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Avoiding Mutual Misunderstanding: Sino-US Relations and the New Administration

Avoiding Mutual Misunderstanding: Sino-US Relations and the New Administration

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China policy should be crafted with an understanding of what motivates the Chinese Communist Party’s actions and reactions.
China expects the United States to lead during the financial crisis and sees its own role as limited to its domestic affairs.
The United States would have more success in its political and economic agenda with Beijing if it developed high-level
relationships with Chinese leaders and avoided aggressive public language on hot-button issues.
The United States should pursue multilateral policies that include China as a responsible stakeholder, especially in regional initiatives.
Developing a positive image with Chinese leaders and the public will give the United States valuable political capital in U.S.–China relations.
China policy should be crafted with an understanding of what motivates the Chinese Communist Party’s actions and reactions.
China expects the United States to lead during the financial crisis and sees its own role as limited to its domestic affairs.
The United States would have more success in its political and economic agenda with Beijing if it developed high-level
relationships with Chinese leaders and avoided aggressive public language on hot-button issues.
The United States should pursue multilateral policies that include China as a responsible stakeholder, especially in regional initiatives.
Developing a positive image with Chinese leaders and the public will give the United States valuable political capital in U.S.–China relations.

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Published by: Carnegie Endowment for International Peace on Mar 06, 2009
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january 2009
 Ater the election o Barack Obama as presi-dent, Carnegie’s Beijing Oce assembleda group o leading scholars o internationalrelations to discuss their expectations o thenew administration. This policy brie con- veys their opinions on various aspects o Sino–American relations and on U.S. oreignpolicy in general. Among President George W. Bushs oreignpolicy legacies, the United States’ relation-ship with the People’s Republic o China isone rare bright spot. The last eight years o U.S.–China relations have been dened by two themes. The rst is unprecedented bilat-eral cooperation on shared concerns, such asthe denuclearization o North Korea, terror-ism, and the global nancial crisis, as well asthe inauguration o the Strategic EconomicDialogue between top ocials. The secondis economic competition over issues such astrade imbalances and competition or regionalinfuence. Though the neoconservative suspi-cion and ideological rhetoric o the early Bushadministration have gradually been replacedby pragmatic engagement, which acknowl-edges the necessity o a stable U.S.–China re-lationship, there is still a great deal o mutualmisunderstanding between the two countries.
rt s. Pcpt
 A common misperception among some U.S.policy makers and the American media is thatChina’s Communist Party (CCP) acts as amonolithic, omnipresent body. Perhaps this
a Mt Msst:
Sino–U.S. Relations and the New Administration
Tianjian Shi
wt
MerediTh C. Wen
ENDOWMENT FOR INTERNATIONAL PEACE
C
 ARNEGIE
n
China policy should be crated with an understandin o what motiates the Chinese Communist Party’s actions andreactions.
n
China expects the United States to lead durin the fnancial crisis and sees its own role as limited to its domestic aairs.
n
The United States would hae more success in its political and economic aenda with Beijin i it deeloped hih-leelrelationships with Chinese leaders and aoided aressie public lanuae on hot-button issues.
n
The United States should pursue multilateral policies that include China as a responsible stakeholder, especially inreional initiaties.
n
Deelopin a positie imae with Chinese leaders and the public will ie the United States aluable political capital inU.S.–China relations.
Summar
 
F  I  N  I  Y  
   
 
2POLICY BRIEF
 view was once accurate, but it no longer ts thereality on the ground. With rapid economicdevelopment and an increase in wealth, peoplein China have not only become more interestedin politics but they also have more access toinormation. In just two years, between 2006and 2008, China’s Internet population soaredrom 111 million to 253 million. Newspapers,magazines, and radio and TV stations nowregularly run international news and editori-als to compete or readership. The increasingpublic awareness o international aairs andthe Chinese media’s expanded coverage o global events have created new challenges orthe CCP, which must accommodate not only  vested interests, such as government bureau-cracies and business, but also popular opinion.How public opinion is likely to aect govern-ment policy 
 
