On July 9-10, the US and China held the Sixth US-China Strategic and Economic Dialogue (S&ED) in Beijing. For the past 6 years, this has become the major vehicle for resolving difficulties and pursuing opportunities for mutual benefits.
Judging from pre-conference press releases from both countries and commentary from experts, scholars and informed observers, perhaps the best that could be hoped for is maintenance of the status quo or prevention of any further deterioration. The US and China still long to attain a “new model of major country relations.” China calls on the US to respect its interests, while the US tries to ensure China that it has no interest in containing it. But little was expected to be accomplished.
One could predict how the Dialogue would go by what the US and China said was to be on the agenda, and what they did not say. On the agenda was North Korea, Iran, Syria, Sudan-South Sudan, and Afghanistan, along with climate change and energy efficiency, terrorism and military cooperation. Only climate change and energy efficiency are small enough issues where agreement could be made. That’s exactly what happened.
Not publicly listed on the agenda were the Chinese aggression into disputed maritime territories, currency exchange rates, and computer hacking of US companies and now the US government, as well as intellectual property, and human rights. These critical issues are just too hard to tackle, so there were low expectations. Nothing did happen in these areas.
Chinese aggression against its neighbors in the East Vietnam Sea has actually worsened since the last S&ED, contrary to Chinese promises. This is destabilizing the region. Japan is re-militarizing to defend its interests. Japan developed a stronger alliance with Australia. Japan is trying to counterbalance China which has concluded agreements with Korea. The day before S&ED, the Chinese People’s Daily—a spokesman for the government—published an opinion piece blaming the US for conflicts over disputed islands in the East Vietnam Sea.
The US in the past has publically refused to take sides in the disputes over islands claimed by Vietnam, Japan, Brunei and the Philippines. But, in anticipation of S&ED, the US did let it be known that it was concerned. During the Dialogue, Secretary of State John Kerry strongly protested Chinese behaviors, calling for more diplomacy, obedience to international law, and adherence to guidance to resolve disputes. But on July 10, the US Defense Department announced that it would intervene by ramping up surveillance efforts in the disputed areas, and earlier that it was providing sophisticated radar to countries in the dispute.
In May, the US criminally charged five Chinese military officers with hacking into computers of US companies. China responded by pulling out of the joint Working Group set up to address hacking at S&ED. Foreign Minister Yang Jiechi reportedly told Secretary Kerry that the US would be responsible for creating the necessary conditions for a real dialogue. On July 10, during the meeting, the New York Times reported that China had hacked into US federal government employment records, looking for information on people who had applied for top secret security clearances. This was not mentioned at the meetings. Some analysts claim that this will set back progress on the issue. Others say that perhaps the continued cyber assaults on the US may finally wake up the US to the threat.
North Korea was on the agenda, but the two sides to the Dialogue could only agree that more needed to be done. North Korea and South Korea are feuding, and the US is supporting its ally.
The weak Chinese yuan against the stronger US dollar has been a major issue between the countries for years. The Chinese never accommodate US demands. A weak yuan is important in making China’s goods and services competitive against the US and other developed nations. There was no reason to assume that China will yield on its currency manipulation. All that Secretary of Treasury Jack Lew could extract from the Chinese side was that they would reduce intervention in its currency “as conditions permit.”
In the days before S&ED, the US and China announced the signing of 8 agreements on climate change issues including carbon capture and low carbon cities. These were very minor agreements on information exchange and research. Critics fear that releasing information on US smart grids - electric power generation managed by computer systems - might not be in the national security interest of the US.
The Bilateral Investment Treaty that facilitates investment between the US and China recently concluded its first round of talks. The US wants China to reduce the number of sectors which prohibit US investment, while China wants the US to remove investment restrictions by Chinese firms that may pose security threats to US. This has strong resistance by powerful factions within both countries. The only announcement regarding the treaty was that progress was made.
Traditionally, the US will bring up the issue of human rights. At present, China is embroiled with Hong Kong’s and soon Macau’s governance, Taiwan relations, and treatment of Uyghur Muslim minority. The Chinese took this off the agenda ostensibly because President Obama met with the Dalai Lama in February.
How to interpret the US tepid response
Widespread opposition to the Obama foreign policy - based on “soft diplomacy:” leading from behind, reactive, passive, disengaged, and non-confrontational - whether fair or not will likely be blamed for the lack of positive results at S&ED. But there may be other reasons as well.
Some analysts believe that the US may be pinning its hopes on a November 2014 Asian-Pacific Economic Cooperation (APEC) summit meeting between presidents Xi and Obama. If this is so, it means that critical issues between both countries are again being swept under the rug until a later time. Given the agenda, this would be in China’s interest.
Some critics believe that since the US has again asserted itself as a major energy exporter, it may feel less threatened by China which seems intent on securing its energy sources. The recent long-term agreement between Russia and China is significant not only because it increases energy supplies but also because it may strengthen Russia-China security interests.
Unfortunately, the US is intentionally retarding energy supplies by failing to approve the Keystone Pipeline which would bring vast amounts of Canadian oil to the US; greatly tightening and enforcing carbon emissions standards, especially for coal fired power plants; hampering fracking extraction of gas; and increasing reliance on alternative energy sources that require subsidies or are unproven.
Many analysts continue to believe that the Chinese economy is quite fragile and could collapse. The Chinese have a huge housing investment bubble, manufacturing has slowed, and the banking system is in trouble. So, all the US need do is wait. Needless to say, “hope is not a strategy.”
One long-time participant in the Dialogue perhaps summed it up best. The Dialogue is not intended to resolve anything. Rather, it’s a place to share information and express concerns. The only tangible outcome of this Dialogue was announcement of climate change projects. It’s tempting to think that if both countries keep talking at least nothing bad will happen. Experience shows otherwise.