With China, Money Talks

It's a new dawn of summitry in Washington with this week's Strategic & Economic Dialogue between the United States and China, a meeting of several hundred top government officials to talk about shared interests. The discussions made little news -- some shared macroeconomic ideas here, a framework for climate-change discussions there. Mainly, they served to keep leaders in both countries informed of each other's plans and motivations, a way to prepare both countries for four years of Obama administration policy.

Earlier in the year, the administration changed what had been the Strategic Economic Dialogue, previously led only by the Treasury Department, into the Strategic and Economic Dialogue, jointly led by Secretary of State Hillary Clinton and Treasury Secretary Timothy Geithner. Despite the structural change, though, the summit demonstrated that economic issues trump all other concerns, leaving Clinton at something of a disadvantage.

The narrative that undergirds the U.S.-China relationship is by now rote: Chastened U.S. officials who once lectured their counterparts in the People's Republic on financial liberalization are now humbled in front of their largest creditor, reduced to offering promises of fiscal responsibility. But that conventional wisdom is both boring and rather irrelevant. Neither country can afford to disturb the fiscal relationship between the two nations. Chinese officials who normally stress out about U.S. borrowing -- no banker likes to see their debtor in the red -- seemed unusually convinced by Office of Management and Budget Direct Peter Orszag's speech on the U.S. government's plan to reduce the deficit after the recession, delivered during one of the summit's official exchanges.

Throughout those exchanges, the central message from U.S. officials was a warning: We will not be providing the world's consumer demand anymore as Americans increase their savings. U.S. officials also advised China to shift its policies to cultivate domestic consumption and to reduce exports and investments. Meanwhile, China pushed demands for a larger role in international economic institutions. Both sides complained about each other's protectionism. The two countries signed a memorandum of understanding to push forward climate-change negotiations, consulted on North Korea and Iran, and agreed to take the whole show on the road to Beijing next year. Nonetheless, issues of trade and finance dominated the talks.

I was reminded why that is the case at the conclusion of the conference, a gala dinner at the Ritz Carlton. The event was dedicated to prosperity -- a program studded with corporate and banking logos certainly made that point. Heavy hitters from both delegations were in attendance, and the U.S.-China Business Council hosted the whole affair. Were all that not enough, the dinner itself was practically a jamboree of Leftie bĂȘte noirs, with Robert Rubin and Henry Kissinger both making remarks.

There's little question that as long as China and the U.S. are the two largest economies in the world and deeply intertwined, all other issues will be a distant second priority. So it makes sense that the explicit talk was of trade deals and carbon caps, while references to the recent crackdown on the Uighurs, China's Muslim minorities in Xinjaing province, were carefully worded. That doesn't mean Clinton's strategic discussions are a waste of her time, but the importance of maintaining our economic partnership overlays a patina of realism on a relationship that cries out for idealism.

As we debate the importance of engagement versus isolation in foreign affairs, it is heartening to see hundreds of high-level government officials from two very different countries meet with each other to candidly discuss critical issues. Kissinger's emotion at the gala as he recalled the great moment when the U.S. and China opened relations nearly 40 years ago was a reminder of what diplomacy can accomplish.

President Barack Obama, delivering an opening statement on the first day of the dialogue, noted that "some in China think that America will try to contain China's ambitions; some in America that think there is something to fear in a rising China. I take a different view. I believe in a future where China is a strong, prosperous, and successful member of the community of nations; a future when our nations are partners out of necessity, but also out of opportunity."

His vision is the right one, and it is shared by one of the leaders of the Chinese delegation: State Councilor Dai Bingguo explicitly told Americans that China sought no arms race or hegemony, simply internal prosperity. But a subtler point was made by China's other delegation head, Vice Premier Wang Qishan.

"The trend of the China-U.S relationship is decided by the common interest of our two peoples," he said. "The statesmen in both countries can only follow this trend, and must follow this trend."

The common interest of the peoples, rather than the economic elite, ought to be the driving motivation behind the two countries interactions. There is no doubt that economic openness has brought wealth to both countries, and the Obama administration is happy to laud the Chinese for bringing millions out of poverty. But in a relationship between "capitalism with American characteristics" and "socialism with Chinese characteristics," sometimes the people -- whether they be workers losing jobs in the United States or the millions of Chinese living without political freedom or prosperity -- have interests other than the elites. Today, we're in an economic crisis, and pragmatism overrides all else. But as recovery continues, the U.S. will require more thought on the strategic track, and perhaps in a few years our discussions with China, as they should be with all our friends, will be more frank.

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