By Glenn Kessler
Washington Post Staff Writer
Tuesday, July 28, 2009
For many years, U.S. officials traveled to Beijing and lectured the Chinese about the value of their currency and the need for economic and political reforms.
On Monday, about 200 senior Chinese officials traveled to Washington and heard soothing words of reassurance from U.S. officials: The dollar is still sound, your investments are safe and we are working really hard to restructure our economy.
Such is the nature of the U.S.-China relationship today. Behind all the reassuring language is a nervous sense that the fate of the world economy is increasingly dependent on the United States and China working together.
President Obama opened the first meeting of the U.S.-China Strategic and Economic Dialogue on Monday by declaring that the two countries share a responsibility for the 21st century, and should strive to cooperate not only on economic matters but also on key issues such as climate change, nuclear proliferation and transnational threats.
"The pursuit of power among nations must no longer be seen as a zero-sum game," he said at the start of the two-day meeting, held at the Ronald Reagan Building and co-chaired by Secretary of State Hillary Rodham Clinton and Treasury Secretary Timothy F. Geithner. "Progress -- including security -- must be shared."
The meetings are intended mostly to allow officials to exchange views on a wide range of issues and to establish contacts in each other's governments. On Monday, Obama gave a gentle prod to China on its human rights record, noting that "all people should be free to speak their minds," but otherwise focused on forming with China a partnership "of opportunity."
The talks are a broader version of the dialogue that was started in 2005 by Robert B. Zoellick, deputy secretary of state under President George W. Bush, and later led, with a more economic tilt, by Henry M. Paulson Jr., Treasury secretary under Bush.
This time around, Clinton, who during the presidential primary campaign declared that the U.S. relationship with China would be the "most bilateral relationship in the world in this century," has sought a prominent role for foreign policy issues. The cast of participants has been broadened; Monday's talks includes Federal Reserve Chairman Ben Bernanke, National Economic Council Director Lawrence H. Summers and Peter Orszag, Obama's budget director, as well as other Cabinet members.
The Chinese side is led by State Councilor Dai Bingguo, who oversees foreign policy, and Vice Premier Wang Qishan, who oversees economic policy. Dai, speaking in the morning, noted that the two countries are separated by huge differences in culture, ideology and social systems, but added that the economic crisis demonstrated "we are actually all in the same big boat that has been hit by fierce wind and huge waves."
"The United States will never become China, and China will never become the United States," he added. "But the living fact is that China and the United States' interactions have never been so frequent, our interest has never been interwoven so closely, and the mutually beneficial cooperation between our two countries has never been so broad, and the driving force boosting the China-U.S. relationship has never been so strong."
As China's economy has boomed, so has its international clout. With the revenue generated by huge trade surpluses with the United States -- and policies that keep its currency artificially low -- Beijing is the largest single investor in U.S. Treasury bonds. That $1.5 trillion stake means that China has been critical to Obama's efforts to boost the U.S. economy through deficit spending, although Chinese officials have expressed worry that the value of their holdings will fall if the U.S. deficit is not brought under control.
"China has a huge amount of investment in the U.S., mainly in the form of Treasury bonds," Assistant Finance Minister Zhu Guangyao said in a press briefing with reporters. "We are concerned about the security of our financial assets." He added that China favors a "stable" dollar, which has fallen in value this year against major currencies.
Geithner, addressing the meeting, stressed that the administration is "committed to taking the necessary measures to bring our fiscal deficits down to a more sustainable level once recovery is firmly established." He also praised Chinese leaders for their efforts to boost domestic consumption, which he said "will be a huge contribution to our global challenge in bringing about a more rapid but more balanced and sustainable global recovery."
Both sides acknowledged that they must tread carefully in the coming months, with U.S. officials warning Beijing not to expect that American demand will once again spur China's growth.
"There was a lot of discussion about how both sides are grappling with the timing of the withdrawal of their macroeconomic stimulus," said David Loevinger, the Treasury's senior coordinator for China affairs, told reporters. "There was general agreement that it was very important that this doesn't occur too soon because the recoveries are still very fragile, but also an acknowledgment that they have to take place at the right time, and not let another set of imbalances and bubbles build up in the economy."