Sino-US crisis: Is Beijing overplaying its hand?

By Chris Patten

LONDON - Remember the G-2? America's financial difficulties and foreign entanglements, together with China's economic ascent, led many last year to envisage the emergence of a sort of global condominium between the two countries. The G-8 had morphed by necessity into the G-20, which, whenever it really mattered, would shed its zero: the United States and China would call the shots.
The idea was an over-simplified reflection of global realities.

It left out other emerging powers like Brazil and India. It exaggerated the weakness of America, which remains the world's only superpower. It also reeked of the European Union's peevish realization that its inability to get its act together on contentious issues was likely to place it firmly on the sidelines. At the Copenhagen climate summit last December, don't forget, a deal of sorts was cobbled together by the US and the emerging economies over the EU's head, even though Europe had the most advanced set of proposals on tackling climate change.

Despite all this, there was enough credibility in the G-2 idea to give it legs. President Barack Obama's first visit to China last November, in which he accepted the role of pliant suitor at the court of the emperor, strengthened the impression of a deal between today's great power and tomorrow's.
That was last year. This is now, and the idea looks a lot less plausible. Why has the G-2 become so far-fetched so fast?

The Dalai Lama speaks for the media after meeting with U.S. President Barack Obama and Secretary of State Hillary Clinton. Reuters

First, the weak and largely jobless economic recovery in America and Europe shines the spotlight on China's surging exports and the non-tariff barriers confronted by would-be importers to China. You would have difficulty finding many members of the US Congress who do not ascribe some of America's problems, including the hollowing out of the middle class, to China's alleged currency manipulation.

China may point to the mountain of US Treasury bonds that it has bought up, thereby helping to sustain America's budget deficit. (What China's recent sell-off of US T-bills will mean is, for now, anyone's guess.) They grumble at the injustice of blaming them for the global economy's imbalances.

But China does have a case to answer. Critics think that pegging the currency below its real value is part of a deliberate strategy to keep growth rolling, thereby avoiding the tricky politics of growing unemployment in a system that has no institutionalized channels for expressing popular grievances. Unless this issue is addressed soon, it will lead inexorably to protectionism in America and Europe.

Advocates of tit-for-tat trade polices have even found supportive quotes from Adam Smith on the subject.
A second issue likely to blow the G-2 apart before it has actually taken shape is the impact of China's authoritarianism on the free movement of information. China's clash with Google and US protests at cyber attacks on American targets remind the outside world, as well as America's media and political elites, of the difference in values between the two countries.

This is particularly awkward at a time when the Chinese authorities seem to be taking an even harder line on dissent. The human rights activist Liu Xiaobo has just been locked up for 11 years, drawing widespread condemnation. The veteran campaigner for the release of political detainees, John Kamm, argues that this was "a tipping point" for the Chinese authorities, and that "they will have to work themselves out of this in a less hard-line way."

The outcome of the climate talks in Copenhagen is a third reason for concern. China has been widely accused of blocking a more ambitious result, mostly because of its resistance to external surveillance of its agreed targets, appealing to state sovereignty with all the self-righteousness that the world was accustomed to hearing from former US President George W. Bush. Maybe the criticism is unfair. But it certainly was unwise to allow a junior official to shout and wag his finger at Obama at one of the key Copenhagen meetings. Americans, too, Chinese officials should remember, have "face" that they do not wish to lose.

Some people cite the spat over arms sales to Taiwan and the Dalai Lama's visit to Washington as a fourth dampener on all the G-2 talk. I am not so convinced. These are fairly ritualistic issues, and Chinese officials are smart enough to know that, given the Chinese government's recent behavior, Obama had little choice but to decide on them as he did.

Far more worrying is an issue that is yet to play out. How will China react to any move to introduce tougher sanctions on Iran if no progress is made in efforts to prevent it from developing nuclear weapons? If China blocks action in the United Nations Security Council, relations with America will be set back to a point where any G-2 talk will seem laughable.

Deng Xiaoping, the architect of China's economic rise, advised his colleagues to move stealthily in dealing with the rest of the world. "Hide your brightness, bide your time," he counseled. As someone who believes that China's rise should be good for the world, I hope that Deng's wise advice will be heeded by those Chinese officials who seem to think that this is a good moment to start stamping their feet.

Chris Patten, the last British Governor of Hong Kong and a former EU Commissioner for External Affairs, is Chancellor of the University of Oxford. Copyright: Project Syndicate, 2010. Exclusive to the Sunday Times.

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