/ 4 November 2009

Obama plays China card, but who holds the ace?

Although United States President Barack Obama has never set foot there, China cast a long shadow in the Pacific region where he grew up.

Obama, who will visit Shanghai and Beijing for the first time on November 15 to 18, spent much of his childhood in Hawaii, five time zones away from Washington, DC; and beginning in 1967, when he was six years old, he lived in Jakarta for four years.

At the time, China was in the throes of chairman Mao Zedong’s bloody Cultural Revolution. Abroad, the nation was less interested in selling widgets than in promoting Mao’s brand of radical communism — a force the US saw behind communist movements and political upheaval in Vietnam, Indonesia and elsewhere in Southeast Asia.

In 1979, Obama’s senior year at Punahou school in Honolulu, China and the US normalised diplomatic relations, launching a three-decade period in which ties between the two grew inexorably tighter and deeper — and complicated.

”Think of what China was in 1979: it was an autarkic, insular, inward-looking country that was preoccupied with its own internal things,” said a senior US official. ”Even 10 years ago … there was still a sort of sense of ‘We’re not a part of these global rules, we’re not doing this stuff.’ Now they see themselves as sitting at the table.”

If there were any doubts that China would have a seat at the table from now on, Obama dispelled those when he sent Secretary of State Hillary Clinton there on her first official trip abroad — not Pakistan, Afghanistan or any other foreign policy hot spot.

”That the first major visit [was] to China, and to Asia as well, is symbolic of where the locus of international economic activity — and to some degree the locus of international activity, period — is going to be in the coming years,” said economist and author Zachary Karabell, whose new book Superfusion posits that the US and Chinese economies have effectively merged.

Beijing, once considered a wallflower on global affairs, is in turn warming to its more prominent role, though it’s unclear that will translate into greater cooperation with Washington on issues such as climate change and the nuclear disputes with Iran and North Korea — not to mention human rights differences.

US Deputy Secretary of State James Steinberg highlighted the tension at the heart of the relationship in a speech in September. ”Given China’s growing capabilities and influence, we have an especially compelling need to work with China to meet global challenges,” he said.

But Steinberg added that there was a tacit bargain in which the US expects China to reassure the rest of the world that its growing role ”will not come at the expense of security and wellbeing of others”.

That of course includes America’s.

”The big challenge there is going to be to maintain a competitive US economy, and at the same time to maintain a high degree of stability and equanimity in the US-China relationship,” said Clyde Prestowitz, president of the Economic Strategy Institute think tank.

Indeed, even as the US and China have grown closer diplomatically, their economic and trade ties have deepened to the point of mutual dependence. Not only does China depend on the US export market to fuel its high-flying economic growth rates, the US relies on China’s vast savings to help finance its burgeoning budget deficits.

”It is clearly unsustainable. This relationship helped give rise to global economic imbalances,” said Ben Simpfendorfer, an economist with Royal Bank of Scotland in Hong Kong. ”If we are ever going to free ourselves of these imbalances, we need to reverse this relationship, get China to buy things in the US and the US to invest in China.”

”Stakeholder” strategy
When it comes to the big foreign policy issues of the day, the Obama White House and that of his predecessor George Bush tend to live in opposite worlds. The rare exception is China.

Obama’s approach builds on aspects of the Bush administration’s stance toward China, which encouraged Beijing to be a responsible ”stakeholder” in the global community.

But all indications are that the Obama White House intends to move the bilateral relationship to the next level, making it more of a partnership — and that in turn is raising hackles among some traditional US allies, who often don’t see eye to eye with China and now worry they will be marginalised.

One of the clearest signals of the Obama administration’s desire to give China and other large, fast-growing economies more global clout was the decision — adopted at the Pittsburgh Group of 20 summit in September — to make the G20 the premier forum for discussing global economic issues.

The shift reduces the role of the G7 and G8, groups dominated by rich Western countries that have long enjoyed elite status in global economic decision-making. And that has led to some European anxiety that the G20 could give way to a G2 of the US and China.

In Pittsburgh, European officials privately vented frustration at a US willingness to bend over backwards to give China a voice. During one session on International Monetary Fund voting power, a European official became so angry at China’s position he had to leave the room to cool down.

At a luncheon, some Europeans were less astonished by China’s refusal to include climate change in the communique than by the US’s willingness to go along. Several delegates could barely eat their lunch, according to a former US official who was told of how the discussion played out.

But the Obama administration wants to reassure Beijing that the US, for one, welcomes China’s new assertiveness on the world stage, even if the two countries don’t always agree.

Climate change is expected to be a major topic of Obama’s meetings with President Hu Jintao when he visits Beijing. Ahead of the December 7 global climate talks in Copenhagen, the administration sees this issue as a key test of whether China will step up to the plate as a truly global player.

”What we’re seeing here is for the first time really in the history of US-China relations, truly global issues are moving to the center of the US-China relationship,” said Kenneth Lieberthal, who was a top Asia adviser to former president Bill Clinton. — Reuters