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UPDATED: July 13, 2014 NO. 29 JULY 17, 2014
Striking a Balance
China and the U.S. seek to repair bilateral relations following a year of strategic distrust
By An Gang
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The talks reaffirmed the consensus of building a new type of major power relationship and helped to put a stop to the downward spiral of bilateral relations. The Chinese participants believed that the United States should recognize the crucial importance territorial integrity and national sovereignty hold for China and not interpret China's defense of its territory as the pursuit of regional hegemony.

Rebalancing economies

At present, the major economies of the world are trying to redefine their respective responsibilities and obligations from an international perspective.

The United States' economic revival has not been as strong as expected but is better than some had feared. The eurozone has passed through the darkest stage of its debt crisis and its economic situation should stabilize, although some structural problems have yet to be settled. Japan is showing initial signs of emerging from its age of deflation, but weakened stimulus, higher consumption tax and the government's mounting debt has crippled the effectiveness of Abenomics. Emerging economies such as India, Russia, South Africa and Brazil are struggling with inflation and capital outflow, bearing the brunt of a possible global economic slowdown.

As the backbones of the global economy, China and United States' ability to coordinate macroeconomic and financial policies will determine the prospects of recovery. During the last financial crisis, the United States and China contributed to stabilizing the world economy by launching quantitative easing measures and economic stimulus programs. To secure the economic recovery, the two countries have now shifted gears to minor stimulus and more focused easing measures. Under such circumstances, it's time for Europe to implement more daring easing policies and carry out the targeted longer-term refinancing operation.

The most important mission for the S&ED is to promote cooperation between China and the United States in terms of economic reform and restructuring. Currently, China is trying to transform its economic growth pattern and encourage domestic consumption and a greater role for private companies. Meanwhile, the United States seeks to boost its savings rate, beef up infrastructure construction, reform pension and medical care systems and adjust taxation, technical education and employment systems. The two countries' respective economic agendas complement rather than conflict with each other.

Talks on a Bilateral Investment Treaty have made remarkable progress after 13 rounds of negotiations over a five-year period, with a pre-establishment national treatment plus a negative-list approach having been squared away. This treaty is viewed as one of the most significant deals to be have been reached since China first joined the WTO years ago. Once a high-level Bilateral Investment Treaty is reached, the two countries' industrial adjustment will receive investment support from each other's companies.

Another eye-catching topic at the annual S&ED was China's exchange rate policies. The U.S. side accused China of manipulating the yuan to support China's exports, while China believes the depreciation of its currency is a result of the global market's expectation of a dollar appreciation and the slowing economic growth of China.

Thanks to the improvement of the Chinese economy in the second quarter of the year, the yuan's exchange rate rose a little bit against the U.S. dollar before the opening of the sixth S&ED.

As of now, Washington has done little to relax restrictions on exports of hi-tech products to China, and reduce discriminatory treatment for China's IT products in the U.S. market, nor has it carried out the long-delayed quota reform plan in the International Monetary Fund—all in addition to the poorly handled cyber security issue.

China and the United States have become the most important economic partners in the world and their partnerships with other countries are closely interwoven with political considerations. But nevertheless, economic concerns must ultimately be supported by positive bilateral relations.

The author is an op-ed contributor to Beijing Review

Email us at: liuyunyun@bjreview.com

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