When Chinese President Hu Jintao visits America’s industrial heartland this week, he’ll demonstrate why President Obama will have a tough time winning concessions on economic issues creating friction between the world’s two largest economies.
In advance of formal meetings between the leaders, which begin in Washington on Wednesday, the administration has signaled that Beijing must get serious about halting Chinese theft of American intellectual property, eliminating barriers to U.S. imports and revaluing China’s currency.
But Hu’s planned visit to the Chicago area Thursday represents an attempt to turn the tables on Washington — at least in terms of public perception. Thanks to a relative handful of Chinese investments in U.S. companies there and in other parts of the Midwest, Beijing can argue that it is helping to bring economic renewal to a region long plagued by decline.
In effect, Hu will be saying, “Look here. Despite all your complaints, we’re not a problem for the U.S. economy. We’re actually creating and sustaining jobs right here in America.”
In parts of Illinois at least, Hu’s message is likely to be well received. Chicago has a sister city relationship with Shanghai, and Chicago-area companies including the parent company of United Airlines and Continental Airlines, Boeing Co., McDonald’s Corp. and Motorola are deeply embedded in China, heightening the perception of mutually beneficial ties between the countries.
The message is likely to be well received in China as well. Washington’s complaints have stirred popular anger over what is seen as an attempt to deny China its rightful place as a world power.
“Hu’s job is to re-brand China,” said Minxin Pei, a China specialist who directs the Keck Center for International and Strategic Studies at Claremont McKenna College.
It won’t be easy. Outside of purchases of U.S. bonds, China invested an estimated $6.2 billion in U.S.-based companies, real estate and other assets last year, according to Derek Scissors, a China expert at the Heritage Foundation in Washington. That’s a blip compared with the projected $275-billion trade surplus China enjoyed with this country.
Moreover, the ability of President Obama and Hu to make decisions on major economic issues is tightly circumscribed by domestic politics in both countries.
Obama faces increasingly belligerent calls for getting tough with China, not just from newly empowered Republicans but from labor unions and rank-and-file Democrats in key industrial states. A bipartisan group of senators is introducing legislation this week that would sock China with large tariffs if it doesn’t raise the value of its currency, which now gives it a huge advantage in exports.
“The American dream is imperiled,” Sen. Charles E. Schumer (D-N.Y.) warned Monday.
Republicans have served notice that they will make the administration’s China policy a major battleground.
Charles Freeman, who was a China negotiator for President George W. Bush, said he recently attended a meeting of newly seated House members and was surprised at the vehemence with which they discussed China.
“The mood wasn’t just restive — it was positively nasty,” said Freeman, now with the Center for Strategic and International Studies in Washington. “This is tricky for the administration.... The White House said from the beginning that the Hu visit would be about ‘jobs, job, jobs.’ If it ends up being about ‘how China stole our jobs,’ that’s a big loss for the White House, and for U.S.-China relations.”
For his part, Hu also faces political crosscurrents at home. The intellectual property, currency valuation and other issues that Washington wants him to address threaten to slow the booming growth of China’s economy — growth that is crucial to political stability and the ruling Communist Party’s grip on power.
As China’s economy has boomed and its society become more complex, political decision making more and more requires consensus-building. Hu has far less unilateral authority than his predecessors in Beijing.
Important factions at home, for instance, want to strengthen China’s currency as a way to fight domestic inflation brewing from its overheated economy. But other powerful forces within government and in wealthy coastal provinces argue against it.
As a result, both Obama and Hu would have trouble making significant concessions without drawing paralyzing opposition at home.
A year ago, for instance, Obama proposed overhauling the way Washington restricts exports of certain goods for security reasons. Easing such restrictions would pave the way for the U.S. to boost shipments to China. But for months the effort has been bogged down in Congress.
“We don’t seem to have the political will” to do what’s needed, said Nicholas Lardy, a China expert at the Peterson Institute for International Economics. “So we let the Chinese buy it from the Japanese or the Germans… [and] shoot ourselves in the foot.”
The currency issue also represents a tangle in both China and the U.S. Obama and most independent economists argue that allowing a rise in the value of the yuan — which Beijing keeps low to make its exports cheaper in world markets — would aid American manufacturing and reduce the large U.S. trade deficit with China.
But U.S. business constituents are divided on the issue. Many multinational firms have established extensive operations in China and to some degree benefit from a cheap Chinese currency, while smaller companies complain bitterly about unfair foreign competition.
So for Hu, the state visit to Washington is widely seen as more about formalities, about symbolism more than substance — the red carpet, the 21-gun salute, the state dinner.
“The Chinese objective is really to cement Hu Jintao’s legacy,” said Drew Thompson, director of China Studies at the Nixon Center, a think tank in Washington. “He’s coming for a photo opp.”
As such, Thompson and other experts have modest expectations for Hu’s three-day visit. Publicly, Obama and Hu will undoubtedly project an image of greater cordiality and mutual respect. They’re also likely to announce some commercial deals — possibly more Chinese orders for Boeing jets — and efforts to improve military-to-military relations and undertake cooperative efforts on clean energy.
But neither side is likely to bend on long-standing differences on crucial economic policy even as the U.S. goes deeper into debt and China increases its export dominance, competing more directly with the U.S. on higher-value goods and strengthening its influence in the global economy.
“We have these intrinsically difficult issues and weak leadership in both countries,” said David M. Lampton, director of China studies at Johns Hopkins University’s School of Advanced International Studies. It’s going to be a long road managing relations with no clear solutions.”
Times staff writer David Pierson in Beijing contributed to this report.