yao Ming, who said, "No matter whether you are new or an old team member, you need time to adjust to one another."
     -- U.S. President Barack Obama, explaining the importance of meeting to get comfortable with each other

[H]aving these strategic-level discussions with our Chinese counterparts will help build the trust and relationships to tackle the most vexing global challenges of today--and of the coming generation. The Chinese have a wise aphorism: "When you are in a common boat, you need to cross the river peacefully together." Today, we will join our Chinese counterparts in grabbing an oar and starting to row.
-- U.S. Secretary of State Hillary Clinton writing in the Wall Street Journal, on the need to work together

And neither stopped there. Both Obama and Clinton included other such statements in their speeches.

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From the Opening Remarks

President Obama

“The relationship between the United States and China will shape the 21st century…

“…I believe that we are poised to make steady progress on some of the most important issues of our times.

“My confidence is rooted in the fact that the United States and China share mutual interests. If we advance those interests through cooperation, our people will benefit and the world will be better off -- because our ability to partner with each other is a prerequisite for progress on many of the most pressing global challenges….

“… [W]e also strongly believe that the religion and culture of all peoples must be respected and protected, and that all people should be free to speak their minds. And that includes ethnic and religious minorities in China, as surely as it includes minorities within the United States.

“Support for human rights and human dignity is ingrained in America. Our nation is made up of immigrants from every part of the world. We have protected our unity and struggled to perfect our union by extending basic rights to all our people. And those rights include the freedom to speak your mind, to worship your God, and to choose your leaders. These are not things that we seek to impose -- this is who we are. It guides our openness to one another and to the world….

And the President drew on a Chinese thinker, Mencius, to note, “‘A trail through the mountains, if used, becomes a path in a short time, but, if unused, becomes blocked by grass in an equally short time.’ Our task is to forge a path to the future that we seek for our children -- to prevent mistrust or the inevitable differences of the moment from allowing that trail to be blocked by grass; to always be mindful of the journey that we are undertaking together….”

Click here for the full text of Pres. Obama's speech.

Secretary Clinton

“Although past relations between the United States and China have been influenced by the idea of a balance of power among great nations, the fresh thinking of the 21st century can move us from a multi-polar world to a multi-partner world. And it is our hope that the dialogue we initiate today will enable us to shape that common agenda.”

She concluded with another Chinese saying:
A well-known Chinese saying speaks of a sacred mountain in northern China near Confucius’s home. It says: ‘When people are of one mind and heart, they can move Mt. Tai.’ We cannot expect to be united at every turn, but we can be of one mind and heart on the need to find common ground as we confront the shared challenges of the 21st century.”

Click here for the full text of Secretary Clinton's speech.

Vice Premier Wang Qishan

The Vice Premier read a letter from Chinese President Hu Jintao.
"[The Dialogue] is also of great importance for peace, stability, development and prosperity of the whole world."

The Vice Premier went on to say ”During the economic dialogue, under the theme of building confidence to restore economic growth, strengthening China-U.S. economic cooperation, China and the United States will have intensive dialogue on making further efforts to tackle the international economic crisis, building a strong financial system, deepening trade and investment cooperation, and promoting sustainable economic development.

"A more open and more dynamic Chinese economy will bring opportunities to all countries in the world, including the United States.”

Secretary Geithner

“Our joint response to the global financial crisis marks a turning point in our cooperation with China on global challenges. This crisis will be remembered not only for its severity and global reach, but also for the speed and the strength of the international response. The actions taken by the United States and China made a substantial contribution to our collective success in blunting the force of the crisis and restoring confidence. And both countries have made clear our commitment to maintain strong policy responses until recovery is firmly in place. At this moment of crisis, we acted together….

“China's success in shifting the structure of the economy towards domestic-led growth, including a greater role for spending by China's citizens, will be a huge contribution to more rapid, balanced, and sustained global growth….”

Click here for the full text of Secretary Geithner's speech.

While attention has been focused on the co-chairs of the meetings (Secretaries Clinton and Geithner and Vice Premier Wang Qishan 王岐山and State Councillor Dai Bingguo 戴秉国), many others are making presentations and participating at the meetings. The Chinese group consists of more than 100 officials.

Many of the issues being discussed at the Strategic and Economic Dialogue meetings have previously been examined in our weekly newsletter Talking Points. Below are excerpts from recent issues.

Trade and Investment

The charts below hint at how intertwined our economies have become. Click on them to see larger versions at our website. On the left, one sees the dramatic rise in U.S.-China merchandise trade from $5 million a year on the eve of President Nixon’s trip to China to $409 billion last year. Trade accelerated rapidly from China’s ascension to the World Trade Organization in November 2001 but has declined dramatically since fall 2008.

The chart at left also shows that China has long sold much more goods to the U.S. than it has bought. China’s 2008 trade surplus with the U.S. was $266 billion. The chart on the right shows where a significant share of that surplus has gone. China’s foreign reserves now total approximately $2 trillion. More than 82% of this is invested in dollar-denominated assets, with the largest share invested in U.S. Treasury Securities. The chart at the right shows how China’s Treasury holdings have risen since 2000. The Chinese government is the largest foreign owner of American debt. In March 2009, the government owned $768 billion of Treasury securities.

Click on the charts to see larger versions at the USC U.S.-China Institute website.

Climate Change

The U.S. consumes roughly twice as much energy as Chinese, but the U.S. Energy Information Agency projects the gap to narrow to about 10% by 2020. Per capita energy consumption in the U.S. is roughly seven times per capita consumption in China.

Click on the chart above to view a larger version at the USC U.S.-China Institute website.

