Archive for the Chinese Foreign Relations Category

Major Developments in China since last Leadership Change

Posted in China - US Relations, China Politics, Chinese Economy, Chinese Foreign Relations, Chinese International Trade on 11/09/2012 by David Griffith

How China Has Changed Since the Last Leadership Transition

Published: Thursday, 8 Nov 2012  

By: Rajeshni Naidu-Ghelani, CNBC

All eyes are on China this November as the country prepares for the once in a decade leadership transition within the ruling Communist Party.

The world’s second biggest economy has undergone a massive transformation within the last 10 years. From rapid urbanization and economic growth to social and political development, China has marked many milestones and firsts in the past decade — highlighting its significance on the global stage.

With this in mind, we look at six major changes that China has undergone since the last leadership transition in 2002. Focusing on factors like economic development to changes in consumer behavior, we look at how big of an impact China’s transformation has had on the rest of the world.

Rapid Economic Growth

The Work Bank

Riding the wave of rapid economic expansion, China’s growth engine has remained strong over the past decade. China’s economy grew from being the 5th largest in the world in 2002 to 2nd only to the U.S. by 2010. 

The country has seen an average annual gross domestic product (GDP) growth of 10.6 percent since the last leadership transition in November 2002. Yearly economic growth was in the double digits from 2003 to 2007 and hit a high of 14.2 percent in 2007 — levels not seen since the early 1990s. However, like the rest of the world, China was impacted by the global financial crisis in 2008 and saw its GDP fall to 9.6 percent that year. Since then, the superpower has been able to maintain strong economic growth of over 9 percent, but it continues to be plagued by fears of a hard landing. GDP in the second quarter of this year fell to 7.6 percent, hitting its slowest pace in three years.

Many economists now expect China’s annual GDP to fall below 8 percent in 2012, with even Beijing setting a target of 7.5 percent growth — marking China’s first drop to that level since 1999. Uncertainty over how the new leadership will deal with slowing growth is intensifying and several analysts have told CNBC that policymakers may be taking their eye off the ball when it comes to the economy to prepare for the once-a-decade leadership transition. The politics involved in the government change may be slowing the policymaking in China and deterring the government from making significant economic decisions, according to experts. 

Rising incomes

National Bureau of Statistics China

Economic development has led to rising incomes in China as workers demand higher wages to cope with soaring living costs in major cities.

In a 10 year period, the per capita income of urban residents rose from $827 in 2001 to $3,711 in 2011, according to the National Bureau of Statistics of China. That’s a nearly 350 percent increase. China’s average minimum wage has been rising an average 12.5 percent annually from 2006 to 2010, and the government announced earlier this year that minimum wages should grow by an average of at least 13 percent in the five years to 2015.

Rising wages has become a major concern for local and international manufacturers betting on “cheap” Chinese labor for growth. Many are moving production inland to save on costs, while others are looking into alternative manufacturing hubs in Asia like Vietnam, the Philippines and Indonesia. For example, Apple supplier Foxconn, in the news recently for labor unrest at its Chinese factories, announced in August that it would invest $10 billion in Indonesia to tap into one of the cheapest labor forces in Asia.

Stocks Outperform in a Decade

Thomson Reuters

China’s battered stock market, which was down more than 20 percent in 2011, and is lower by nearly 6 percent so far this year, has made headlines recently for being the worst performing major equity market in Asia — a sharp contrast to China’s growth story.

Still, taking into account the total gains made over the past decade paints a more bullish picture. The Shanghai Composite index rose 35 percent from 2002 to 2011, far outperforming the U.S. benchmark S&P 500 which only rose 9 percent in the same period. But, despite the substantial 10-year gain, it hasn’t been all smooth sailing for Chinese equities. The Shanghai Composite fell about 65 percent to 2,016 in October 2008 during the global financial crisis from a peak level of 5,725 in September 2007. While stocks continued to gain ground up until August 2009, it has been in a steady decline since.

