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What Obama must do on his China visit

November 12, 2009

Mark Burles
Senior Vice President
Ipsos Public Affairs
, Seattle

I think the biggest decision the Obama Administration confronts in preparing for his upcoming visit to China is not what issues to raise with his hosts, but how to raise them.

Addressing the key topics first, the issues we need to discuss with the Chinese leadership are pretty clear. Specifically, we need to talk about when and how the Yuan will appreciate relative to the dollar and, more broadly, how China is going to re-balance it’s economy toward higher personal consumption while the US moves towards higher personal savings. This is a part of a much larger issue, as China and the US are at the center of the global economic transition that won’t be resolved until the extremes in savings and consumption within our two very large economies are addressed.

We also need to talk about trade issues, as issues around tariffs continue to swirl on both sides. The key point here is to make sure these disagreements are neither ignored, because some alleged trade violations are true, nor blown out of perspective, because both side recognize that trade with the other is key to their economic well-being.

Getting the tone right will be the tricky part. Obama’s goal should be to appear to be neither overly accommodating nor combative. If we hope to make any real progress on sensitive issues, such as the value of the Yuan, then the hard bargaining needs to take place behind closed doors. The Chinese government simply does not respond in any sort of constructive fashion to being publicly called out on these kinds of issues (a trait not exclusive to China, by the way). I would not expect any great breakthroughs on these issues, but the Administration’s goal should be to confirm a common understanding that China needs to be encouraging higher consumption among its own consumers and needs to allow the Yuan to appreciate relative to the dollar over time.

The Administration would benefit from trying to set realistic expectations ahead of time. Our relationship with China has always included serious points of tension, and that is not going to change anytime soon. We get into trouble when we think we can resolve them quickly. This trip can be an important step in the Obama Administration’s dialogue with Beijing, but it will remain only one step in a larger process.

  
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