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China-US: look Hu's talking!

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China-US: look Hu's talking!


Rivals but also partners. The world’s eyes are firmly fixed on Washington as the leaders of the globe’s two biggest powers hold long anticipated talks. Presidents Obama and Hu Jintao meet against a background of deepening ties but also friction over the economy.

The main bone of contention is China’s currency and Washington’s charge that Beijing is keeping it artificially weak against the dollar. Despite a 3.5 per cent increase since June last year, the US claims the yuan is still undervalued, giving Chinese exports an unfair advantage. That problem boosts the ballooning US trade deficit with China, which is expected to hit 270 billion dollars this year.

In addition, Beijing is the biggest single holder of American debt, with some 900 billion dollars in US Treasuries. Some in Washington fear the Chinese could dump those bonds if a major political dispute were to arise. Others, however, think that would be counterproductive to China’s interests.

Analyst Kenneth Lieberthal, from The Brookings Institution, said: “Both governments, both countries are now economically highly interdependent. Both are facing the needs for major structural adjustments in their economies. We need to understand what each other is doing and why and how we can be supportive, because those structural adjustments work for both countries.”

But it is not just the economy. In the diplomatic arena, Washington is seeking more help from China to persuade North Korea to abandon its atomic programme, which the Americans believe is for military purposes. It is the same scenario with Iran. The White House wants Beijing to take a firmer stance with Tehran over its nuclear ambitions, despite the close ties between the Iranian and Chinese leaderships.

With such issues on the table, and China’s growing economic and military clout, many are billing Hu Jintao’s US visit as the most important since Deng Xiaoping’s historic trip in 1979 and the formalisation of ties between both powers.

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