Of course the Chinese want to proceed with the Strategic Economic Dialogue. While the Dialogue continues, Beijing can defer pressure to dismantle barriers to free trade, especially its manipulation of its currency, the renminbi, to help Chinese exporters. “This is something that works,” said Treasury Secretary Henry Paulson, as he wrapped up the fifth session of the Strategic Economic Dialogue in Beijing at the end of last week.
The Chinese apparently think so - they remain committed to the twice-a-year sessions where China and the United States discuss their commercial relations. As Vice Premier Wang Qishan, Beijing’s chief representative at the talks, said at the close of the session, “We are looking forward to continuing the candid and pragmatic dialogue with the new U.S. administration.”
Many argue the President-elect will moderate his China views once he takes office. Of course he might, but as a candidate he created markers that important constituents in the Democratic Party will try to hold him to. Moreover, the pro-Beijing lobbies in the United States will surely be on the defensive in the immediate future. “If we’re heading toward 9 percent or 10 percent unemployment, and people look around and see China running larger and larger surpluses, they’re going to say, ‘What’s going on here?’ ” noted Nicholas Lardy of the Peterson Institute for International Economics in Washington.
In fact, Paulson started the talking process in 2006 to defer China currency legislation that was then working its way through Congress. These days, Beijing has to be particularly concerned what may happen in Washington, because Obama, in the week before the election, released a letter stating that “massive current account surpluses accumulated by China are directly related to its manipulation of its currency’s value.”
Paulson has achieved little on currency issues since the Strategic Economic Dialogue’s first session. And to highlight the ineffectiveness of the process, Beijing, in what can only be described as an in-your-face maneuver, drove the value of the renminbi down by almost one percent last Monday.
In its assessment of the just-concluded session of the Strategic Economic Dialogue, Hong Kong’s South China Morning Post noted this about Paulson: “His reputation as China’s best U.S. friend and his immense popularity among the Communist Party elite remain high despite his departure next month.” What we need are treasury secretaries who are intensely unpopular in Beijing because they get the job done for the American people.