Despite the downtrend in the last three years, several analysts are still optimistic about a turnaround in Chinese equities on the growing possibility of more easing by the government to spur growth. Japanese brokerage Nomura predicted in July that Chinese stocks could climb as much as 20 percent by the first quarter of 2013 after having bottomed in early June. Meanwhile, the notable head of Goldman Sachs Asset Management — Jim  O’Neill — said in September that Chinese equities present the “most attractive” investment opportunity in all of the BRIC markets.

Internet Explosion

China Internet Network Information Center

By sheer numbers, China is experiencing a technology boom unlike anywhere else in the world. Its internet population surpassed half a billion users in 2011 — making it by far the world’s biggest online market. That’s a more than 362 percent increase since 2005. Even then, the internet usage penetration remained at 38 percent in 2011, presenting further growth potential.

About four out of 10 Chinese use the internet, accounting for a total of 538 million users, according to state-run agency China Internet Network Information Center (CNNIC). That population is set to jump to 700 million users by 2015, according to the Boston Consulting Group (BCG), which is more than double the entire population of the U.S. The country’s fast growing online market provides a big opportunity for retailers and BCG predicts that China’s online retail sales will triple to more than $360 billion by 2015 to make it the world’s largest online retail market.

Smartphone makers are also looking to increase their presence in the country’s mobile phone market. Nearly 70 percent of China’s internet users connected to the web through their handsets in 2011, according to the CNNIC.

Mega Rich Get Richer

The Hurun Research Institute

China’s billionaire count has surged in the past decade, spurred on by the country’s rapid economic development.

In 2001, China had only one billionaire, but that number has jumped to 251 this year —according to the Shanghai based Hurun Report — making it second only to the U.S. in the world when it comes to most billionaires. Billionaires account for just 1.3 percent of wealth individuals with $30 million or more in China, but control nearly a quarter of the ultra-rich group’s wealth of $1.58 trillion, according to research firm Wealth-X. These billionaires are worth an average of almost $2.6 billion each.

China’s consumption and construction boom are two of the major drivers of wealth for the super-rich with a majority of billionaires counting on property as one of their main sources of wealth. The public listing of companies has also made business owners billionaires overnight. But recently, the stock market has also caused China’s billionaires to lose almost a third of their combined wealth with the benchmark Shanghai Composite falling 20 percent from August 2011 to July 2012, according to Wealth-X. In total, the population of China’s wealthy with assets worth $30 million and above shrank by 2.3 percent in the past year, while their combined wealth decreased nearly 7 percent to $1.6 trillion.

Consumption Boom

National Bureau of Statistics China

Consumer spending in China has seen double digit growth for a decade, creating a path for the country to become the world’s biggest consumer market by 2015, according to government authorities.

Its fast growing consumer class of about 130 million has given a big boost to markets from retail and housing to travel and other discretionary sectors. China’s consumer retail sales, for example, are expected to surpass $5 trillion in 2015, according to Commerce Minister Chen Deming. Rising incomes amid rapid urbanization are major reasons behind China’s consumption boom and the World Bank expects the growth to continue as income per capita climbs to more than triple to $16,000 by 2030 from about $5,000 now.

Businesses like carmakers, luxury retailers, and hotel chains have been flocking to the world’s second largest economy to target Chinese consumers. Italian fashion house Prada, for example, counts on China as its biggest market with 30 percent of its global sales in the fiscal year that ended in January 2012 coming from the country. The luxury retailer has 19 stores in China, but plans to open up to 15 more this year. The world’s largest premium carmaker BMW, meanwhile, increased sales of its flagship BMW brand in China by 55 percent in September compared to the previous year, while its Mini cars saw sales jump a whopping 121 percent in the same period.

But not all retailers have had a similar level of success in China. Home Depot, the world’s largest home improvement chain, struggled to win over Chinese shoppers with its U.S. style do-it-yourself model. The U.S retailer announced in September that it will close all seven of its big box stores to focus on specialty stores and e-commerce in China.

How Will China’s Changing Leadership Affect US Relations

Posted in China - US Relations, China Politics, Chinese Foreign Relations on 11/08/2012 by David Griffith

Will U.S.-China Relations Change After China’s Historic Leadership Transition?

