By Tao Wenzhao
US Secretary of the Treasury Henry Paulson visited China in the
latter half of September. He and Chinese Vice-Premier Wu Yi launched the bilateral economic strategic
dialogue, which is widely viewed as important leverage to promote
Sino-US relations.
For China and the United States, economic ties have become a new
cornerstone for bilateral relations as a whole, as is shown by the
experience since the end of the Cold War.
Over the last decade or so, economic co-operation and trade
between the two nations has been rising in a sharp upward
curve.
Figures provided by the Chinese customs authorities indicate
that the total trade volume between the two countries hit US$211.63
billion in 2005, compared with a mere US$8.26 billion in 1988. The
United States is China's second-largest trade partner and China the
United States' third largest. Moreover, the United States is the
biggest investor in China, investing US$48.03 billion in total
between 1980 and 2004.
China needs US investment and US consumers buying Chinese-made
goods. Conversely, the United States needs China's help in bringing
down labor cost and the prices of capital and commodities.
Low-priced Chinese goods help make it possible that the United
States enjoys low inflation. Imports from China also help the
average American household save more than US$600 each year.
All this signifies that the bilateral economic co-operation has
great potential for expansion in the future.
Two other events of watershed significance are the bilateral
accord reached by China and the United States over the former's
joining the World Trade Organization and the US legislation
granting China Permanent Normal Trade Relations (PNTR) status in
2000.
Starting in 1990, the US Congress' deliberation on granting Most
Favored Nation status, now PNTR, to China on an annual basis
constituted a destabilizing factor with respect to bilateral
relations. Elements harboring hostility to China took advantage of
this yearly occasion to pour dirty water on China, which
unavoidably hamstrung relations. This unpleasant situation, going
on for more than a decade, was eventually put to an end by the act
granting PNTR status to China.
The strategic economic dialogue is important because it
redefines bilateral economic relations. China has enjoyed a
favorable trade balance, and the United States a reversed one. This
created a wrong impression that China needs the United States more
than the United States needs China. Some in the United States harp
on the condescending note that it is the United States that makes
China's favorable balance possible.
The fact that the United States has initiated the strategic
economic dialogue shows that it assigns much more importance to
Sino-US economic ties than before and has a deeper understanding of
both countries' economic interdependence on each one.
Shortly before starting his Asian trip, Paulson said in
Washington on September 13: "The Unites States has a huge stake in
a prosperous and stable China, a China able and willing to play its
part as a global economic leader."
He also noted: "The biggest risk we face is not that China will
overtake the United States but that China won't move ahead with the
reforms necessary to sustain its growth."
Different people have different interpretations of Paulson's
remarks. But one signal is certain: the two economies are
indispensable to one another, sharing the economic weal and
woe.
The economic strategic dialogue will cover an unprecedented wide
range and go into unseen depth. This is, therefore, different from
the mechanisms introduced in the past, which were designed to
address the disputes and friction arising from a given economic
sector at a certain period of time.
Looking at the bilateral economic relations from a general
perspective, the strategic economic dialogue addresses the
framework for bilateral economic ties in the long run, geared not
only to the present economic affairs but also to those for
generations to come.
A message is thus conveyed: The United States hopes to know
China's long-term reform targets and plans, China's economic policy
and the direction in which the Chinese economy is going, all of
which are likely to impact the US economy.
Conversely, China will be able to better know the US economic
policy and the means to carry it out. The mechanisms of the
strategic dialogue and the old mechanisms that are already in place
complement each other, which facilitates clearing away
misunderstanding and promoting mutual trust. All this will
positively impact Sino-American economic relations in the long
term.
The United States is the world's No 1 economic entity and its
largest trade power. China ranks fourth in terms of economic size
and is the third-largest trade player on the globe. Furthermore,
China's economic standing is still rising among its global peers.
It is widely acknowledged that China and the United States are
major engines that power global economic growth. Any mishap in
these two economies is bound to cause harm to others.
In addition, the dire likelihood that the derailment of one
country's economy may lead to regional - or even global - recession
should not be ruled out. In 1997, for instance, financial crisis
first broke out in Thailand and soon spilled over to the whole of
Southeast Asia. Fortunately, the dialogue mechanism will be able to
send out early-warning signals should such a crisis raise its head
again.
Any set of bilateral relations is dictated by the common
interests of the two parties involved. However, people,
decision-makers in particular, can play a very important role that
cannot be exaggerated.
Now that Paulson has taken the helm of the US Treasury
Department, we look forward to him playing his part in promoting
bilateral economic ties in the coming two and a half years.
Paulson has visited China more than 70 times, venturing to
mountainous villages as well as touring major cities. He thus
understands China's national traditions, historical experiences and
current situation better than many other US officials.
Moreover, the portfolio of treasury secretary carries much
importance among US cabinet members. All this facilitates his
fulfillment of his tasks with regard to promoting US-Chinese
economic ties.
Protectionist feelings still run high in the US Congress at
present. US Senators Charles Schumer and Lindsey Graham are pushing
for a vote on their 27.5 percent penalty tariffs on Chinese imports
unless China moves to allow a greater appreciation of the renminbi.
Paulson's China visit and the launch of the Sino-US economic
strategic dialogue are of particular importance at this moment.
China is honoring, and will continue to honor, its pledges made
upon its joining the World Trade Organization. But in handling some
specific matters such as the renminbi's exchange rate, caution and
patience are called for. Being careful and cautious on sensitive
economic matters is a responsible attitude for the world economy as
well.
The author is a researcher with the Institute of American
Studies under the Chinese Academy of Social Sciences.
(China Daily September 28, 2006)
