Beijing, not Washington, holds economic cards
Wednesday, June 3, 2009 | South China Morning Post | Word Count (574)
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The tone and nature of US Treasury Secretary Timothy Geithner's maiden trip to China was markedly different from the visits by his predecessor, Henry Paulson. Heated talk of the valuation of the yuan and trade imbalances was set aside for praise and hopes for a co-operative relationship. Part of that is down to Mr Geithner's at times meek demeanour, but it can mostly be attributed to the changed circumstances of global economics. Beijing, not Washington, now holds the cards.
That was apparent in the statements issued after Mr Geithner met President Hu Jintao and Premier Wen Jiabao yesterday. The Chinese leaders exuded confidence. The American thunder of old was replaced by a willingness to please. China was on the world stage beside the US and being treated as a friend and equal. This is how the relationship should be. The world's leading developing and developed nations should work closely together. Each has a perspective and advantage in helping resolve global challenges. This cannot happen effectively without a partnership.
America's economic woes are largely driving the shift. Trillions of dollars of foreign goodwill is being used to fund US President Barack Obama's efforts to pull his country out of the financial chasm it has fallen into. China is the biggest foreign owner of US Treasury bonds. As of March, it held US$768 billion of such debt. Beijing's US-denominated government and corporate paper investments could well be twice that amount.
Mr Geithner's visit was not to negotiate deals or sign pacts. His main goal was to assure Beijing that his country's monetary policy and ballooning deficit would not undermine the value of the US dollar and paper bonds. Yesterday he repeated pledges he made on Monday: that the assets were safe and American spending would be disciplined once a recovery took hold.
Just how deep the global financial crisis will be remains uncertain. Individual pieces of data showing a monthly, quarterly or year-on-year improvement do not in themselves constitute a recovery. Mr Wen rightly reminded Mr Geithner that China's stability and growth needed to be assured through tightening oversight of international reserve currencies. The Obama administration needs to keep this firmly in mind because America's return to economic health is in China's interests as much as its own.
Trust, respect and co-operation are key. Mr Geithner, Secretary of State Hillary Rodham Clinton and, last week, House of Representatives Speaker Nancy Pelosi, have kept the necessary tone during their visits and meetings. Understanding is essential to building a sound working relationship. Both sides have to be open and transparent.
Mr Hu and Mr Obama announced the setting up of a cabinet-level economic and strategic dialogue after meeting in April. The first meeting will be in Washington next month, it was revealed yesterday as Mr Geithner flew out of Beijing. This is a significant and worthy step. There is no better way to further build the ties that are needed.
China and the US are equally influential nations. They share common interests and goals. Significant inroads can be made in solving the world's economic, environmental and strategic problems through their working together.
It is a relationship that the two have shown an interest in building and one that, regardless of the economic climate, they must remain dedicated and committed to.