By Bernice Napach | Daily Ticker

The U.S. is not the only superpower facing political change this week. China begins its 18th Communist Party Congress on Wednesday and party leaders will decide who will lead the world’s second biggest economy.

“This is an historic time to be watching China politically now,” says Nicholas Consonery, Asia analyst for Eurasia Group, a global political risk research and consulting firm. “The Communist Party, which has been in charge since 1949, is going to see a big transition in the entire leadership of the party.”

Consonery tells The Daily Ticker that the Party’s standing committee, which leads the country, will almost completely turn over and may even be reduced in size from nine to seven members. These individuals will likely run China for the next 10 years.

It’s expected that Xi Jinping, China’s vice president, will be named the new head of state and Li Kequiang, the current executive vice premier, will become the new premier. Although the changes will announced by Nov. 11, they won’t take effect until March 2013.

Consonery says the changes are wide and deep — the equivalent in the U.S. to a change in the presidency, the Joint Chiefs of Staff, the Supreme Court and the governorships of most or all the states, all at once.

“It’s not just change at the top of the party, but the whole party structure,” adds Consonery.

Related: China’s Slow Growth ‘Marks an End of an Era’ But No Hard Landing China’s new government will face many domestic challenges including a slowing economy, a growing middle class and increasing demands for political reform. China’s economy grew at a 7.4% annual rate in the third quarter—its slowest since the first quarter of 2009.

China’s new leadership with also have to contend with an increasingly fraught relationship with the U.S. and its Asian neighbors.

The Obama Administration has been bringing more cases against China through the WTO, charging China with unfair trade practices.

Related: America vs. China: “Free Trade is Only for Friends,” Says Prof. D’Aveni “The U.S. is clearly headed in the direction of taking more forceful stances with China over trade and economic issues,” says Consonery.

In Asia, there’s a “growing level of concern about China’s rise…on the part of many of its neighbors and a clear determination on the part of the U.S. to increase its engagement there,” says Consonery. China and Japan both claim ownership of the uninhabited Senkaku Islands, which are currently controlled by Japan.

Chinese surveillance ships have been seen sailing in the waters around the islands. On Tuesday the U.S. and Japan began an 11-day join military exercise in the area.

Meeting the Future Chinese Leader, Xi Jinping

Posted in China - US Relations, China Politics, Chinese Economy, Chinese Foreign Relations, Chinese International Trade on 02/18/2012 by David Griffith

David Griffith’s Note: I went to the US-China Economic Forum yesterday in downtown Los Angeles as a guest of the Chinese Consul General to get a glimpse of the future Chinese leader, Xi Jinping, and I was encouraged by what I saw.  Xi appears to be a man who likes America and can in turn put a new face on China that Americans will embrace.  The American leaders there, Vice President Joe Biden, Governor Jerry Brown, and Mayor Antonio Villaraigosa looked very comfortable with the future president and their various counterparts from Chinese government at both the national and provincial levels.  Over 500 Chinese companies were part of a series of major trade announcements.  The event definitely confirms Southern California’s prominence in trade with China.

LOS ANGELES (Reuters) – China’s leader-in-waiting Xi Jinping on Friday swiped away fears that his country’s economic growth could stumble, and turned to courting American companies, film-makers and governors hungry for a slice of that growth on the final day of his U.S. visit.

At the end of Vice President Xi’s five-day trip, his U.S. counterpartJoe Biden announced China had agreed to make it easier for Hollywood to distribute movies to China’s expanding audiences. Xi (pronounced “shee”) told a business forum in Los Angeles that China would promote greater domestic demand and turn more to the United States to buy imports and send investment.

Despite recent economic slowing and persistent price pressures, Xi told the gathered business executives that China’s economic momentum would not falter as some economists warn.

“China’s economy will maintain stable growth,” he said “There will be no so-called hard landing.”

Xi is almost sure to succeed Hu Jintao as Chinese president in just over a year, and the final day of his tour of the United States featured commercial deals and reassuring talk intended to blunt American ire about the trade gap between the countries.

