US-China Economic Cooperation Calls for Political Vision

State Councilor Yang Jiechi says President Xi Jinping's state visit to the US will address practical cooperation.[Photo by Xu Jingxing / China Daily]

The recent roller coaster rides of Chinese and U.S. stock markets rattle investors, but should not dampen their enthusiasm in economic cooperation. Economists often label such downturns as "volatility," in which the economy is assumed to slow down but enjoy a safer and more sustainable growth. The current downturns, however, are so dramatic that they do not seem like a minor adjustment, causing concerns of the two largest economies' health.

In the United States, the past year has witnessed slow economic growth and unusually low inflation. Despite economic data suggesting U.S. monetary policy is tight, many believe it simply too loose, including some Federal Reserve officials. That's why there is an ongoing debate on whether to make the policy even tighter by raising interest rates for the first time in six years. But if it were that loose, U.S. economy should be more booming with rising inflation. The reality shows the opposite: U.S. economy's growth and inflation have been low all these years.

On the other side of the Pacific, China's GDP has been mainly driven by government spending, rather than consumer spending, and the latter accounting for only 35 percent of its GDP, which is one of the lowest levels in the world. What's more, China's investment rate becomes very high, reaching almost half of GDP. The real concern is that China's investment productivity is meager. For decades, China has been attracting capital and taking advantage of ample labor resources to achieve high-speed economic growth, but not nearly good at fostering innovation and protecting environment. Now it begins to face grim environmental constraints and an acute shortage of skilled labor as it runs the second largest economy. A widening inequalities between rural and urban areas and other domestic issues could undermine the sustainability of China's economic advances.

Facing their unique challenges, the world's two largest economics have all the reasons to put full effort in their economic cooperation, which is almost certain to be at the top of the agenda when Chinese President Xi Jinping visits the United States this month. It makes little sense if they choose to do otherwise. Thus the benefits and necessity of such a cooperation are self-evident, which is fully grasped by policy makers in the two countries.

Now the key is how to make the cooperation more efficient and sustainable, which has never been so closely watched by the international community than today. It is, indeed, the most important bilateral relation in the world, which, at the same time, faces new challenges. To the world, it has become clear that almost every world's problem becomes easier to solve if the US-China relationship is on solid footing.

The recent history demonstrates that the two countries could collaborate well on a growing array of hot-button international issues, such as anti-terrorism drive, global warming, Iran's nuclear program, the North Korea issue, and global pandemics such as Ebola. But more work is needed to improve the bilateral political and economic ties. Serious effort has been made to address sizable gaps between the two countries over a host of major issues concerning the bilateral ties, including human rights records, cyber espionage, business regulation and trade surplus.

One way to see this is that it takes time for both sides to learn how to handle the more complex relations between them: The U.S. needs time to get used to China's status of a new superpower in global economy, while China itself is learning to get used to its role as a regional power and growing economic responsibilities to the world. But what's clear to both nations is that they must move forward despite old and new challenges, and replace confrontation with more cooperation over a wide range of political and economic issues.

The good news is that both countries want to avoid confrontation and seek to rely on cooperation to change the status quo. By many measures, it is a fool's game if anyone chooses to ignore China's growing status as a regional political power and soon-to-be the largest economy in the world. In fact, the U.S. and Chinese economies are so intertwined that either could not go well without the other. The trade between the two countries reaches more than $600 billion. China has become the largest foreign holder of U.S. debt, which owns more than $1.2 trillion in bills, notes and bonds, according to the U.S. Treasury. China has also been a major agricultural importer of U.S. food and grain. In addition, U.S. schools have attracted more than 274,000 Chinese students, while 25,000 American students study in China.

An economic prosperous China will not only contribute to the stability of Asia, but to the peace and stability of the whole world, including the United States. The United States has the duties to engage China and create an environment encouraging the new economic power to take responsibility commensurate with its wealth and power. China also deserves a seat at the international table, whose cooperation is essential in solving almost all global economic problems.

It is noted that the benefits of such a cooperation may be clouded as the U.S. presidential campaign kicks off this years, which frequently drives U.S. political agenda out of its track. American foreign policy, which is often dominated by a bipartisan consensus, has a strong impact on its economic policy. For example, China's appreciation of its currency should be taken as a welcome step as it will allow market forces to have a greater role in setting the exchange rate. But when the appreciation was so sharp that U.S. politicians and investors view it as a clear signal of a faltering economy.

As President Xi Jinping boards his plane and kicks off his state visit to the United States, some new ground should be broken in terms of U.S.-China economic cooperation. With global economic stability at stake, both countries share a strong interest in strengthening economic cooperation, which also shows to the world that the two largest economics can join their hands together and work through their differences in both political and economic issues. It is highly predictable that the U.S.-China economic cooperation will be more political than economic in the U.S. presidential campaign year. At the moment, a political vision is urgently needed from both sides to bring their cooperation to the next stage. President Xi's state visit to the U.S. represents such a vision and effort.

The author, Dr. Zhong Bu, Associate Professor from College of Communications, Pennsylvania State University