U.S.-China Relations: Great Powers, Great Issues

President Obama's China Visit Focused on the Financial Crisis, Trade, Climate Change and Asia's Geopolitical Landscape, Says Ogilvy's Scott Kronick and Jamie Moeller

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BEIJING (AdAgeChina.com) -- Barack Obama's four-day trip to China from Nov. 15-19 has touched on many more issues than previous summits between the United States and China.

Scott Kronick
Scott Kronick
China's rapid transformation into a global financial power means that climate change, clean energy and bilateral trade issues have taken priority over traditional summit agenda items like nuclear proliferation and human rights.

As the U.S. president's trip draws to a close, Ad Age China looks at the top issues facing China and the U.S. in a special report by Scott Kronick, president of Ogilvy & Mather Group in Beijing and president of Ogilvy PR in China, and Jamie Moeller, global managing director of Ogilvy Public Affairs Worldwide in Washington, D.C.

Financial Crisis
Analysts debate what role China might play in responding to the global financial crisis, given its huge foreign exchange reserves but relative reluctance to become a major player in global economic affairs and its tendency to be cautious with its reserves. Some have speculated that China may, in order to help stabilize its most important trading partner, the U.S., boost purchases of U.S. securities (especially Treasury securities) to help fund the hundreds of billions of dollars that are expected to be spent by the U.S. government to purchase troubled assets and stimulate the economy. Additionally, China might try to shore up the U.S. economy by buying U.S. stocks.

Ogilvy's Jamie Moeller
Ogilvy's Jamie Moeller
Some contend that taking an active role to help the U.S. (and other troubled economies) would boost China's image as a positive contributor to world economic stability, similar to what occurred during the 1997-1998 Asian financial crisis when China offered financial aid to Thailand and pledged not to devalue its currency.

On the other hand, there are a number of reasons why China might be reluctant to significantly increase its investments in U.S. assets. One concern could be whether increased Chinese investments in the U.S. economy would produce long-term economic benefits for China. Some Chinese investments in U.S. financial companies have fared poorly, and Chinese officials could be reluctant to put additional money into investments deemed risky. And a downturn in China's economy would likely increase pressure to invest money at home.

In October, the U.S.-China Joint Commission on Commerce and Trade met in Zhejiang Province and signed 11 agreements relating to clean energy, tourism and aviation.

In addition, China agreed to strengthen oversight of the pharmaceutical sector and to investigate copyright infringement of U.S. medical and scientific journals.

In the corporate world, this year has seen numerous cross-border operations and mergers & acquisitions. Just last month, Sichuan TengZhong Heavy Industrial Machinery acquired General Motors' Hummer. Tengzhong will own the Hummer brand, trademark and trade names, and the rights to manufacture Hummer vehicles.

Under the stimulus package implemented at the close of last year, the Chinese government pledged to inject four trillion RMB over the next two years in to the Chinese economy.

The government aims to boost 10 domestic industries: automobiles, steel, shipbuilding, textiles, machinery, electronics and information, light industry, petrochemicals, nonferrous metals, and logistics. This package includes tax cuts and incentives, subsidies and funding to help firms invest abroad.

An even bigger trade issue is the 35% tax on imported Chinese tires imposed by the U.S. due to the belief that the increasing number of imports were hurting domestic manufacturers.

Thes Chinese government is concerned that Chinese products will have no place in U.S. or European Union markets. In response, it announced a tax on poultry imports and auto parts from the U.S.

Climate Change
Currently, China and the U.S. are responsible for 40% of global carbon emissions. President Obama has expressed support for climate change legislation, saying the U.S. should serve as an example and start reducing carbon emissions which cause global warming.

For China, cutting emissions would likely result in slower development. At the UN General Assembly on Sept. 22, 2009, Chinese President Hu stated all countries must fulfill their individual, respective duties to cut overall global emissions. As developing countries need to maintain momentum and continue their current pace of development, richer countries must pass regulations to heavily cut carbon emissions.

Making the issue of climate change a priority, President Hu announced plans to boost renewable energy at a Shandong wind project last month.

Furthermore, China's 11th Five Year Plan outlines goals for reduced pollution levels, and teams have been developed to ensure these goals are met.

Changing Geopolitical Environment
Human rights have been a principal area of U.S. concern in its relations with China. Some policy makers contend that the U.S. policy of engagement with China, especially since granting China permanent normal trade relations status in 2000, has failed to produce meaningful political reform.

Others argue that U.S. engagement has helped to accelerate economic and social change and build social and legal foundations for democracy and human rights in China. President Obama may bring up the issue of freedom of expression, religion, access to information and perhaps Tibet.

A number of policy makers have accused the Obama Administration of de-emphasizing human rights in its early overtures to China.

In May 2009, a bi-partisan congressional delegation traveled to China and met with governmental and non-governmental groups in a visit primarily focused on forging bilateral cooperation on climate change.

From the summit, we should expect public proclamations of energetic and ongoing dialogue. While the thorny issues around trade and the specifics of climate change will certainly be addressed, it is unlikely either leader will be willing to let disagreements overshadow the ongoing need for cooperation between the world's two superpowers.

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