“We will further increase imports from other countries in the light of our economic and social development and consumer demand. We will actively expand imports from the United States,” Xi later told a midday meeting.

Biden, who accompanied Xi to Los Angeles, praised the Chinese Vice President‘s efforts to reach out to often wary Americans, but reminded him that rancor over trade imbalances and barriers had not evaporated in all the sunny goodwill.

“The crux of our discussion is that competition can only benefit everyone if the rules are fair and followed,” Biden told the midday reception for Xi.

The U.S. movie industry has long complained about China’s restrictions on the number of foreign films allowed into the country each year, a limit that they say boosts demand for the bootleg DVDs that are widely available in China.

The film announcement does not remove China’s quota system, but it might ease some of the ire.

The agreement allows more American exports to China of 3D, IMAX, and enhanced-format movies, and also expands opportunities to distribute films through private enterprises rather than the state film monopoly, the U.S. Trade Representative’s office said.


The two vice presidents both suggested that Xi’s diplomacy, deals and folksy public displays could pave the way for steadier ties between the world’s two biggest economies.

Xi said that he felt from his visit that “mainstream American opinion” supports stronger ties. “I can now say that my visit has been fully successful,” he said.

“We’ve established a personal friendship and a healthy working relationship,” he said of himself and Biden.

Xi is poised to become China’s next leader after a decade in which it has grown to become the world’s second-largest economy. Beijing wants to avoid tension with Washington while the Communist Party leaders focus on the power handover.

Xi’s visit to the United States was also intended to get both sides more familiar with each other for the decade that he could be in power. He will most likely succeed Hu Jintao as party chief in late 2012 and as president in early 2013.

Under Xi, China’s economic size and military capabilities are likely to grow closer to U.S. levels.

Washington and Beijing have often jostled over economic, political and foreign policy disputes from human rights to Taiwan and most recently Syria.

The U.S. trade deficit with China expanded to a record $295.5 billion in 2011, and many U.S. lawmakers complain China’s yuan currency is significantly undervalued, giving its companies an unfair advantage.

The Obama administration has also accused China of distorting trade flows by ignoring intellectual property theft, putting up barriers to foreign investors and creating rules that favor China’s state-owned behemoths.

Xi’s stop in Los Angeles was choreographed to blunt those complaints and make China’s case that its rapid growth presents the U.S. economy with opportunities, not threats.

Scores of executives from major U.S. and Chinese companies, from Intel to Microsoft, lined up to sign deals after Xi’s address at the economic forum on Friday.

They included “Kung Fu Panda” studio Dreamworks Animation’s venture to make films from Shanghai, and Chinese telecom giant Huawei’s pledge to award $6 billion in contracts over three years to Qualcomm Inc, Broadcom Corp and Avago.


More than the publicly stern Chinese President Hu, Xi has tried to put a friendlier face on his government during his U.S. visit, including revisiting the small town of Muscatine in Iowa where he visited in 1985 and stayed two nights with a family.

The 58-year-old also visited the International Studies Learning School in South Gate — a Los Angeles enclave of mainly Hispanics — where students learn Chinese.

At the school, Xi recalled his first visit to Muscatine: “They gave me the same impression that, like Chinese people, they are warm-hearted, friendly, honest and hard-working. Twenty-seven years have passed, but that remains my impression, and it has become a deeper one.”

Xi also offered a glimpse of his personal life, telling the students he enjoyed swimming and watching sports, including American basketball, baseball and gridiron football.

Showing his familiarity with Hollywood fare, Xi said it was difficult to find time to relax. “It’s like the name of that American movie — ‘Mission Impossible’.”

After their visit to the school, Biden told reporters the talks with Xi had been very forthright, and was also intensely curious about the workings of the American political system.

“This is a guy who wants to feel it and taste it, and he’s prepared to show another side of Chinese leadership,” said Biden. “He is intensely interested in understanding why we think the way we do, what our positions are, and the need to actually broaden this kind of understanding.”

