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Saturday, 25 September 2010

The Premier & The President

Chinese Premier Wen Jiabao's presence at the United Nations in New York this week has allowed him to meet with several country's leaders individually to discuss matters of common interest. Conversely, amid rising tensions with Japan, China publicly stated its refusal to meet with the Japanese delegation, deeming it "not the time" for such interaction. Of course, Wen's principle sideline engagement was always going to be a session with President Barack Obama- an event which took place at the UN's headquarters on Thursday.

Sino-American relations are generally on a level footing at the moment, although incidents like the Pentagon's publication of its annual report on the PRC's military capabilities still have the potential to prompt displeasure from Beijing. Many observers looked ahead to the meeting with interest, as recent weeks has seen renewed concern over China's under-valuation of the Yuan- a policy that America believes is a threat to its economic health. Indeed, as the BBC has reported, the US contends that Chinese moves to keep the RMB weak is aimed at giving its exports a price advantage in the marketplace. This in turn directly impacts on American jobs.

The People's Daily summed up the discussion between Wen and Obama with the headline “Sino-US ties rosy, yuan on steady course”. According to the newspaper (also the CCP's mouthpiece), the Premier made overtures in favour of currency reform, with Obama stressing co-operation as the way for relations between the two countries to move forward. The coming decades will see China become increasingly important on the international stage- a fact which the American President was clearly mindful of throughout the meeting. Despite their differences, China and the United States will come to rely on eachother more and more, making the securing of a solid foundation to their bilateral relations essential for both governments. The benefits of positive co-operation could also be seen with in contexts including the six party talks on the Korean Peninsula. Washington and Beijing on good terms might not mean they agree on the future for both Korean nations, but an absence of a power-play between them will allow both sides to focus on the issue in hand.

Yet, reports from America suggest that the situation may not be as rosy as the People's Daily wants its readers to believe. A BBC news item published late yesterday evening tells of how a US Congress committee has rubber-stamped a bill which would allow the US to punish countries that under-value their currencies with economic sanctions. The American political process means that the bill still needs to be passed by both the House of Representatives and the Senate, with (as the BBC highlights) America's mid-term elections later this year making the latter prospect look less certain. However, were the draft to find support in both houses and become law, Obama's administration may be forced into taking action against China in order to preserve its own domestic popularity. This would undoubtedly provoke a reaction from Beijing, making the currency issue still one of the main hurdles in the Sino-American dialogue. Certainly, the PRC will need to extend reform of the Yuan to make its growth more sustainable in the long-term. Nonetheless, given Beijing's past sensitivity to foreign intervention in any aspect of its policy programme, it is perhaps too soon to describe relations between the world's two biggest economies as 'rosy'.

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