is
 
an important new actor to con-sider when ormulating policy toward China.Beijing’s priorities and its political motivesare complex. Building a constructive relation-ship will require that the United States ap-proach China not only as a global power ca-pable o deending its territorial integrity andasserting its strategic interests, but also as adeveloping nation with a government deeply concerned with internal stability, economicdevelopment, and the regime’s legitimacy inthe eyes o ordinary Chinese. The actor o internal legitimacy cannot be underestimatedin understanding and predicting China’s re-sponse to real or perceived threats to its na-tional interests.
T Fc Css: Ptcpt“acc t its Cpbts”
It is important or American leaders to under-stand that China is willing to participate inboth ormulating policy proposals and takingsubstantive measures to contain the interna-tional nancial crisis and revive global eco-nomic growth to the degree to which it per-ceives its capabilities permit. Accordingly, theUnited States must temper its expectationsregarding how much China can contribute tomultilateral eorts.Ofcial Chinese media have reiteratedChina’s limited capacity to help during thecrisis internationally and domestically. WhilePresident Hu Jintao has worked to bolstercondence in China’s ability to weather thestorm, Premier Wen Jiabao has tried hard tolower domestic expectations. He has pub-licly cautioned that the crisis is “worse thanexpected” in China. With exports accountingor close to 40 percent o China’s gross do-mestic product (GDP), the ull impact o thecrisis on the Chinese economy is already vis-ible and severe. China’s growth rate has plum-meted due to weakening demands or Chinesegoods in the United States and Europe. enso thousands o manuacturing actories havebeen closed and hundreds o thousands o migrant workers have been laid o in thecoastal areas. Chinese economists agree thatat least 8 percent growth is needed to accom-modate new laborers entering the work orce.Industrial growth or October was 8.2 per-cent, the lowest in seven years. Te Chinesegovernment projected GDP growth or 2009at 7.5 percent, but many economists predictan even lower growth rate, which will lead torising unemployment. Stalled growth coulduel social unrest.Given these problems, China sees its rstresponsibility in dealing with the global eco-nomic crisis as stabilizing its domestic mar-kets. Between September and November2008, China adopted a series o stimulus mea-sures, including cutting interest rates threetimes, lowering bank reserve requirement ra-tios twice, making tax changes, revising laborlaw requirements or enterprises, and increas-ing credit quotas. On November 9, the StateCouncil unveiled a bold stimulus packageamounting to an estimated U.S. $586 billion,the equivalent o about 16 percent o China’s2007 GDP. Te package is aimed at boostingdomestic demand over the next two years tonance programs in ten areas, primarily inra-structure. Foreign policy experts in China ar-gue that a healthy and stable Chinese marketis the most important contribution China can
Tinjin Shi
heads theCarneie Endowment’s pres-ence in Beijin and is a special-ist in Asian security issues andpolitical participation.He was associate proessor, andbeore that assistant proessor,in Duke Uniersity’s Depart-ment o Political Science rom1993 to 2008. He was also assis-tant proessor in the Depart-ment o Political Science at theUniersity o Iowa rom 1992to 1993, a lecturer in PekinUniersity’s Department oInternational Politics rom 1988to 1989, and deputy director othe Opinion Research Center oChina rom 1988 to 1989.Shi is the author o seeralbooks, includin,
Lineage and Village Governance in Contem- porary China: Multidisciplinary Research and Political 
 
Participa-tion
 
in Beijing
. He also sits onthe editorial board o
 Journal of Contemporary China
.The author is rateul toMinxin Pei and Meredith Wenor their contributions to thispublication. Carneie Beijinconsulted with the ollowinChinese experts durin thedratin o this brie: Dr. ZheSun, deputy director, Centeror American Studies, FudanUniersity; Dr. Yaqin Qin, icepresident, Forein Aairs Col-lee; Dr. Qinuo Jia, deputydean, School o InternationalRelations, Pekin Uniersity.
 
AvOIDINg MUTUAL MISUNDERSTANDINg3
make to the world economy. Indeed, Chineseofcial rhetoric during the recent G20 summitunderlined the limited role that China sees oritsel in a concerted global action: It wouldcontribute “according to its capabilities.”Tough China holds $1.9 trillion in oreigncurrency reserves, it would be wrong to view this as a sign o Chinese strength, much less asa reason or China to make greater nancialcommitments to a global anticrisis plan. First, when divided by 1.3 billion (China’s popula-tion), per capita oreign currency reserves areroughly $1,500, a modest amount. Moreover,about two-thirds o Chinese oreign currency reserves have been invested in U.S. dollar-based assets, such as U.S. treasury bonds. Withthe recent reevaluation o the yuan, China hasalready suered large paper losses. I anything,China’s oreign currency reserves are bound togrow more slowly as the country’s exports slow and domestic consumption rises. Tereore,oreign policy experts in China suggest thenew U.S. administration lower its expecta-tions on capital contributions rom Chinaduring the economic crisis. Tey argue thatraising unrealistic expectations would lead torustration on both sides and jeopardize bilat-eral relations.Despite talk o American decline, oreignpolicy experts in China expect that the UnitedStates will assume the mantle o responsibility and leadership during this period o nancialuncertainty. Tey also believe that more dra-matic and eective measures will be taken by the new administration to stabilize the U.S.economy and reorm the critical institutions inthe international economy. As the largest de-veloping nation, China expects to participatein the process o creating and reorming inter-national regulatory institutions to make themable to respond to uture nancial crises.
ProTeCTioniSM iS noT The Way Todeal WiTh The CurrenT eConoMiC CriSiS
Many experts in China are worried about thepossibility o protectionism under an Obamaadministration. Democrats are stereotyped asprotectionist, and the campaign rhetoric dur-ing the Democratic primaries only increasedsuch ears among scholars and policy mak-ers in China. People read with alarm theclaims made by the Obama campaign thatlabor and environmental standards would beintroduced into trade agreements. Further,as the U.S. economy experiences diculties,many expect that labor unions will pressurethe new administration to pass measures toprotect American workers. Thus, many inChina expect the new U.S. administration toace rising domestic political pressure to erecttrade barriers.Most oreign policy experts and policy mak-ers in China hope that the new administra-tion will approach trade pragmatically. They emphasize that injecting protectionism intoU.S.–Chinese trade relations would neitherhelp the world economy nor return or keep jobs in the United States. They argue that theGreat Depression proved that protectionismcan infict catastrophic damage on the worldeconomy.
SToP PreSSing China ToaPPreCiaTe iTS CurrenCy
 According to U.S. economists, appreciationo China’s currency, the RMB, would bluntthe impact o world oil and commodity priceson China, encourage economic activity inthe service industry, and raise domestic con-sumption o goods imported rom the UnitedStates. From the perspective o Chinese econ-omists, revaluation would urther reduce thecompetitiveness o goods produced in Chinaand urther jeopardize the Chinese economy.Nor is revaluation o the RMB seen as likely to serve American economic interests, becauseChina would be orced to purchase less American debt at a time when rising ederal
hw pbc p s  t ct mtpc s  mptt w ct t csw mt pc tw C.

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