China is a heavy consumer of coal while the U.S. uses far more oil. The United States and China are the world’s third and fourth largest producers of crude oil, but U.S. demand has long outstripped domestic resources and China’s rapid economic development and embrace of cars has caused oil consumption there to nearly double since 1998. China’s oil consumption, though, is only 42% of America’s. And on a per capita basis, American oil consumption dwarfs Chinese consumption. In 2008, per capita American consumption was more than 23 barrels of oil, whereas per capita Chinese consumption was just over 2 barrels. American reliance on automobiles for transportation accounts for the greatest share of the consumption disparity, though about 30% of American oil consumption is for power generation and heating. The charts below offer comparisons of US-China total and per capita consumption since 1980.

U.S.-China Oil Consumption, 1980-2008	Per Capita Oil Consumption in the U.S. and China

Click on the image to see a larger version at the USC U.S.-China Institute website.

The U.S. and Chinese governments both hope that increased use of renewable energy sources such as hydro, wind, and solar power will help with security and climate change mitigation efforts. The chart below shows the renewable share of Chinese energy consumption edging past that of the U.S., but both countries’ use levels out below world averages over the next decade.

Click on the chart to view a larger version at the USC U.S.-China Institute website.

On July 15, Sec. Locke praised China for planning to invest 40% of its $586 billion economic stimulus in “green projects.” Many analysts dispute this figure, but in any event, Sec. Locke is hopeful that American firms will be able to attract some of that business and other “green business” going forward. At the same time, the Secretary complained

“the United States and China’s trade relationship has to evolve. There are concerns and deep structural issues to be addressed.

“Chief among them is a bilateral trade imbalance that simply can't be sustained. Growth predicated on ever increasing Chinese exports being consumed by debt-laden Americans provided years of prosperity—but it also sowed some of the seeds for our current economic problems.”

At present, it seems unlikely that much of China’s renewable energy stimulus spending will go to American or other foreign firms. In May foreign firms were disqualified from bidding on 25 wind turbine contracts. And the trade deficit seems unlikely to be helped by wider U.S. adoption of solar energy. China is the top producer of solar panels, nearly all of which are exported.

Treatment of Minority Groups

Violence erupted in Xinjiang in northwest China on July 5. At least 197 people were killed with thousands more injured and detained. In the days leading up to the Strategic and Economic Dialogue, Chinese Vice Foreign Minister He Yafei 何亚非 argued,

"The nature of the [Urumqi] riot is neither an ethnic problem nor a religious issue, but a grave and violent criminal incident plotted and organized by the outside forces of terrorism, separatism and extremism."

The Chinese government accuses Rebiya Kadeer, a Uighur businesswoman who was previously jailed in China and who now lives in the U.S., and the U.S.-based Uyghur World Congress with having fomented and coordinating violence in Xinjiang earlier this month. The July 8 issue of Talking Points noted the Chinese position. Kadeer and the Congress have denied being involved. Still, the Chinese government was able to persuade the government of India to deny Kadeer a visa to visit. And it pressued the organizers of a Melbourne, Australia film festival to cancel Kadeer’s participation. The festival had already agreed to screen a documentary featuring Kadeer. As a result of the festival organizers decision to reject the Chinese demands, three Chinese filmmakers withdrew their films from the festival. Chinese authorities have criticized Japan for permitting Kadeer to visit.

The USC U.S.-China Institute will update this report on the Strategic and Economic Dialogue as needed. Click here to subscribe to our weekly e-newsletter Talking Points. Visit the documents section of our website for the latest speeches, reports, and other resources.

Strategic and Economic Dialogue, July 28, 2009

Strategic discussions today focused on the North Korean nuclear weapons program as well as other possible threats sucha as  pandemic diseases. Sec. Clinton noted that her counterpart, Councillor Dai Bingguo, had much experience working on North Korea and that she and he discussed the situation there at some length. Other American officials participating in these meetings included Health and Human Services Secretary Kathleen Sebelius and Susan Rice, ambassador to the United Nations. China's Vice Foreign Minister Wang Guangya also participated. At a press conference after the meetings, Clinton said that human rights, including the current situation in Xinjiang, were discussed at the meetings. She also noted that, unlike many of the economic discussions, her talks with the Chinese necessarily focused on matters that involve third parties. In those instances, progress and agreement can be difficult to achieve.

The Economic discussions overseen by Sec. Geithner and Vice Premier Wang Qishan focused on plans to strengthen the financial system and ensuring sustainable growth. At a press conference, Geithner said, "[T]his is the critical thing – that as we move to raise private savings in the United States, as we move to bring down our fiscal deficit in the future, as we move to put in place a more stable, more resilient financial system in the United States, we need to see actions in China and in other countries to shift the source of growth more to domestic demand." He said he was optimistic that the Chinese could engineer such a change. He said, "[I]f you look at what China has achieved over the last 30 years, they have a remarkable record of letting out – laying out a path for ambitious reform and actually delivering on those commitments." Wang, for his part, affirmed China's commitment to greater reliance on domestic demand. Through a translator he said, "China will focus on boosting domestic demand and in particular consumer demand." He noted that achieving this would be neither quick nor easy.

It appears that little progress was made during talks focused on averting the hazards posed by climate change. The two sides, however, did agree to a memorandum of understanding to "enhance cooperation" on energy and environmental matters. The MOU "elevates climate change" in the bilateral relationship and "recommits" the countries to helping forge an international agreement to transition to a low carbon sustainable global economy. Xie Zhenhua, Vice Chair of the Chinese national Development and Reform Commission and Todd Stern, America's Special Envoy on Climate Change signed the agreement. The two key players in this will be the U.S. Department of Energy (currently headed by Sec. Steven Chu) and the National Development and Reform Commission (headed by Zhang Ping).