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US-China Strategic & Economic Dialogue (May 2010) Reviewed

Introductory Observations

Contemporaneously, this year’s United States – China Strategic & Economic Dialogue (S & ED) has taken place against the backdrop of very rough and patchy US-China relations in the past one year. The mutual euphoria of a new wave in US-China relations raised by incoming President Obama seems to have evaporated. So has evaporated the G-2 Concept which was projected as a mechanism to be used by USA and China, to jointly work out solutions to global political problems. Also hovering in the background is the reality and the perception that any concessions being made by USA to China whether political or strategic, arise from US compulsions to involve China in a financial bail-out of the United States from its financial mess. Perforce, the current US trend is transitional and US-China relationship is likely to revert back to its prior bleak strategic landscape of contentions and distrust. The review of the S & ED 2010 outlined below needs to be viewed from this perspective.

The United States-China Strategic & Economic Dialogue (S & ED) took place in Beijing on May 24-25, 2010. The United States sent a 200 strong high powered delegation for discussion of a wide-ranging agenda of security and economic issues between the United States and China. The US side was led by US Secretary of State and the US Secretary of the Treasury.

The Dialogue sessions were addressed by the entire galaxy of China’s top leadership. The US-China Dialogues were first conceived between former President Bush and President Hu in the form of two separate dialogues on security and economic issues and to be held twice a year. In April 2009 the new US President Obama and Chinese President Hu agreed to combine the two dialogues into one ‘Strategic and Economic Dialogue’. President Obama’s intention was to elevate the level of participation and give the US Secretary of State a major role in the security and economic dialogues with China.

The two major goals of S & ED were set out as follows (1) A high-level US-China forum where leaders and officials could discuss bilateral issues (2) Major security and economic issues between USA and China could be synthesised to enable a joint integrated approach to emerge.

The significance of this year’s United States – China Strategic & Economic Dialogue lies not in the hundreds of points on the agenda. The significance of the S & ED lies in the regional and global perceptions generated on the current health of US-China relations and how far the global superpower (USA) can and the economic superpower (China) can move forward in a concerted manner.

Keeping aside the rhetorical flourishes from the United States and China that kept sprouting during the course of the two-day Dialogue and the pious statement of intentions to further advance the content of US-China relationship, the overall impression that emerges is that the United States because of its financial fragility batted on a weaker wicket. China sensing this vulnerability was far more assertive and hardly climbed down from its existing stances.

Against that backdrop, this Paper reviews the US-China 2010 S & ED under the following heads:

US-China Economic Dialogue Highlights

US-China Strategic Dialogue Highlights

United States Compromises on Nuclear Non-Proliferation: The Pakistan Case

United States Strategic and Economic Relations: Future Perspectives

US-China Economic Dialogue Highlights

The US economic agenda for discussion was wide and extensive, but in essence centred around the two major highlighted issues, namely:

China should re-evaluate its currency

China should revise the policy of “indigenous innovation”. In essence this Chinese policy aims at keeping out foreign firms from doing business in China by favouring and giving preference to Chinese firms. In other words it amounts to ‘Chinese protectionism’ primarily aimed at the United States.

On both these issues, China refused to budge from the existing positions. Since the revaluation of the Chinese currency is a recurring theme in all high-level US-China dialogues, the Chinese President once again asserted that China would consider the issue at its own pace and time.

Apparently as a consequence the United States did not lend its ears to China’s demands that the United States lifts restrictions on export of US cutting-edge technologies to China.

US-China Strategic Dialogue Highlights

No grand joint strategic vision could be expected from USA and China with their respective competing strategic interests in critical regions of the globe standing in contradiction to each other.

From the United States side the emphasis during the Dialogue was expectedly focused on North Korea and Iran. North Korea had recently ratcheted up tensions by an unprovoked shooting and sinking of a South Korean naval ship. The Chinese virtually pleaded that the United States should restrain South Korea from retaliation and escalation. It is strange that China does not make any efforts to restrain its wayward protégé North Korea from military adventurism but expects that the United States should restrain South Korea from retaliating against North Korean military provocations.

