The developing US-China relationship

By Frank Ching

The political track of the United States-China strategic and economic dialogue held last week in Beijing was beset by bickering, such as that over China’s maritime disputes and charges and countercharges over cyber espionage, with little of substance achieved. Things were different, however, on the economic track, where there was movement on negotiating a high-quality bilateral investment treaty and reduction of government intervention in the value of the Chinese currency. Concessions were not one-way. The U.S. agreed to “continue to move towards a growth pattern characterized by higher investment and national savings, cut federal budget deficit, reduce debt-to-GDP ratio, encourage personal saving, and pay closer attention to the impact of the U.S. monetary policy on the international financial system.” Even on the strategic track, there was reason for some satisfaction as the two sides proved willing to set aside differences and not let one or two issues hijack the whole relationship.

China refused to convene the cyber working group, canceled after the U.S. announced the indictment by the Department of Justice of five Chinese military officers for allegedly having stolen American corporate or proprietary information and transferring it to China’s state-owned enterprises. The Chinese side made it clear that for cooperation on the crucial cyber issue to resume, the U.S. must first demonstrate “sincerity” by dropping charges against the Chinese officers. Despite such problems, however, the two sides were able to make progress with dozens of “outcomes” on each track. President Xi Jinping, meeting Secretary of State John Kerry and Treasury Secretary Jacob Lew, the U.S. co-chairs, called on the two sides to accelerate discussions on the bilateral investment treaty, increase military contact while increasing cooperation on climate change. The approach, he said, is for the two sides to “seek common ground while reserving or resolving differences and conflict.” Similar sentiments were voiced by the American president, Barack Obama, who stated in a letter that the two countries should demonstrate to the world that even when “the relationship is as complex as ours, we remain determined to ensure that cooperation defines our overall relations.” During talks on the economic track, the U.S. and China agreed to intensify negotiations on a bilateral investment treaty with the aim of agreeing on a text this year and starting negotiations on China’s negative list in early 2015. The negative list reflects a major shift that China agreed to last year, with a presumption on openness and with areas closed to foreign investment being confined to a list.