Xi was due to watch part of an LA Lakers basketball game before he left for the next two countries of his international tour, Ireland and then Turkey.


US-China Relations and the Role of Education

Posted in Chinese Foreign Relations with tags , , on 10/14/2011 by David Griffith
The People's Republic of China (green) and its...

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US-China relations will be an important cornerstone for many sectors in the coming decades. A panel representing business, higher education, and public policy sound off on what today’s students ought to know and be able to do.

Watch this panel discussion, courtesy of the Asia Society.(45 min., 58 sec.)

US-China Relations and the Role of Education.

India – Pakistani Relations Are Improving

Posted in Chinese - Indian Relations, Chinese Foreign Relations, Indian - Pakistani Relations, US - Indian Relations on 07/27/2011 by David Griffith

David Griffith’s Note: any improvement in relations between countries in the world’s ‘hot spots’ is a positive development for the global community. China and the United States also benefit from reduced tensions and increased cooperation in this area.

India, Pakistan say relations are on right track

By KATY DAIGLE – Associated Press | AP – 28 mins ago

NEW DELHI (AP) — The foreign ministers of India and Pakistan spoke of entering a new era in relations between their nuclear-armed nations, after meeting Wednesday for the first time since bilateral peace talks resumed this year.

While no major breakthroughs on their thorny disputes had been expected, the two agreed to work more closely in fighting terrorism and to ease commerce and travel across the U.N.-drawn Line of Control dividing their nations.

The Himalayan territory of Kashmir — a major source of tension that fueled two of three wars fought by the rivals since 1947 — will continue to be discussed “with a view to finding a peaceful solution,” Indian Foreign Minister S.M. Krishna said. Both nations claim the whole territory now split between them and maintain heavy deployments along the border.

Pakistan’s newly installed foreign minister, Hina Rabbani Khar, had raised eyebrows in India by meeting Tuesday with Kashmiri separatists, who openly oppose India’s heavy-handed rule and argue Kashmiris should vote to decide the territory’s final status. India has refused any such referendum, accusing Pakistan of fomenting conflict by arming and training rebels. Pakistan denies this and says it provides only moral and diplomatic support in backing the call for self-determination.

Nevertheless, the two sides described their talks Wednesday as constructive and cordial, agreeing on several measures toward improving life for Kashmiris, increasing the number of cross-border trading days from two to four and expediting travel permits, including for tourism and religious pilgrimage.

They discussed security cooperation, and reiterated their commitment to fighting terrorism with the aim of stabilizing the region. They also agreed their countries’ should explore dialogue on nuclear issues beginning in September — marking the first time they might share nuclear information since the late 1990s when both were conducting nuclear tests.

“This is indeed a new era of bilateral cooperation between the two countries, and it is our desire … to make it an uninterrupted and an uninterruptible process,” the Pakistani minister said after the talks. “There has been a mindset change in the people of the two countries that we must acknowledge.”

The meeting was a major milestone in the new round of peace talks that began in February. India suspended an earlier round of talks after 10 Pakistani-based gunmen laid siege to the city of Mumbai in 2008, killing 166 people. India has argued that Pakistani intelligence helped plan that attack and that Pakistan has not done enough to crack down on those behind it.

Despite a July 13 triple bombing in Mumbai that killed 20 people, neither side backed away from the new round of talks. India’s investigation into that attack has focused on a shadowy domestic terror group reportedly linked to Pakistani militants, but top government officials have been reluctant to point fingers, calling for patience as the investigation proceeds.

Krishna said after Wednesday’s meeting that, though challenges lie ahead, “I can confidently say that relations are on the right track.”

They agreed to hold new talks in the first half of next year, with expert groups meeting first in September. In the meantime, India’s minister for industry and commerce has invited his Pakistani counterpart to visit.

The two countries’ foreign ministers last met a year ago in Islamabad in a tense meeting that erupted into accusations that both sides were fomenting terror attacks on each other. Since February, however, the two sides have discussed a range of issues including terrorism threats, cooperation on the Mumbai investigation and Kashmir. Their prime minister even watched an Indian-Pakistan cricket match together in March.