While the US sought more forthright Chinese condemnation on Iran and support for UN sanctions, the US Secretary of State was consciously aware that its Resolution drafting for the UN Security Council had to be watered down in a manner that China was not forced to oppose it.

Afghanistan and Pakistan also came up for discussions as like USA in both these countries, China too has significant strategic stakes.

Overall, it can be stated that nothing dramatic emerged or any new initiatives were brought on the table nor any strategic pledges were made by China or the United States.

United States Compromises on Nuclear Proliferation: The Pakistan Case

Before this Dialogue event, China had announced that it had entered into an agreement with Pakistan for Chinese firms to construct two new nuclear reactors in Pakistan.

The Obama Administration had placed nuclear non-proliferation as the centre piece of its foreign policy strategy. It was therefore, expected that the United State would raise serious objections and alarm on this new China – Pakistan nuclear deal. Pakistan had been preparing the ground with the United States not to oppose the China – Pakistan nuclear deal.

Consistent with the United States established record on China – Pakistan nuclear cooperation from making nuclear bombs to missiles, the United States seems to have winked at this Deal. The lofty principles of nuclear non-proliferation were consigned to the waters of the Potomac River by the present US Administration for reasons of political expediency.

It reinforces the point that when it comes to strategic matters concerning Pakistan or China or both, the United States is ever-willing to forgo its policy formulations for reasons of strategic expediency with Pakistan and economic expediency with China.

United States – China Strategic & Economic Relations: Future Perspectives

In terms of future perspectives, the following can be analytically asserted going by current trends and overall impressions of the S&ED 2010:

US – China strategic partnership in the future is well-high impossible. The G-2 concept has been laid to rest. There was too much regional and global opposition to it. Till such time the US economy and financial state acquire stable footings, the United States would continue in what can be best called as “China Appeasement” polices. China is well aware of the current US limitations on being more assertive in polices towards China. China would continue to exploit US limitations until such time it is check-mated by the United States. Overall, United States and China figure heavily in each other’s threat perceptions and will continue to do so for decades to come. The effusive rhetoric, the warn handshakes and exposition of pious intentions should not fool the world. Below this veneer there are ongoing intense military preparations for what both perceive as an eventual show-down in their power games.

Asserted earlier in my SAAG Papers was that there is an inevitability of the United States checkmating China both strategically and economically. China is currently militarily hemmed-in from all sides by the United States. The economic hemming-in of China by the United States is not a question of if but when.

The United States may be dependant on China for a financial bail-out currently, but China is more acutely aware that its trillions of dollars investments in US Treasury bonds could come to naught with one single move by the United States. It is a significant leverage that the United States is holding as an ‘Ace’ close to its chest.

Concluding Observations

In discussions in the United States, voices are being raised that the United States should “De-friend China” and also that no purpose is being served by such Strategic & Economic Dialogues. The contention is that as it is there is an ongoing daily dialogue on contentious issues between USA and China. They argue that such high-level dialogues raise expectations to unrealistic levels. This not only distorts US policies but a disproportionate effort and time are wasted without any tangible gains. There is much merit in this.

The “many springs” that emerged in US – China relations in the last 50 years have not brought forth any substantial gains. Both China and USA seriously distrust each other’s policy moves, formulations, motives and intentions. These are hardly conducive to the forging of any meaningful and substantive US-China strategic partnership or even a strategic relationship.

United States – China relations are not based on any shared values or a strategic vision arising from a common ideology. There are far too many strategic divergences and contentious issues which divide these two powerful nations. What holds them together are strategic and economic expediencies. These hardly provide the glue for any substantive relationship between the United States and China.

(Courtesy- South Asia analysis Group. The writer, Dr. Subhash Kapila, is an International Relations and Strategic Affairs analyst. He is the Consultant, Strategic Affairs with South Asia Analysis Group. Email:

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