Talking Points, April 1 - 15, 2009

Talking Points
April 1 - 15, 2009

“[T]he relationship between China and the United States is not only important for the citizens of both our countries, but will help to set the stage for how the world deals with a whole host of challenges in the years to come.” – U.S. Pres. Barack Obama

“[T]he two sides both have reached agreement on the characterization of the China-U.S. relationship in this new era and on the mechanism of the strategic economic dialogues. These results have not come easily, which deserve both sides’ efforts to cherish.” – PRC Pres. Hu Jintao

The G-20 Summit is underway in London. Presidents Obama and Hu met yesterday. They took photos, made statements, and then discussed many issues. It was announced that Obama will visit China later this year. The Strategic Economic Dialogue initiated by former Treasury Secretary Henry Paulson will be broadened and renamed the Strategic and Economic Dialogue. The expanded agenda follows the outline put forward by Sec. of State Hillary Clinton during her February visit to China. She and Treasury Sec. Timothy Geithner jointly announced the new plan.

This meeting comes after several hectic weeks. Last Wednesday, Zhou Xiaochuan, head of China’s central bank, suggested that the world needed a new reserve currency to replace the dollar. This came after China’s premier indicated Chinese leaders were “concerned” about the country’s huge investment in American debt. U.S. officials quickly responded to both comments, asserting that U.S. Treasury bonds are the safest investment available and that the size and relative stability of the U.S. economy had long made the dollar the reserve currency of choice and that this was unlikely to change anytime soon. China’s foreign reserves now exceed $2 trillion. More than $750 billion are invested in U.S. debt and another $150 billion are invested in U.S. corporate debt.

Another point of contention this past week was the release of the annual U.S. Department of Defense report on China’s military power. The report notes that the Chinese defense budget has doubled since 2000, reaching an estimated $60 billion in 2008. In its own report, the Chinese government put its 2007 defense spending at $52 billion. The U.S., though, spent $666 billion, or more than eleven times as much as the Chinese. A Chinese foreign ministry spokesperson condemned the U.S. report, saying it “continues to play up the fallacy of the so-called 'China's military threat.'” Earlier in the month, a U.S. surveillance ship was gathering data 70 miles off the Chinese coast when it was confronted by Chinese civilian and military vessels. The Chinese argued the surveillance ship violated their exclusive economic zone, while the Americans contended the ship was in international waters and was not violating any law. To push the point, the U.S. Navy dispatched a guided-missile destroyer to escort the ship.

Between Clinton’s February visit to Beijing and the Obama-Hu meeting yesterday, human rights issues also attracted notice. In late February the U.S. and the Chinese governments issued assessments of the other’s human rights record and in early March they sparred over the situation in Tibet.

It is the economic situation, however, that is the focus of discussion in London. China and the U.S. have both argued that the other is erecting protectionist barriers. Chinese officials decry the “buy American” provisions of the U.S. economic stimulus package and on Tuesday, the U.S. Trade Representative issued a report that argues that China fails to meet basic obligations of World Trade Organization membership. The report blames “China’s continued pursuit of problematic industrial policies that rely on repeated and extensive Chinese government intervention intended to promote or protect China’s domestic industries.” It points to favoritism in building a 3G telecommunications infrastructure, lack of effective protection of intellectual property rights, and other issues.

The voices and daily updates sections of our US-China Today web magazine are a convenient way to stay abreast of these developments. While you are there you can read about microfinance in China and view a video story about how an American television station is ramping up its Chinese language programming.

"The feeling here is that the U.S.-China relationship is the defining relationship of the world.”  -- Elizabeth Garrett, quoted in the Los Angeles Times, May 2006

On Saturday, Pres. Obama nominated Elizabeth Garrett, USC’s Vice President for Academic Planning and Budget, to serve in the Treasury Department as Assistant Secretary for Tax Policy. Garrett, who is also a professor of law, still must be confirmed by the Senate. We congratulate Vice Pres. Garrett on this great honor.

The U.S. government faces immense financial challenges, including a ballooning deficit, the need to invest in infrastructure rebuilding, huge and continuing military obligations overseas, and an aging population with large pension and health care expectations. Obama, however, has chosen wisely. Garrett is a distinguished scholar, whose most recent book is Fiscal Challenges: An Interdisciplinary Approach to Budget Policy (co-edited, 2008). She previously worked as a clerk for Supreme Court Justice Thurgood Marshall and as legislative aide to Senator David Boren. In 2005, President George Bush named her to a nine-person bipartisan commission on tax reform.

Garrett’s knowledge and judgment have been felt campus wide, but her impact on the U.S.-China Institute has been especially profound. In 2005-6, USC President Steve Sample and Provost C.L. Max Nikias assigned her and Howard Gillman (now dean of USC College) the task of mobilizing the campus community behind a new China-centered initiative. Since then, Garrett has played a crucial role in building the Institute. Her energetic support and wise counsel has contributed a great deal to our success.

Beth, thank you. We will miss you, but all of us will benefit from the service you are about to give.

Best wishes,
The USC U.S.-China Institute
Support the institute at: http://www.usc.edu/giving/.

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