Security analyst C. Uday Bhaskar expressed cautious optimism about Wednesday’s meeting, suggesting the foreign ministers had likely left the toughest issues for later, though “for the local people in Kashmir, this has improved the situation in a significant way.”

The ministers “have gone for the lowest-hanging fruit, improving cross-border travel, setting up committees. They are baby steps,” Bhaskar said. “Against the backdrop of Mumbai 2008, what has been achieved by the two foreign ministers is as much as possible, even if modest.”

Khar was also meeting with Prime Minister Manmohan Singh and the leader of the opposition before flying Thursday back to Lahore, Pakistan.

Why Do We Fear a Rising China?

Posted in Chinese Economy, Chinese Foreign Relations, Chinese International Trade with tags , , , , , on 06/07/2011 by David Griffith


Courtesy of TIME
by Michael Schuman

It’s hard to argue that the rise of China, taken on the whole, is anything but good for the global economy. New wealth for China’s 1.3 billion people means 1.3 billion more people who can buy stuff from the rest of the world, creating jobs from American research labs to Japanese industrial zones to Brazilian mines. A global economy no longer solely dependent on the U.S. consumer for growth is potentially more stable and prosperous.

Yet few people see China that way. Many don’t acknowledge China’s positive role in the world economy at all. Instead, they focus on the competition China has created, especially for the developed world, or the jobs many believe China has “stolen.” However, even those who realize, or even directly benefit from, China’s advance still can’t but feel uneasy about that advance. But why is that? Why do we fear a rising China in a way we don’t a rising India? Or why is an economically powerful China less acceptable than, for example, a stronger Europe?

The conflicting emotions many have about China’s rise are the subject of my latest TIME magazine story, focused on Australia’s relationship with the Middle Kingdom. What’s happening Down Under is a glimpse into the future for all of us. And for me, reporting there got me thinking about why so many of us – and not just in the West, but out here in Asia as well – are having so much trouble coming to terms with the idea of China as a superpower.

There are few countries in the world that have benefited more from China’s rapid economic growth than Australia. The boom in exports Australia has enjoyed due to surging Chinese demand, especially for raw materials, is a key reason – perhaps the determining factor – why the country avoided a recession after the 2008 financial crisis. Trade with China is also spurring investment and creating jobs. But simultaneously, Australians are becoming uncomfortable about their growing relationship with China. They fret that the economy is becoming too dependent on China for its growth. They worry China will use its economic leverage to put political pressure on the country, or employ its growing economic power to become a strategic threat. They don’t much care for Chinese companies buying Australian assets. Australians worry that what helps their wallets hurts their country politically and strategically, and the more powerful China gets, the bigger that potential danger. Hugh White, head of the Strategic & Defence Studies Centre at the Australian National University, explained the sentiment to me this way: “As China keeps growing strong enough to fulfill Australians’ economic aspirations, it grows more powerful and undermines U.S. primacy and our strategic aspirations. People are conscious that with the benefits we get from Chinese growth, there is a certain degree of vulnerability.”

I think many of us around the world can sympathize with the Australians. As David Pilling of The Financial Times recently pointed out, China’s neighbors aren’t too fond of the way Beijing throws its new heft around in the Asia region as its economic influence grows. It’s no coincidence that political leaders in Seoul and Taipei strive to maintain strong ties to Washington even as their economies become driven more and more by China. Americans are queasy that the Chinese own so much U.S. debt. The Japanese own just about as much, but that doesn’t seem to bother anybody.

Of course, 30 years ago, it might have. The reaction many have to China today is very similar to the one that towards Japan in the 1980s, when the Land of the Rising Sun was the rising economic challenger to the West. In recent years, Americans got all jittery about a Chinese attempt to buy oil firm Unocal; more than 20 years ago, Americans got all jittery over Japan’s acquisition of Rockefeller Center. Why? After the overly emotional response in the U.S. to Sony’s acquisition of Hollywood’s Columbia Pictures, co-founder Akio Morita pointed out that Australian born Rupert Murdoch had previously bought 20th Century Fox, without the drama. He was suggesting the reason was racism.

