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Expert's View
UPDATED: June 13, 2007 NO.24 JUN.14, 2007
China-U.S. Still Dancing
China is constantly bashed and made the scapegoat for global trade imbalance, shifting attention from America's own macroeconomic policy, which is the real cause for such imbalance

The rationale of the MAD doctrine means the two countries are equal, saying, China is not obligated to please the United States with big orders as "compensation." Foresighted Americans realize that the China-U.S. relationship landscape has been significantly changed, and emphasis is now focused on normalizing and stabilizing present bilateral trade momentum. If wise enough, top leaders of both sides should consider how to establish a mutual beneficial trade pattern, under which they can seek solutions through consultation and dialogue.

Due to closer trade and economic ties, the current state-to-state relationship can no longer be adjusted by political and military means as in the past. Trade frictions caused by trade imbalances should be, and can only be, resolved through mutual efforts via negotiation. Different from military strategies, an economic MAD is perhaps a better solution for common prosperity and joint development.

Where Is the Compromise?

China-U.S. relations have long been stabilized by strengthened trade ties and galloping trade volumes, through which China's economic reform is to some extent secure and the United States has made huge profits. But it seems that the bedrock for bilateral trade has shifted in recent years.

Against the backdrop of globalization headed by the United States, China enjoys a competitive edge with a cheap but capable talent pool. The most preferential policy in drawing excess global capital, and an ever-expanding domestic market with huge consumption potential, make China a world manufacturing and processing center. Multinationals, most of which are from the United States, promote its further development as their driving force. Statistically, China achieved a staggering trade surplus, (not disposable to Chinese), but with the profits generated flowing back to U.S., European, and Japanese investors.

It is obvious that the American consumers and the U.S. market have mostly benefited from globalization. However, political factions cannot be easily satisfied as a result of electoral strategy and group interests. China is constantly bashed and made the scapegoat for global trade imbalances, shifting attention from America's own macroeconomic policy, which is the real cause for such imbalances. Given the mounting pressure, China, responsible as it is, has to make concessions on its currency policy and present big orders to retain current bilateral trade relations. Despite China's efforts, the U.S. side suggests further changes for a more flexible yuan, totally free trade and investment markets, as well as other system reforms.

This SED has also been criticized by some American politicians, who thought it was empty talk or a temporary strategy that will be cancelled.

Their asymmetric dependency inherently fosters "privilege" for the United States. In the past years, the U.S. side has proposed all mutually recognized definitions of bilateral relations. For example, after Washington said last year it hoped China would become a "stakeholder" with the United States in the current international community, China accepted this position and suggested that both countries should be mutual stakeholders.

As the China-U.S. relationship is unprecedentedly challenged, both governments should pay efforts to devising a new solution to address these issues. In a move to resolve the problems and disputes, China has sincerely taken active measures to win trust and support from its counterpart by mutual understanding, while the United States should make a step forward in response instead of continuously lodging complaints.

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