Grand strategy

P S SURYANARAYANA in Singapore

The Obama-Hu Jintao interactions bring into focus a strong political nuance in America’s economic diplomacy towards China.

United States no longer aspires to checkmate China by old-fashioned containment, with or without apologies to George Kennan, who first visualized such a US policy

in relation to the Soviet Union six decades ago. During his latest four-nation Asia tour, which ended on November 14, President Barack Obama said so in polite terms and even emphasized a new policy line.

Tracing the centre-piece of his policy, Obama said, “I have been very clear and persistent since I came into office (nearly two years ago) that we welcome China’s rise.”

In a US-centric perspective, he said, “The fact that China has grown as remarkably as it has, has lifted millions of people out of poverty, that is ultimately good for the world and good for America – because it means that China has the opportunity to be a responsible partner (of the US).

It (also) means that China can be an enormous market for the United States, for Korea, for countries throughout Asia and around the world.”

Without the slang of an impromptu comment, Obama’s policy towards Beijing is based on two strands of thinking about the economic dimension of China’s rise. First, the US is eager to do voluminous business with China, given its rise as ‘an enormous market’. Second, Washington is no less keen to court Beijing as ‘a responsible partner’ in reshaping the battered global economy.

A strong political nuance in Obama’s new economic diplomacy towards Beijing came into sharp focus following his latest interactions with Chinese President Hu Jintao.

They had an exclusive conversation in Seoul on November 11, besides participating together in the Group of 20 (G20) Summit there on the same day and in the meeting of leaders of the Asia-Pacific Economic Cooperation (APEC) forum in Yokohama on November 12 and 13.

Obama summed up this nuance without mincing words, “Precisely because of China’s success, it is very important that (Beijing) act(s) in a responsible fashion internationally. And the issue of RMB (Chinese currency) is one that is an irritant not just to the United States, but is an irritant to a lot of China’s trading partners and those who are competing with China to sell goods around the world.

(The RMB) is undervalued.

And China spends enormous amounts of money intervening in the market to keep it undervalued. And so...it is important for China, in a gradual fashion, to transition to a market-based (currency) system. This is something that China has done in the past.”

Despite the export-boosting ‘undervaluation’ of the Chinese currency, Beijing would have to, in Obama’s world view, discover the ‘opportunity’ of becoming America’s ‘partner’.

In his reckoning, such an “opportunity” would alone sustain China’s phenomenal economic growth going forward.

The real issue before the international community, in this US-China context, is not the degree of logical soundness in Obama’s reasoning but the political impact of his perspective.

Hu, for his part, told Obama that Beijing “stands ready to...move forward the China-US relationship on a positive, cooperative and comprehensive track”. Outwardly, Hu’s response might sound as being no more than a much-practised Chinese mantra for engaging the US.

However, the mantra, when decoded, is a formula for China’s preference for two-way cooperation with the US on the totality of mutually important issues. These would obviously cover the value of the Chinese currency as well.

With G20 Summit addressing this issue in order to avert ‘currency wars’, a catch-phrase in the international media discourse on the present state of the global economy, Obama lost no time in spelling out his expectations about China.

Obama’s take on the G20 communique was, “Letting currencies reflect market fundamentals, allowing your currency to move up and down, depending on the role that you are playing in the international trading system, is the best way to assure that everybody benefits from trade rather than just some.... It means some adjustments for China. And so, we understand that this is not (going to be) solved overnight (though).”

The overwhelming accent on economic issues in Obama’s official and public diplomacy towards China was in tune with the season of G20 and APEC meetings.

At the same time, he did not downplay the importance of political-military issues in the US-China engagement or the relevance of economics in his talks with the leaders of America’s allies, Japan and Australia, on this occasion.

Yet, the primacy of political-military issues in his talks with the Japanese and Australian Prime Ministers, Naoto Kan and Julia Gillard respectively, did reveal a subtle game plan.

Of telltale importance were the comments by Kan and Obama after their talks in Yokohama on November 13. Kan said, “In Japan’s relations with China and Russia, recently we have faced some problems, and the United States has supported Japan throughout.... For the peace and security of the countries in the (East Asian) region, the presence of the United States and the presence of the US military, I believe, is only becoming increasingly important.” Kan’s assessments on such issues were confirmed by Obama wholeheartedly.

“The commitment of the US to the defence of Japan is unshakeable. Our alliances, bases and forward presence are essential not only to Japan’s security, they help us ensure stability and address regional challenges across North-East Asia,” Obama said.

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