international analysis and commentary

Obama wins, China rejoices

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It is easy to imagine the collective sigh of relief among Chinese elites following confirmation of Barack Obama’s re-election as President of the United States of America. For Obama’s first term in office has been marked by improved bilateral relations, increased cooperation at the global level, and no major problems between the US and China. A possible Mitt Romney presidency could have brought uncertainty at a time when China is about to undergo its ten-yearly government transition. With Obama in power, Beijing’s new leader can look forward to a welcoming Washington.

Much has been said about the possibility of a trade war between the US and China. It is true that the Obama administration has been more willing to bring China to the WTO dispute-settlement body than was the Bush administration. However, it is also true that the volume of bilateral trade between both countries has never been so high. In fact, it is well above pre-global financial crisis levels. This demonstrates that trade disputes have not disrupted the flow of goods between both countries. Moreover, Washington’s and Beijing’s acquiescence with the decisions taken through the dispute-settlement body indicates maturity from both governments.

Similarly, currency issues have not halted Sino-American economic relations throughout the first Obama administration. Romney had promised to label China a “currency manipulator” on his first day in the Oval office. Taking a radically different approach, the Obama administration has applied diplomatic pressure on Chinese authorities to let the value of the yuan rise against the dollar.

This approach has worked. The yuan is now at its highest value against the dollar since 1993. The People’s Bank of China has let the Chinese currency steadily appreciate since Obama took office. In April of this year, the PBOC also moved towards a more market-driven currency regime. Were the US Treasury to have labeled China a “currency manipulator”, Beijing’s reaction could have triggered a currency war.

Thus, the first Obama administration has been mostly positive for China in the area of bilateral economic relations. In contrast with the Clinton administration, which only signed a China trade bill less than a month before the November 2000 presidential elections, the Obama years have showed that a Democratic president need not hinder economic relations with the Asian giant. The new Chinese leader can look forward to four more years of cooperation in this area.

What about military and security relations? The “Asian pivot” or “Asian rebalancing” announced by Secretary of State Hilary Clinton in November 2011 has led some Chinese and non-Chinese analysts to argue that the US is seeking to contain China’s military rise. Allocating a proportionally higher number of resources to the Asia Pacific would indicate that the Obama administration is ready to confront the Chinese military to protect its interests in the region. This should make Chinese leaders wary of Obama’s intentions during his second term in office.

Yet, the Hu Jintao government has been relatively optimistic about the Asia pivot. Beijing has expressed hope that the US will actually strengthen stability in the Asia Pacific. Indeed, last September Secretary of Defense Leon Panetta took the unprecedented step of announcing that Washington will invite the People’s Liberation Army Navy to the 2014 Rim of the Pacific naval exercises. The exercises take place biannually, involve up to 22 countries, and are the most important military manoeuvres in the region. The presence of the PLAN would be a signification step towards military cooperation between the US and China.

Indeed, September also witnessed the first joint anti-piracy military drill between the navies of both countries off the coast of Somalia. American and Chinese ships worked in a combined team, in an exercise celebrated both by Panetta and his Chinese counterpart, General Liang Guanglie. The anti-piracy mission in the Gulf of Aden is the PLA’s first-ever outside of China’s territorial waters or their vicinity. Cooperation with the US Navy shows that, beyond political rhetoric, Beijing and Washington are willing to work together against common threats.

There is nothing to indicate that military cooperation could not have continued under a Romney administration. However, there is also nothing to suggest that a Romney-led government would have been ready to improve military ties with Beijing. The Obama administration has already proved that it is willing for the American and Chinese militaries to work together. His second term in office is therefore likely to witness an improvement in bilateral military ties.

Thus, Sino-American relations are poised to continue improving during the next four years. Obama upgraded two separate dialogues initiated by the George W. Bush administration as soon as he took office. The annual Strategic and Economic Dialogue has spurred a growing number of working-level meetings among senior officials in a broad range of issues. Trade, security, science and technology cooperation, climate change or law enforcement are some of the issues which have been openly discussed by both countries. In all likelihood, discussions will carry on under the new American and Chinese administrations.

In addition, common threats abound. The positions of the first Obama administration and the Hu government on the best means to deal with the global financial crisis, nuclear proliferation, piracy, terrorism or climate change are not significantly different. At a very fundamental level, their actions indicate that both of them agree on the need to tackle shared problems through multilateral cooperation. A major shift from the Obama administration during the President’s second term is unlikely, as is a change in direction from the soon-to-be named Chinese government.

Obama’s victory is therefore welcome news for Beijing. The new Chinese leadership will have four years to strengthen links with an American administration which has already shown its willingness to cooperate. The Hu government improved relations with the Bush administration to an extent that it would have been difficult for the Obama administration to turn back the clock, even if it had wished so. The next Chinese leader and the re-elected Obama have the opportunity to further consolidate relations between today’s two superpowers.

 

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