That may be part of the story today with China as well. But the issues are far more complex than that. In the West, Europeans and Americans have dominated the world scene for so many centuries that they’re uncomfortable with the notion of someone else claiming the throne of global hegemony. The concern Americans had with Japan back in the day was that the Japanese were competitors in the global economy, not partners. The fear was that Japan was trying to undermine American dominance, at least in the realm of business. Even beyond that, Japan was winning with an economic system that challenged American ideals of free markets and free enterprise. For many, the rise of Japan seemed to have something sinister behind it – a competing and unfamiliar economic, corporate and cultural system that was producing superior results to those of the West, and appeared to have only its own interests at heart. The challenge from Japan was not just economic, but ideological.

The reasons many fear China today are very similar. China, too, uses a competing economic model – “state capitalism” – that challenges the economic ideology of the West. In many ways, China also behaves in a mercantilist fashion, which gives the impression it cares little about anyone else. It keeps its currency controlled so its exports can out-compete those from other countries, and it grabs natural resources for itself wherever and whenever it can. Often state-controlled companies are doing the grabbing, making China seem like a threatening monolithic juggernaut. Worst of all, the political ideology behind China’s economic ascent completely counters Western ideals about democracy and human rights. China is not just competing with the U.S. in world markets, but offering up an entirely different economic and political system, one that at times seems better at creating growth and jobs, even as it restricts much-cherished civil liberties. China is succeeding based on ideas that Americans despise.

The concerns many in the world have with China go well beyond even that. No one ever expected Japan to become a military threat to the West, or even a contender for diplomatic influence around the world. Japan wanted to be No.1, but only when it came to its role in the world economy. Aside from that Japan was a part of the global establishment – a member of the G7 and a clear U.S. military ally. China is none of those things. More and more, China is using its economic clout to offer an alternative to the U.S.-led political and economic system. Beijing routinely complains about the primacy of the dollar and wants its own currency to play a greater international role. Chinese diplomats have tried to extend their country’s political pull across Africa and Latin America while supporting countries clearly hostile to U.S. interests (such as North Korea.) And Beijing is becoming a bigger military power as well, something that makes its neighbors, many of which have a history of conflict with China (South Korea, Vietnam, Japan, Taiwan) extremely nervous. Every extra 10% to China’s GDP translates into more money the government can spend on its navy and armed forces.

In other words, China appears to be challenging not just today’s economic orthodoxy and order, but the world’s political and military framework as well. China isn’t content just to sell more TV sets to the world, like Japan. The Chinese want to have more control over the world. And they want to use their economic clout to get it.

Or so we think. The fact is we’re only guessing at what China might do as a superpower. Since China is still a relatively poor nation today, it makes sense that at this stage in its development, its leadership tends to be focused on what’s good for China. Will China’s outlook broaden as it become richer? We don’t know.

When the U.S. took over global leadership from a waning British Empire, the world had a pretty good idea what to expect – that overall the U.S. would continue to hold to ideas of free enterprise and democracy. Now an equally important shift is taking place – the rise of the East – but it’s not so clear what it all means for the direction of global civilization. So maybe that’s what we fear most of all. The uncertainty of a fundamentally changing world

Read more:

Progress Made in China-US Trade Talks

Posted in China - US Relations, Chinese Foreign Relations, Chinese International Trade, Doing Business in China on 05/11/2011 by David Griffith

China eases trade rules, allows U.S. fund sales

REUTERS Wednesday May 11, 2011

By Paul Eckert and Doug Palmer

WASHINGTON (Reuters) – China on Tuesday pledged easier access for U.S. companies to key sectors of its economy by removing barriers to its huge market in government contracts and offering a foothold to U.S. mutual funds.

The pledges were made in two days of talks between the world’s two biggest economies which ended with both sides hailing progress in their often tense relationship.

