11/29/2010 Much Afoot with US-China Relations - B…

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30 Nov 2010

Much Afoot with US-China Relations 2 Record Amou nt of Locked up Shares to

John Melendez
Becom e Tradable Th is Week in China

3 What Happens if Chinese Growth Slows?

China after the US Midterm Elections –
4 China 's Q3 Consu m er Confidence Index Falls

The recent 2010 US midterm elections served as a discussion platform not only for Am erica’s internal issues, but on Inflation Concerns
also for America’s external dealings with other countries. Topping the lis t of electoral bones of contention was
5 New World Departm ent Store Buy s Two
heated discussion about China. During the m idterm s, we saw a curious and seemingly collective bipartisan
agreement to point a finger at China for its effects on the US economy and labor m arket. Projects, Aim s to Expand Self-Owned Store
Network
Now that the hype of the m idterm s has passed, both American and Chinese leaders are left with the reality at
hand. No easy task. Both countries m ust play their cards on many tables, with the rules changing daily along the
way.

:
China’s Rise on the World Radar –
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It seem s everywhere within the news , China shows up more frequently than ever.
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At the global level, international inves tors shivered cautiously when faced with the notion that China may put the All news Marco Markets Finance
brakes on its economy. While m uch of the res t of the world founders in s tagnation, few countries can boast that Talk Business & Industry Opinion
their internal economy continues to grow at an uncannily breakneck pace. On this same topic, we s ee China
Breaking news
recently attaining tenure as the world’s s econd largest economy. Elsewhere in news, the Middle Kingdom also
rises up as the globe’s second largest energy cons umer. But such recognition as an energy consum er cannot
come without a cost. As one of the world’s largest energy consum ers – whose energy bank is greatly derived from
coal – China als o adm its being one of the largest environm ental polluters in the world.

Closer to US shores, we hear news that China will play a part in the recovery of what was once thought to be an
exclusive American institution – General Motors. With GM’s announcement to offer itself up through an IPO, two of
China’s largest national banks – the Industrial and Comm ercial Bank of China (ICBC) and China International
Capital Corp (CICC) – have s tepped forward to offer an active hand in the US industrial giant’s recovery. Pending
further red-tape approval, the Shanghai Automotive Industry Corporation (SAIC) may cast in its lot with General
Motors als o.

Other recent issues such as rare earth export res trictions, the as cent of Tianhe-1A as the world’s fastest
supercomputer, and China’s place as home to the mos t foreign students in the world – these all complem ent
other is sues we’ve been hearing about China for years. Territorial s pats with Japan and Vietnam continue to flare
up. China’s footwork with Taiwan still res ounds s trongly on the political dance floor. And Beijing’s dealings with
socio-political hotspots like Tibet and Kashm ir strike the newswires with a continuous thrum.

Thes e all pan out as a clear m essage for thos e who haven’t already m ade note on a long-obvious notion: China is
now a force to be reckoned with. Engagement with this awakening giant must com e further to the fore.

Something Afoot with US-China Diplomacy –

In a coordinated recognition for serious dialogue, at least three key US figureheads have recently m ade their
rounds in Asia. Well aware of their diminished clout with the Middle Kingdom, their moves collectively com prise
background legwork to bolster s upport elsewhere for America’s interests in Asia.

US Secretary of State Hillary Clinton has recently concluded a diplom atic tour of Vietnam, China, Cam bodia,
Malaysia, Papua-New Guinea, New Zealand and Australia. Mrs. Clinton’s trip serves as an as surance to China’s
neighbors of American commitm ent to its presence as a major regional player in the As ia-Pacific. Said Clinton
during her tour, "As China becomes more of a player in regional and global affairs, then we expect that China will
be a respons ible player and will participate in the international framework of rules that govern the way nations
behave and conduct them selves." Clinton’s trip also included a meeting with Japan Foreign Minister Seiji Maehara
in Honolulu.

