By Ariana Eunjung Cha
Washington Post Foreign Service
Saturday, December 16, 2006
BEIJING, Dec. 15 -- The Chinese might have been forgiven for thinking they were watching an American movie.
No trope of stagecraft went unexplored this week as the United States jockeyed for advantage in a high-level economic dialogue with China. There was a good-cop, bad-cop routine: Susan C. Schwab, the U.S. trade representative, accused China of "backsliding" on reforms, while Federal Reserve Chairman Ben S. Bernanke spoke in a patient, scholarly voice about how much it would benefit China to accede to U.S. currency demands.
There was bullying, with several reminders from the Americans that the United States is China's No. 1 export customer -- the implication being that the wide-open U.S. market could slam shut if the Chinese aren't careful.
There was coaxing, with the Americans telling the Chinese they could improve their image as good economic citizens if they would adopt the U.S. program.
It was hard to tell what the Chinese thought about the show.
They set the stage with flair, rolling out red carpets and luscious Chinese delicacies in the ornate Great Hall of the People. But much of the action transpired behind closed doors, with journalists left to glean bits of information from after-the-fact briefings.
In public, the Chinese were impassive and tough, reminding the visiting Americans of their country's problems and of the need for social stability as China undergoes profound economic transformation. "Some American people are not only having limited knowledge of the reality of this country" but also "even harbor some misunderstandings," Vice Premier Wu Yi declared, not once, but twice -- in her opening and closing remarks.
In the end, the Chinese didn't give much ground. As the first Strategic Economic Dialogue spearheaded by Treasury Secretary Henry M. Paulson Jr. wound up Friday, the two sides announced several small-scale, mostly symbolic agreements.
What they did not announce was a breakthrough on the most contentious economic issue between the countries: the value of China's currency in relation to the dollar.
While most countries allow market forces to determine the exchange rate for their currency, China's central bank fixes its value within a narrow band. It has moved a few percentage points in the past year, but many Western economists complain that the yuan is still priced too low, with estimates ranging from 15 to 40 percent. The effect, they contend, is to make Chinese goods unfairly cheap on overseas markets, driving an export boom in China, while making Western-made goods extraordinarily expensive on the Chinese mainland.
On the currency issue, Paulson's counterpart, Finance Minister Jin Renqing, offered only a vague commitment to pursue "exchange-rate regime reform." The incoming U.S. Congress is expected to take a tough stand in 2007 after an election in which many of the winning Democrats ran on skepticism about free trade.
One of Paulson's goals in launching a dialogue with the Chinese was to move beyond the formality of state meetings with their characteristic tone: two countries talking past one another. In that respect, the meeting was a success. U.S. officials described blunt, tense exchanges on some issues, such as Chinese complaints about American restrictions on the export of high technology and U.S. concern that China's oil deals in Africa are bolstering repressive governments.
"When we disagree, we do so with mutual respect and an eye towards finding agreement where possible, and it was in that spirit in which we conducted our meetings," Paulson said.
The two sides announced modest agreements Friday that had, in some cases, been in the works for weeks or months. For example, two U.S. securities exchanges, the New York Stock Exchange and the Nasdaq Stock Market, will be allowed to open more elaborate offices in China, furthering their hope of capturing the business of the giant Chinese companies that are starting to sell shares to the public. In the past year, most of that business has gone to Hong Kong and London.
U.S. and Chinese leaders also announced working groups on service-sector development; improving health care, energy and the environment; and easing investments and promoting transparency. Those groups will present their findings at the next strategic dialogue, in Washington in May.
The countries also agreed on terms to expand financing for companies that want to export U.S. goods to China, a measure that had been in the works for about a year but had stalled.
James H. Lambright, chairman of the Export-Import Bank of the United States, said that as the strategic economic dialogue approached, it became clear to everyone how important it would be over time to increase U.S. exports.
Exports have been a surprising source of strength for the U.S. economy this year. The Chinese have long vowed to expand their consumer economy so ordinary people could afford goods from home and abroad.
"We now have a better understanding of how our interests intersect," Lambright said.