Currency, trade remain volatile issues Chinese President Hu Jintao's visit to Washington for a nuclear security summit this week is the latest sign of a warming in relations with President Barack Obama's administration that looks set to continue in the months ahead. The two leaders are expected to work more closely this year on a range of issues, including Iran's nuclear ambitions, military cooperation and North Korea. Beijing may also be close to revaluing its yuan currency and unveiling a long-awaited shift in its foreign exchange regime. Washington has argued that it is in the interest of China, and the world, to let the yuan strengthen. US-Chinese relations have improved rapidly since April after months of disputes over China's currency and Internet controls, US arms sales to Taiwan and Obama's meeting with the Dalai Lama at the White House. “China reacted maybe a bit tougher rhetorically than in the past and than we had expected,” said Bonnie Glaser, a China expert and senior fellow at the Center for Strategic and International Studies in Washington. But she added, “The reaction was limited primarily to rhetoric,” with China, for example, threatening to impose sanctions on US goods, but never actually moving to do so. After weeks of coyness, Beijing announced on April 1 that Hu would attend the two-day nuclear security summit. Days later, Washington said it would delay a report that could have labeled China a currency manipulator. “The relationship with the Chinese goes up and goes down,” said J.J. Ong, an Asia expert at the the House of Representatives Foreign Affairs Committee. “There are cycles to it.” Hu and Obama had an extended telephone conversation on April 1 in which Obama urged Hu to help ratchet up pressure on Iran over its nuclear activities, after China agreed to join serious talks about possible new UN sanctions on Tehran. “I think what we've seen throughout the year is that at important junctures, the president's bilateral meetings and conversations with these leaders helps kind of move things forward,” Ben Rhodes, deputy national security adviser for strategic communications, told reporters this week. “Our view from the beginning has been is that if you really want to broaden the ability to isolate Iran and to affect its cost-benefit analysis as it relates to their continued failure to live up to their obligations, that you needed to bring in a broader coalition, and that Russia and China would be important parts of that effort,” he said. ‘It won't be rosy' Analysts said they would be looking for more from China on Iranian sanctions, a resumption of US-Chinese military cooperation and signs of whether China can help bring North Korea back to six-party talks seeking to end Pyongyang's nuclear ambitions in exchange for aid. “It won't be rosy. If we can manage the currency issue, and Iran and North Korea – by manage, I do mean manage, and not solve – then I think that we will at least build some sort of a track record of some positive accomplishments between our two countries,” Glaser said. Hu is also expected to make a state visit to Washington later this year, to return Obama's visit last November, and US Secretary of Defense Robert Gates may visit China. “Tensions are down and both sides are stressing the positive,” said Kenneth Lieberthal, director of the John L. Thornton China Center at the Brookings Institution. At the center of the strategy is the administration's ability to keep global issues central to the Washington-Beijing relationship, separate from disputes over trade and currency between the United States and its largest creditor. “If the Chinese had really high expectations with Obama coming into office, after what he said about it being one of the most important bilateral relationships and elevating strategic dialogue to show the importance China has in US foreign policy, invariably they were going to be disappointed when the US sold weapons to Taiwan or met with the Dalai Lama or criticized the Chinese human rights record,” said Walter Lohman, head of Asian studies at the Heritage Foundation. No one expects economic issues to go away. Washington must still issue the hotly anticipated currency report, and the White House is under pressure from Congress to name China a currency manipulator. The Obama administration is generally expected to bring other countries into its effort to push China on the yuan, which may be a theme at the G20 summit in Canada in June. “Looking back next year, my guess is if there is seen to be a major problem in US-China relations during the course of 2010 ... it will be the trade relationship,” Lieberthal said. He said the issue was a potent one politically, especially with US congressional elections in November. A combination of high US unemployment and the huge US trade deficit has made China an easy target, and put pressure on Obama to get tough with Beijing on trade and currency issues. “It (the currency issue) is clear and simple and therefore politically powerful,” Lieberthal said.
