» Business » Of US, economics, and the rising power of China

Of US, economics, and the rising power of China

By Frank Sieren & Andreas Sieren
November 30, 2009 14:37 IST
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That was an unpleasant journey to Asia for Barack Obama. On one hand, it has shown to him that he has become President at a very unfavourable time. Against the powerful forces inflicted on him by America's weak economy and China's new strength, Obama's charisma resembles tired aftershave after a long day's work.

He was not able to play his refreshing free and democratic persuasiveness tune. In Asia, one is cautious of the USA. Especially since it looks like things will continue as usual.

Since this Asia trip, Obama has understood one thing for certain: reliable values determine undeniably the success of economic dealing and vise-versa: The one who has the economic power also decides on the values.

And economic power, Obama had to note soberly, lies with the others.

Even the title of the Asia-Pacific Economic Cooperation Summit in Singapore did not bear the hand writing of the Americans: "Sustaining Growth, Connecting People." During the course of the meeting it became clear what was meant by the slogan: the American development model has failed; they should sit and do their homework; in the meantime we Asians have to rely on ourselves.

Chinese President Hu Jintao said that problems regarding the global economy can be addressed by "taking a serious look at its root causes," that is, the US.

The world could no longer depend on the combination of  "American consumption and borrowing and Chinese exports" as the engine for sustainable growth in the long term, stated host and Prime Minister of Singapore Lee Hsieng Loong. "We know that the old formulas are not going to work as well in the future because it's a different world," he said. "You have to find another balance."

Obama had to candidly concede that "debt-driven growth cannot fuel America's long-term prosperity. We cannot follow the same policies that led to such imbalanced growth."

"Yes, we can", would have been an inappropriate slogan at this point.

His staff was not even in a position to defend important details against the Chinese in the final statement of the APEC Heads of State. The US wanted "Exchange rates based on the economy", which was deleted. China allows no interference in its exchange rate regime. And an agreement before the climate summit in Copenhagen in December, one of the most important topics on Obama's political agenda, was postponed. The Asians felt that it "is not the right place for that." The new global economic order is exhausting.

Things did not improve in Shanghai, Obama's first stop in China. When the American was responding to questions of 500 students he was dancing verbally like someone in a quick-step competition. Obama did not address delicate topics such as Tibet, Xinjiang and Taiwan directly, despite the Chinese TV not broadcasting the interview live as the Americans had hoped.

When asked why the Americans are supplying arms to Taiwan, he even tried to tip-toe around the issue and reiterated the importance of a 'one China' policy, expressing delight that Taiwan and the People's Republic of China are now working closer together.

In one breath, he put the new economic reasoning in a nutshell. It is important for America not to believe "that what is good for us is automatically good for somebody else." The Americans had to "have some modesty about our attitudes towards other countries." "But," said Obama, "we do believe that there are certain fundamental principles that are common to all people, regardless of culture."

On one hand, what Obama says is reasonable. On the other hand one should not forget the future: there is not much negotiating space when visiting your biggest creditor.

Yet Hu Jintao did not feel like a winner. Both Obama and Hu met in Beijing like two wrestlers clasping each other, not being able to move forward or backward.

Hu did not even address protectionism. Climate: nothing new. Regarding human rights, the final score was 1:1. Obama declared, as expected by China, that Tibet is part of China, so that the Chinese will continue to buy American state securities. At the same time he said that the Chinese should resume talks with representatives of the Dalai Lama, if only to ease American public opinion on the issue.

Everything was so much easier when the US was the unchallenged global economic super power.

Obama's advisors later muttered that the US did well despite the rather complicated circumstances. And the Chinese diplomats were pleased that they had met with the Americans "at eye level". As if they could not believe that China's gain of power had come so quickly.

Both parties rejected one aspect: the two top politicians parted rather as competitors than as partners. Competitors who intended to pay each other and who had to realise that now during this global economic crisis they are in the same boat.

What will happen next?

Even if the Chinese become even more powerful as they lend even more money to the Americans, they do find an open confrontation with America too risky. For that the Chinese are too new on the global stage. But they will continue to build their power with patience and rigour. They will, for example, softly put forward to their Asian neighbours: us or the Americans. Japan, still the second largest economy in the world, finds itself in a predicament.

A security and value-based partnership with the USA, or an economic partnership with the Chinese? China remains an attractive market for Japan from a location and cost perspective. The choice is obviously not that simple. The Japanese will try to keep both cooperating partners for as long as possible.

But once China increases the pressure, the democratically elected Prime Minister Yukio Hatoyama will without doubt decide in favour of the economy -- even if the value system of the US looks a lot more attractive.

This scenario is a lot less precarious than it appears. In a world that moves closer together it can be more advantageous to have clear interests represented by the different regions. The Americans will then look after American interests, the Europeans after European interests and the Asians after Asian interests.

That appears to be preferable to weak and stretched interregional clubs with diverse members trying to agree on rotten compromises.

Frank Sieren has been living in Beijing for 15 years and is regarded as one of the leading German China experts. His brother Andreas is a specialist in international relations and development aid. He worked for many years for the United Nations in Asia and Africa.

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Frank Sieren & Andreas Sieren
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