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reflections

Jul 11, 2013 | 03:21 GMT

China's Economic Slowdown

(Stratfor)
It can be difficult to separate the important from unimportant on any given day. Reflections mean to do exactly that — by thinking about what happened today, we can consider what might happen tomorrow.

The fifth round of the U.S.-China Strategic and Economic Dialogue began today in Washington. The meetings, which bring together foreign and economic ministry teams, are designed to provide a more comprehensive and regular pattern for dialogue between the United States and China. But the context of the current meeting is far different from the first dialogue in 2009, when China appeared to boast the only encouraging economy amid the global financial crisis. Five years later, the United States has seen slow but steady economic recovery and growth, while China expects its slowdown to continue.

The first Strategic and Economic Dialogue came during a global economic crisis, and China used the opportunity to highlight its model of economic growth in what it deemed a corrupt and declining Western system. Around that time (though not directly in the dialogue), there were rumors hinting at the formation of a so-called G-2, which would bring together China and the United States to bilaterally discuss and address the global economic crisis. It was a moment when China could portray itself as being as influential as the United States internationally; it could even try to take the moral high ground when it came to economic policy.

What is a Geopolitical Diary? George Friedman explains.

The 2013 meeting sees China and the United States in opposite positions. In his opening address, U.S. Treasury Secretary Jacob Lew noted that the United States has now seen 40 straight months of economic growth, has gotten its economic house in order, and that it is now China whose economy is "undergoing a systemic transition where significant and fundamental shifts in policy will be required to sustain growth in the future." Lew listed the various areas where China needs to improve its policies and behavior, from the financial sector to network security and intellectual property rights, areas that call less for equal compromise than for Chinese acceptance of U.S. norms.

China is no longer criticizing the United States for its poor corporate oversight. Now the United States is reminding China that they must change. Ahead of the dialogue, Chinese Vice Premier Wang Yang published a signed article in The Wall Street Journal, and Chinese State Councilor Yang Jiechi published an article in The Washington Post. The articles called for increased cooperation in the U.S.-China relationship and emphasized China's reform efforts and the continued and expanding opportunities for U.S. businesses in China. In short, they portrayed China as a no-less enticing investment opportunity and a growing market for U.S. goods. They also characterized China as a critical partner for continued U.S. growth and showcased the reform agenda of Chinese President Xi Jinping.

Both also briefly mentioned network security issues, which are much higher on the U.S. agenda. Chinese media, however, ran several signed commentaries regarding network security, mostly criticizing the United States for having a double standard following the revelations of U.S. spying on China.

China's attention to the network security issue and to issues beyond cybersecurity illustrates how the countries' roles have reversed since earlier meetings. China is in the weaker position, facing a slowing economy and possible domestic instability caused by economic weakness. At the same time, Beijing is being criticized for its seemingly assertive if not aggressive behavior in the cyberworld and in the physical world of Asian security. China can use the network security issue in its domestic media both as a way to gain the moral high ground and as a potential scapegoat should the dialogue not reinforce China's image as a confident rising global power.

It appears as though China can offer little to the United States in this round of dialogue, at least nothing that will help the United States with its more pressing issues, which include domestic employment, the withdrawal from Afghanistan and the political management of the ongoing instability in the Middle East.

China also has little to offer on the subject of North Korea. In any case, the United States has no pressing need for China's assistance. Washington recognizes the importance of a relatively stable China to keep the global economy from slipping again, so it will press its interests, but it will not do so aggressively.

In China, the Strategic and Economic Dialogue is receiving major media coverage. In the United States, it is not. Compared to 2009, Washington is feeling stronger while Beijing is feeling weaker. The idea of a G-2 is no longer even remotely considered. Internationally, China is not the United States' equal, and it is clearly not immune to economic cycles.

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