OPINION:
Hu Jintao, the general secretary of the Chinese Communist Party and China’s unelected president, arrives in the United States today for a summit meeting with President Obama. The White House is downplaying expectations for the meeting. Good move.
The human-rights discussion is likely to be frosty because Mr. Hu’s track record is grim. He presided over a 1989 crackdown in Tibet in which Chinese security forces killed hundreds of Tibetans, an event recognized when the 1989 Nobel Peace Prize was awarded to Tenzin Gyatso, the 14th Dalai Lama. The current Nobel peace laureate, Chinese dissident Liu Xiaobo, participated in the 1989 Tiananmen Square protests, also ruthlessly suppressed, and was jailed by Mr. Hu in 2008 for his work advocating human rights. Democratization, Internet censorship, persecution of Christians and Falun Gong and reform in North Korea will see no progress at this summit. China’s military modernization efforts will continue apace.
Economic controversies will be center stage. Mr. Hu recently said, “The current international currency system is a thing of the past,” though it clearly works to China’s advantage. Beijing has kept the value of the yuan artificially low, giving Chinese exports unfair advantage in the international marketplace and punishing countries seeking to export to the mainland. China also holds close to a trillion dollars in U.S. debt, a key point of leverage for Beijing given the Obama administration’s debt-fueled fiscal policies.
Currency manipulation has long been part of the communist playbook. The Soviet Union vastly overvalued the Rouble in order to profit from currency exchanges, but this turned out to be a nearsighted strategy as exports fell, international trade dried up and members of the Soviet bloc were reduced to barter agreements. The Chinese approach has allowed Beijing to exploit global markets to prop up “people’s democracy” at home, though the current economic crisis and strains on growth have revealed its underlying tensions. Making matters worse, Beijing contends U.S. monetary policy and low interest rates have created inflationary pressures in the Middle Kingdom and lessened the return on investment for holding U.S. debt.
Congress is rattling sabers. Yesterday, Sen. Chuck Schumer, New York Democrat, and Sen. Lindsey Graham, South Carolina Republican, proposed legislation to punish China for currency manipulation by equating it with “dumping.” This would allow U.S. industries affected by purportedly unfair trade practices to file complaints which could lead to duties being imposed. The bill also addresses China’s manipulation of the market for “rare-earth metals” mined in China, which are critical to the growing market for batteries.
The trillion-dollar question is, which country needs the other more? The value of Chinese exports to the United States has tripled since 2000, and America is China’s top trading partner. China cannot afford a trade war, but neither can Washington risk alienating the top holder of Treasury securities. Beijing is counting on the apparently limitless American appetite for cheap Chinese products to keep its economic engines running. The U.S. trade deficit with China hit $263 billion in 2009 and keeps rising. Populist rhetoric aside, that one-way street won’t change directions because Mr. Obama needs someone to underwrite his expansion of federal debt.
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