Sino-US relations are showing signs of mounting strain ahead of a high-profile meeting in Washington next week, and analysts fear this could hamper progress in relaxing tensions between the world’s two largest economies.
Chinese and American leaders will convene in the US capital for the latest round of the annual US-China Strategic and Economic Dialogue (SED), with experts warning of signs of a deterioration in political, military and economic ties.
Pieter Botellier, professor of China studies at the Johns Hopkins School of Advanced International Studies and former chief of the World Bank’s Beijing mission, said that relations between the nations had become “very stressed”.
Protectionism on both sides, and ongoing US frustration at the perceived slow pace of Chinese currency appreciation, are drivers behind the growing tension, he said.
Diplomatic sources have identified a similar trend. “The sense is that the American loss of patience with the Chinese on many fronts continues, and is more aggravated now than a year ago,” William McCahill, a former senior diplomat at the US Embassy in Beijing, told Emerging Markets.
“Even though there has been more movement especially in recent weeks on the currency, other doing-business issues – [intellectual property rights] violations and Chinese protectionism – have really come to the fore. These have irritated the US administration and seriously eroded support within the business community.”
On the Chinese side, Bottelier detects a growing frustration with the US’s failure to back China’s quest for full market-economy status in the WTO. “For China this is a really important issue, and the US occasionally makes noises about pushing the conversation along, but nothing so far has come of it,” he said.
Chinese trade officials also feel aggrieved at the perception that mainland corporates are being shut out of American markets. They are concerned about interventions by the Committee on Foreign Investment in the United States (CFIUS) on proposed Chinese takeover attempts of US companies – most recently, Huawei’s attempt to buy US server technology company 3Leaf.
“There is a distinct lack of clarity concerning how the US deals with Chinese investment proposals. Other nations don’t seem to get the same level of scrutiny from CFIUS,” Bottelier said.
The SED, formally announced by US President Barack Obama and Chinese President Hu Jintao at the G20 summit in April 2009, was designed as a platform for high-level discussion on a number of key issues, from trade to international relations.
However, increased disagreement means that the prospect of significant progress on key issues such as currency and protectionism at next week’s Washington meeting, the third installment of the SED, now appears slim.
McCahill said: “I’m quite willing to be pleasantly surprised, but I don’t see the mood in place to achieve progress or any particular incentive on either side.
“We’re going to have a dialogue of the deaf for the next couple of years”, he said, although he did not believe the relationship would “go off the rails”.
While analysts expect little progress in addressing the two nations’ imbalanced trade relationship and political disagreements, they also do not expect a serious public falling out.
ANZ’s Liu said: “Neither side would like to rock the boat. It’s in the interests of both to have a smooth economic relationship.”