The difficulties in relations, particularly in human rights issues, were underscored by U.S. Secretary of State Hillary Clinton, who described Beijing’s rights decord as “deplorable” in a magazine interview. China’s current crackdown on dissent, she said, amounted to “a fool’s errand”.

But on economic matters, officials were upbeat after talks.

“We are seeing very promising shifts in the direction of Chinese economic policy,” U.S. Treasury Secretary Timothy Geithner said.

The annual Strategic and Economic Dialogue yielded more results on economic issues than some analysts had expected, although many remained skeptical China’s market-opening vows would translate into concrete benefits for U.S. business.

The talks between top U.S. and Chinese officials carried extra significance because domestic politics may hamper decision-making next year ahead of a U.S. presidential election and Chinese leadership succession.

While some advances were made on the economic track, there was scant movement on thorny diplomatic issues.

“The outcome of this round of meetings shows a clear understanding on both sides that the two countries have shared long-term economic interests and there is scope for a mutually beneficial bargain,” said Eswar Prasad of the Brookings Institution in Washington.

“The real flashpoints are on political and security issues, including human rights,” he added.

Clinton, in an interview conducted last month with The Atlantic magazine and released just as the talks ended, said disputes over human rights would not stop U.S. engagement with China.

“We don’t walk away from dealing with China because we think they have a deplorable human rights record,” Clinton said, according to a transcript released by the State Department.

China, she told the magazine, was anxious about the uprisings jolting the Middle East and North Africa.

“They’re worried, and they are trying to stop history, which is a fool’s errand. They cannot do it. But they’re going to hold it off as long as possible.”

Both sides repeated their stances on North Korea, where China has resisted U.S. pressure to act more forcefully to persuade Pyongyang to back down from confrontation and resume nuclear disarmament talks.

The two sides agreed to boost coordination on Afghanistan and discussed upheavals in the Arab world.

They reiterated their positions on Iran but made no new announcements. China has reluctantly backed U.N. sanctions aimed at curbing Tehran’s nuclear ambitions, but U.S. officials say that some Chinese entities are not complying with them and have urged Beijing to tighten up.

Even so, a senior Chinese finance official said the talks were a “win-win” for both countries. China claimed Washington gave ground by easing restrictions on high-tech exports though U.S. officials said only they would weigh Beijing’s concerns.

On the key issue of exchange rates, Geithner said China needed to allow a faster rise in the value of the yuan, a comment brushed back by China’s Vice Finance Minister Zhu Guangyao, who said Beijing will move at its own speed.

The yuan has appreciated 5.14 percent since being loosened from a two-year peg to the dollar last June, well below what many U.S. lawmakers believe is needed to allow for a level playing field for U.S. producers in global markets.

China on Tuesday reported a hefty trade surplus and record exports in April, ammunition for its overseas critics.

Surprisingly, according to a U.S. official, China — the United States’ biggest creditor — raised no concerns about U.S. budget deficits, which could top out at $1.4 trillion this year.


In a potentially big step forward for U.S. firms seeking more access to China’s financial services market, China agreed to let U.S. and other foreign banks sell mutual funds in China and provide custodial services.

However, some U.S. commentators said China’s past behavior suggested U.S. companies might see little benefit.

“They let you in the market under conditions where you cannot be a real competitor,” Derek Scissors of the conservative Heritage Foundation said. “That’s what they’ve done every single time, so that’s what I expect will happen with mutual funds.”

U.S. officials indicated Beijing would also consider letting foreign insurance companies sell auto insurance for the first time in China, which is becoming the world’s largest car market.

China also said it would take steps to try to ensure the software that government agencies used was not pirated.

Perhaps of most significance was a fresh pledge China made on government purchasing policies that U.S. and European firms had complained locked them out of a big market.

As part of efforts to spur innovation, Beijing had sought to ensure government purchases came from firms using Chinese-owned technology.

However, in January, China pledged that government purchases would be delinked from its “indigenous innovation” policies.

It stated explicitly that the pledge extended to purchases by local governments — not only the central government — answering a big concern of U.S. businesses.