Officials from the two sides wrangled over the wording of a communique issued at the end of a two-day summit of the Asia-Pacific Economic Cooperation (APEC) forum.
Stirrings of tension between China and the United States showed up hours ahead of president Barack Obama’s touchdown in Shanghai on Sunday night, when the two sides squared off in Singapore over currency valuation issues that are at the heart of mounting trade imbalances.
Officials from the two sides wrangled over the wording of a communique issued at the end of a two-day summit of the Asia-Pacific Economic Cooperation (APEC) forum. China had its way when a reference to “market-oriented exchange rates that reflect underlying economic fundamentals” was deleted from the final communique. A draft committing member countries to that objective had been agreed upon by finance ministers, including from China.
There’s a lot riding on the phrase that was deleted. Each side blames the other for the economic imbalance after last year’s financial crisis. China, on course to post 8% GDP growth this year, is under immense pressure to let its undervalued currency, the renminbi, appreciate and encourage greater Chinese consumption to make up for a collapse in consumption in developed economies emerging from a bruising recession.
But Chinese officials are wary that yielding ground on renminbi appreciation could jeopardise Chinese exports and feed migrant unemployment, with implications for social stability. They argue that low interest rates in the US are weakening the dollar, feeding asset bubbles overseas and impairing economic recovery.
Meanwhile, human rights activists claimed on Sunday that Chinese police had detained dissidents and pro-democracy activists ahead of Obama’s visit, a development that could accentuate the ‘clash of cultures’ between the US and China.
The signs of tension, which have cropped up barely a day after Obama made exceedingly conciliatory remarks on building a “pragmatic partnership” with China, point to a lingering trust deficit between the two countries, as reflected in comments by Chinese officials.
“Only if the US changes its power politics can the two sides avoid conflicts,” said Peng Guangqian, a specialist in military strategy at the People’s Liberation Army Academy of Military Science. “After taking office, Obama has reoriented US policy on China, but it’s too early to say if it’s a strategic change or merely expedient measures.”
Shen Dingli, director, Centre for American Studies at Fudan University, points to Obama’s uncomplimentary reference to communism in his presidential inaugural address in January to claim that the US “has a strongly ideological resentment” towards China. China, he adds, will be stronger, and “if the US knows which way the wind is blowing, it should not challenge China”.
The ‘trust deficit’ manifested itself in another area, when Chinese officials held back on US requests for a live telecast and webcast of a planned ‘townhall-style’ interaction between Obama and handpicked Chinese students in Shanghai on Monday. A decision is still pending, but China, which censors the media and the Internet, including social networking sites, is wary of opening the information window too wide for even so short a duration as Obama’s four-day visit.
Obama has an expansive agenda to cover in discussions with Chinese leaders — and is looking for Chinese cooperation on everything from the global economic rebalancing to climate change and the de-nuclearisation of North Korea.
The strains that were manifest on Sunday, despite earlier articulations of goodwill, point to a challenging visit ahead for him.
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