Playing the anti-China card

President Obama has pinned his re-election hopes on a change of policy that threatens trade ties between the two countries

Recent China-targeted initiatives by US President Barack Obama have soured Sino-US relations.

At the just-concluded East Asian Summit, Obama reiterated an increased US presence in Asia and announced a stance on the South China Sea disputes that is at odds with the diplomacy of Beijing on the issue. In his preceding visit to Australia, he also unveiled a plan to station 2,500 US troops in the country within the next five years. These, along with the provocative remarks recently made by the Obama administration on China's renminbi exchange rate and a raft of actions that have harmed China's core interests, including an arms sales package to Taiwan, Obama's meeting with the Dalai Lama and Washington's increased anti-dumping and anti-subsidy investigations against China, have seriously affected the stable development of Sino-US economic and trade relations.

Obama was once viewed by Beijing as a pragmatic US leader, as indicated by his efforts to set up the Strategic and Economic Dialogue mechanism with China and work with Beijing to tackle the global financial crisis and resolve other major global issues. However, the latest developments are an indication that there has been a change in the Obama administration's policy toward China in the face of the US' stubbornly high unemployment rate and weak economic growth.

An escalation in tensions between the US and China is by no means wise at a time when China is the biggest holder of US national debt and its fastest-growing export market. A strengthened economic and trade relationship with China will undoubtedly help the US create more jobs and expedite the pace of its much-needed economic recovery.

Although it has managed to pull out of a lingering recession, the US economy has failed to achieve a sustained recovery. The US' current unemployment rate remains at 9 percent and the Organization for Economic Cooperation and Development expects it to stay at around 8.9 percent next year. Plagued by such a high jobless rate, the US' economic growth rate in the third quarter, the most robust among this year's first three quarters, was only 2 percent. According to a September prediction made by the International Monetary Fund, the world's largest economy will have a growth rate of only 1.8 percent next year and will be unable to effectively withstand the effects of any major risks from the outside world. As US pollster Bill McInturff has observed, the average US consumer confidence index is usually 95 when a president wins re-election and 76 when losing the re-election contest. In November, the index was only 55, indicating Obama's prospects for re-election look particularly gloomy.

Obama has vowed to double US exports within five years, but to realize such an ambitious plan, an average annual 15 percent growth rate is needed. But China has been the only market to which the US has maintained such a high export growth since 2000. Such a fast US export momentum has continued into this year, 18.3 percent in the first nine months. Washington should acknowledge the importance of a stable external market to the realization of such a target. It should know that stronger export restrictions on China will worsen the current international trade environment and make the goal unattainable.

The current policy of containing China being pushed by the US Congress and the Obama administration, if kept unchecked in the future, will inevitably cause huge damage to the otherwise healthy advancement of relations between the two countries and will likely bring their economic and trade ties to the brink of a trade war. The reversal of the long-established win-win trade pattern will not only damage China's interests, it will also damage the interests of China-based American transnational companies. Statistics from the US Bureau of Economic Analysis show the sales revenues achieved by the subsidiaries of US' transnational companies with direct investment in China increased to $243.77 billion in 2009 from the only $3.23 billion in 1994.

In the context of deepening globalization, the significance of the economic and trade ties between the world's two biggest economies goes far beyond the bilateral scope. Thus, a trade war between the two countries would have wide-ranging global effects.

Sino-US cooperation has proved beneficial to both sides and thus the two countries should try to extricate bilateral economic and trade ties from any restrictive political factors. Antagonism and unilateral threats will do no good to the highly interdependent economic and trade ties between the two countries. Politicians in Washington should look at the US' economic and trade ties with China from a long-term, and even self-serving perspective, and try to curb their blame China tendencies.

The author is a researcher with the Chinese Academy of International Trade and Economic Cooperation

(China Daily 12/07/2011 page8)