Form er US Pres ident Bill Clinton s poke to a receptive audience in Taiwan this Sunday, and his visit included a

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11/29/2010 Much Afoot with US-China Relations - B…
meeting with Taiwan President Ma Ying-jeou. Mr. Clinton praised the recent warming in China-Taiwan relations
amidst an opening of trade between the two lands. Clinton hailed the two neighbors’ recent agreement in June to
a reduction in trade tariffs aimed at helping one another’s economies . In spite of progress in these recent months,
the decades-long disagreem ent over Taiwan’s s overeignty loom s in the background. Since China and Taiwan
split am idst civil war in 1949, China has never slackened on its threat to use force against Taiwan as a possible
method to annex the is land.

US President Barack Obama attended three main conferences in recent weeks . He firs t attended the Eas t Asian
Summit (EAS), followed by the G20 summit in Seoul – which resulted in lacklus ter support from other nations on
Obama’s stance on the yuan. President Obam a’s further inability to push through the long-awaited US-South
Korean trade deal (KORUS) inflam es Am erica’s noticeably diminished influence in the region. While attendees of
the later APEC m eeting confirmed their willingnes s to discuss bilateral trade agreements with one another,
President Obama highlighted his attendance in a speech highlighting China's ris e to power. He hinted that the US
and Japan should work together to develop an agenda to establish a more solid US-Japan cooperation.

Other Observations from the Watch Deck –

In an orchestration of maneuvers on m any fronts, the US is engaging China m ore than ever before. While some
fancy footwork is done at China’s doorstep, other maneuvers take place further from China’s shores.

On the military front, gestures are carefully m easured with politics in m ind. In early 2010 the US tested the waters
by invoking China’s wrath through an announcement of a forthcom ing sale of arms to Taiwan, an island that som e
authorities in China cons ider a “renegade province.” US warships docked earlier in the southern harbor of Hong
Kong. US Comm odore Mark Weber’s words about the event are well guarded yet som ewhat upbeat: “Well, you
know that's som ething we let our seniors handle, as well as the Department of State but they've all stated in the
past, we are certainly for a cooperative effort and a peaceful rise and peace and s tability in the region.”

Elsewhere in the world we see the US shoring up its alliances with other countries m utually concerned with
China’s rapid rise. As mentioned earlier Obam a has as ked Japan to s trengthen its ties with the US. Washington
has recently announced its backing of India’s bid for a permanent seat on the United Nations Security Council.
Form er foes US and Vietnam are making deals to s trengthen political and economic ties. Obama’s visit to Asia
was to speak with the region’s markedly democratic nations – Indonesia, India, South Korea, and Japan – all of
which encircle China and are key players to managing its rise.

A Monkey Wrench for Good Measure –

Topping the m ix is North Korea – audaciously throwing in a m onkey wrench by shelling South Korea’s island base
of Yeonpyeong. South Korea’s President Lee Myung-bak has stated further bombing would result in an exercise of
“self-defense right” with its northern neighbor. As the world looked in shock China first stood by in m easured
silence, and later answered – but not by slapping down North Korea as the US wished it would.

Instead China skirted addres sing North Korea directly and turned the tables on the US. China has told the US to
cease naval war games with South Korea, and to steer its ships out of the area. Korea is not the issue in China’s
language; rather it is the pos sible US naval encroachment of China’s “exclusive economic zone”.

China’s kid-glove handling of North Korea seems not without reason. As the New York Tim e’s Helene Cooper
clearly states it: “Beijing has recoiled at reining in its unruly neighbor to the eas t, as the Obam a adm inistration
implored it to do las t week, because it doesn’t want to des tabilize North Korea’s secretive, hermit regime to an
extent that could lead to the government’s collapse and the North’s eventual reunification with South Korea.” In
Chestertown, Maryland, Was hington College Asia expert Andrew L. Oros states, “China isn’t 100 percent on board
with U.S. efforts” because Beijing is “concerned with the idea of a unified Korea with U.S. troops stationed there.”

A Work in Progress –

With all hands on m any decks, with cards being played on many tables, and with statem ents made both in public
and whispered behind closed doors – the US, China, and the m any neighbors of the As ian region seem only to be
posturing to get themselves through the day. This said…

Assuming all are working toward a sustainable and mutually equitable paradigm, then the method, the m eans –
and indeed the acts of madness – are a collective work in progress.

John Melendez is a US-b ased journalist and a former business expatriate of China. Contact him at:
johnm @journalist.com

Tags: China, US, relation

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