Sino-U.S. Economic Ties May Keep Lid on Crisis

Three decades after the Bamboo Curtain came down, China and the United States have gradually grown together in ways that not even the standoff over an American spy plane can easily rend asunder.

The Bush administration has warned almost daily about the risks China is taking by detaining the plane’s 24-member crew.

“Every day that goes by increases the potential that our relations with China could be damaged,” the president said Monday.

And the potential stakes for China are indeed serious if either the White House or Congress decides to take punitive retaliatory action. The possible consequences run the gamut from the caliber of U.S. weaponry sold to Taiwan, to the site of the 2008 Olympics, to the number of Chinese students given visas to study in America.

Yet for all the diplomatic noise and mounting congressional bluster, the futures of the world’s preeminent power and its economically fastest-growing nation are so deeply intertwined that neither side can afford to allow the confrontation to produce lasting damage, according to U.S. and Chinese specialists.

“By strict measurements, China does have more at stake than the United States. They need our markets, a stable global economic environment, foreign investment and neighbors around the region to feel calm about [Beijing’s] arrival on the international scene,” said Kurt Campbell, a senior fellow at the Center for Strategic and International Studies in Washington.

“But that analysis overlooks the fact that the United States needs good relations with China for similar reasons. We depend on a stable environment for global economic and commercial reasons. Asia is increasingly the scene of the most dynamic activity. And any sense of profound disturbance between the U.S. and China has the potential for really undermining global confidence in a dramatic way.”

As demonstrated during the past six presidencies, a central feature of successful U.S. foreign policy is managing China carefully, Campbell added.

China is now America’s fourth-largest trading partner, to the tune of $116 billion in annual commerce, according to the International Trade Administration. So any significant reduction in trade would hurt both nations. China would lose one of its most important markets, while the United States would have to turn to other, more expensive sources and possibly do without some goods, depending on what action the White House or Congress decided to take.

And the numbers tell only part of the story: Any fundamental change in U.S.-China relations could also alter what have become customary ways of life and a gradual acceptance of each other’s people since President Nixon and Chinese Premier Chou En-lai launched the process of rapprochement in 1972.

In America, China is the source of thousands of everyday items, ranging from Beanie Babies to sports equipment, from clothing to appliances, all eagerly snapped up by American consumers because of competitive prices.

But signs also abound in China of the once-isolated Asian giant’s increasing interdependence with the United States. American dollars have poured in to build gleaming skyscrapers, massive factories, hotels and big power plants. American aircraft, machinery, medical instruments and plastics are among the big-ticket items sought by China.

And despite occasional flare-ups such as the plane standoff, American ways continue to be embraced by the Chinese. There are 54,000 students from China enrolled at U.S. universities, and American fast-food outlets are proliferating in China’s big cities.

American businesspeople, moreover, now form large communities in cities like Beijing and Shanghai, where they jostle for seats at McDonald’s outlets and KFCs with Chinese customers, many of them affluent young people who not only were educated in the United States but are also employed by U.S. companies.

Zhang Jie, who works for an American public relations firm in Beijing, is confident that Sino-U.S. economic ties will flourish despite the political differences between the two countries.

“Political conflicts have always been there--not just the spy plane incident,” she said. “We have all kinds of differences over problems like Taiwan, Tibet and human rights, but investment and trade have never stopped.”

Zhang, 33, recognizes that the U.S. government could significantly scale back those ties by trying to bar Beijing’s pending accession to the World Trade Organization or denying China normal trading privileges, as some members of Congress have threatened to do.

But Xiong Li, who works for a company that exports clothes and toys to the United States, cites recent history as his guide when he predicts increasing economic relations.

“The U.S. didn’t stop investing in or doing business with China after the embassy bombing [in Yugoslavia in 1999]. The Taiwanese didn’t pull back their business in 1996 during the missile maneuvers or after Chen Shui-bian was elected president [of Taiwan last year],” said Xiong, noting incidents that have roiled China’s relations with the U.S. and Taiwan.

“Economic globalization is an international trend. No single government can stop it,” said Xiong, 45. “Big companies only go after profits, not politics.”

The biggest danger to trade, the foundation of U.S.-China relations for the past 30 years, is that it will be politicized, triggering retaliation against Beijing followed by a cycle of tit-for-tat actions, analysts say.

Some in Congress already have threatened to retaliate for the detention of the spy plane’s crew by not renewing China’s normal trading status this year. The annual review is required until Beijing formally completes the process required to join the World Trade Organization.

Some analysts also worry about a possible spillover of the emotions from the current confrontation: Americans might become increasingly wary of China’s rise and the potential complications of interaction, and Chinese might become more nationalistic and increasingly angry about America’s noncommercial activities, such as aerial reconnaissance.

Yet for all the tensions that may lie ahead, the fundamentals will not change much, analysts in both countries say.

“The reality for the next decade is that it’s going to be an increasingly complex relationship that’s in that fuzzy ground between friend and foe,” Campbell said. “Managing the relationship will be increasingly difficult. Perhaps reluctantly, and probably with misgivings, however, both sides will recognize that they have to deal with each other.”

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Wright reported from Washington and Chu from Beijing.