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A Rocky Time In U.S.-China Relations As Leaders Meet In Beijing

Jun 6, 2016
Originally published on June 15, 2016 2:43 pm

The U.S. and China are the two largest economies in the world — and interdependent in a host of ways. But as leaders from both countries start annual high-level talks in Beijing, disagreements over how China does business are creating some trust issues in the relationship.

"You might want to think of the US China relationship as kind of like an arranged marriage," says Arthur Kroeber, a Beijing-based economist and author of China's Economy: What You Need to Know.

"They're not in it because they fell in with each other, they're in it because forces beyond them made it happen and now they're stuck with each other and now they have to deal with it," Kroeber says.

One way of 'dealing with it' is through annual talks like the Strategic and Economic Dialogue, which got under way in Beijing on Monday. Chinese president Xi Jinping kicked off the event with a call for more mutual trust. On the relationship with America, he quoted a Song Dynasty Chinese poet who said, "Rivers always take meandering paths before reaching their destination."

For the U.S. side, Secretary of State John Kerry is handling security conversations, while U.S. Treasury Secretary Jacob Lew leads the economic track.

"Having grown to be one of the two largest economies in the world it's increasingly important for China to accept the responsibilities of being a large and powerful economy," Lew said.

U.S. Firms Want More Access

American companies want more unfettered access to Chinese markets and its hundreds of millions of consumers. But China's first priority is its own domestic economy and homegrown firms. It's led to new rules and restrictions making it tougher for non-Chinese companies to compete. Especially on the tech front.

"Frankly the way the rules have been written appear to exclude American companies from being able to provide technology," said Erin Ennis, senior vice president of the U.S. China Business Council.

"Bringing more competition to the market actually makes companies do a better job," she says.

Then there's the issue of overcapacity. To prop up its own economy, China is keeping open dozens of industrial plants that pump out raw materials like steel and aluminum, stuff the world already has enough of.

"It's distorting their markets, it's an impediment to medium and long-term growth. And it's distorting global markets," said Lew.

At the talks, the U.S. is encouraging China to let global markets act with less state intervention. But the Chinese have their own domestic pressures to worry about.

"It's not the best time for us," says Yienching Yang, of China's E-Cai Economic Research Institute. "Because we don't have very good economic growth. And we don't have a very good political environment in the United States."

U.S. Politics

The American political environment is a question, as anti-China sentiments get a voice in Republican Presidential Nominee Donald Trump.

"We've got enough problems in our country. We have to rebuild our country. China and other countries have committed the greatest theft in the history of the United States," Trump said, while campaigning in New Hampshire last August.

Echoing his Chinese counterparts, Lew says ongoing communication is far more effective than confrontation.

"The U.S. China economic relationship is the most important economic relationship in the world," Lew said.

Shared interests are keeping the lines of communication going, even if no specific outcomes are expected in this set of dialogues. And outcomes aren't the point, Kroeber says, of the dialogues. Just working through the tough stuff can considered progress.

"It's a lot like marriage counseling," Kroeber says.

Relationship status? It's complicated.

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The U.S. and China are the two largest economies in the world, and they depend on each other in many ways. But the relationship has hit a rocky period. Top officials of both countries are meeting in Beijing for annual high-level talks. NPR's Elise Hu reports.

ELISE HU, BYLINE: China still buys what America makes in huge numbers and vice versa. Investments flow back and forth fairly freely. But new disagreements over how China does business are creating some trust issues.

ARTHER LOEBER: You might want to think of the U.S. and China relationship as kind of like an arranged marriage.

HU: Arthur Loeber is a Beijing-based American economist and author of "China's Economy - What You Need To Know."

LOEBER: They're not in it because they fell in love with each other, but they're in it because forces beyond them made it happen. Now they're stuck with it, and they have to deal with it.

HU: One way of dealing with it is though annual talks like the Strategic and Economic Dialogue.

(SOUNDBITE OF ARCHIVED RECORDING)

UNIDENTIFIED WOMAN: Please rise and welcome President Xi Jinping.

(APPLAUSE)

HU: The Chinese president kicked off the event in Beijing on Monday. U.S. Secretary of State John Kerry is handling security conversations with China while U.S. Treasury Secretary Jacob Lew is responsible for the economic track. He previewed his agenda with NPR.

JACOB LEW: Having grown to be one of the two largest economies in the world, it's increasingly important for China to accept the responsibilities that go with being a large and powerful economy.

HU: American companies want more unfettered access to Chinese markets and its hundreds of millions of consumers, but China's first priority is its own homegrown firms. China has adopted new rules and restrictions which make it tougher for non-Chinese companies to compete in the domestic market, especially on the tech front.

ERIN ENNIS: Frankly, the way that the rules are written appear to exclude foreign companies from being able to provide technology.

HU: Erin Ennis is senior vice president of the US-China Business Council.

ENNIS: Bringing more competition to the market actually makes companies do a better job.

HU: Then there's the issue of overcapacity. Concerned with unemployment, China is keeping open dozens of industrial plants that pump out raw materials in quantities the world just doesn't really need. Secretary Lew...

LEW: It's distorting their markets, and it's distorting global markets in areas like steel and aluminum.

HU: At the talks, the U.S. is encouraging China to engage global markets with less state intervention. But Yienching Yang of China's E-Cai Economic Research Institute says the Chinese have their own domestic pressures to worry about.

YIENCHING YANG: It's not the best time for us because we don't have a very good economic growth, and we don't have a very good political environment in the United States.

HU: The U.S. political environment is a question. These annual talks began under the Obama administration, and it's not clear they'll continue in the same way. De facto Republican presidential nominee Donald Trump has sounded pretty skeptical about the U.S.-China relationship.

(SOUNDBITE OF ARCHIVED RECORDING)

DONALD TRUMP: We've got enough problems in this country. We have to rebuild our country. China and other countries have drained us. China has created the greatest theft in the history of the United States.

HU: Echoing his Chinese counterparts, Secretary Lew says ongoing communication is far more effective than confrontation.

LEW: The U.S.-China economic relationship is the most important economic relationship in the world.

HU: Shared interests are keeping the communication going even if no specific outcomes are expected during this set of dialogues. Arthur Loeber says outcomes aren't the point. Both sides just working through the tough stuff can be considered progress.

LOEBER: It's a lot like marriage counseling.

HU: And the state of this marriage is complicated. Elise Hu, NPR News, Beijing. Transcript provided by NPR, Copyright NPR.