In the midst of increasing tensions in the Asia-Pacific, the recent China-U.S. summit failed to move beyond the rhetoric that has long gridlocked diplomacy on key issues.
The 8th China-U.S. Security and Economic Dialogue (SED) conference kicked off June 6th in Beijing, with a litany of policy issues to discuss. Led by Chinese President Xi Jinping and U.S. Secretary of State John Kerry, both parties faced an incredible task of confronting a range of issues from cyber security and finance, to protectionism and the ongoing South China Sea dispute.
More China-U.S. rhetoric, little progress
Chinese and American delegates left the conference with more incongruities than conciliatory agreements as both sides prepare for the change of executive leadership within the coming year. American businesses looked for reassurances but found little to celebrate. While China is opening up a $3 billion green finance fund for U.S. companies, that pledge comes on the heels of a historic collapse in transparency and an increase in regulations for foreign companies.
Taking a cue from its recent restrictions on foreign NGOs, China has begun implementation of draconian rules aimed at protecting domestic industries from foreign competition. U.S. businesses are finding the regulatory environment harder and harder to navigate, as businesses remain skeptical that past pledges of reform will be kept due to undue pressure from the changing economic environment taking place in mainland China.
U.S. concerns include proposed cyber legislation limiting foreign companies from bidding and selling advanced information technologies and a pledge from President Xi Jinping to increase government spending on domestic companies. China, finding itself in the middle of an economic transition from take-off stage to a more consumption based economy, is strategically protecting national industries that are fundamental to future growth. These plans are antithesis to its past pledges to not enforce a domestic-only agenda toward advanced technology procurement and production.
As for agreement, the U.S. reaffirmed its support for the International Monetary Fund’s decision to include the renminbi in the Special Drawing Rights (SDR) basked of currency reserves. This reaffirmation comes on the heels of an agreement to designate additional clearing banks in the U.S. to assist with yuan transactions in order to facilitate greater use of the currency.
Additionally, U.S. Treasury Secretary Jack Lew received assurances that the current over capacity of steel that is creating a market-distorting effect will be handled swiftly and timely. However, China has pledged for years to curb excess capacity, but has displayed little appetite in following through. This comes at a time when future employment of China’s massive labor pool is critical in maintaining legitimacy for the ruling party.
Spotlight on the South China Sea
Overshadowing all other issues in the Security and Economic Dialogue is the on-going conflict over China’s aggressive land reclamation occurring throughout the South China Sea. Speaking at the Shangri-La Dialogue in Singapore, deputy chief of general staff, Admiral Sun Jianguo, conveyed a not very subtle proclamation that China will not recognize any international ruling against China’s current actions.
Adm. Jianguo’s deceleration comes in response to the upcoming ruling by the Permanent Court of Arbitration concerning his nation’s military claims throughout the South China Sea. In the next couple of weeks, it is expected that the court will side against China in favor of a case brought against it by the Philippines and four other nations. The ruling is seen as a test case for the U.S. and its allies to hold China accountable to long-established rules in the Asia-Pacific region.
China-U.S. relations remain at opposite ends of the spectrum when it come to the most highly disputed policy issue between the two nations. The U.S. remains in a quandary as China continues to construct military facilities throughout the South China Sea, with little leverage to force China to scale back its aggressive posture.
After the smoke clears, it is evident that the 8th SED conference provided little more than lip-service to the on-going security and economic issues facing China-U.S. ties. To put it bluntly, China doesn’t really care what the U.S. thinks on most issues facing the nation as it adjusts to lower than expected economic growth and faces its own domestic problems.
