WASHINGTON -- The U.S.-China summit on Sept. 25 underscored differences between the two major powers in their positions on key issues at the top of the agenda, including island-building by China in the South China Sea and cyberattacks, though they did make some progress on the cyber issue. U.S. President Barack Obama could not convince Chinese President Xi Jinping to concede on the major issues. With the Chinese economy slowing at a much faster pace than expected, however, it is uncertain how long Xi can continue to play hardball.
At a joint press conference at the White House after the summit, Xi reiterated his country's position that "islands in the South China Sea, since ancient times, have been China's territory," without batting an eye.
During the talks with Xi, Obama told the Chinese leader, "The U.S. will continue to sail, fly and operate anywhere that international law allows," implying that his country will continue to deploy warships and surveillance aircraft to territorial waters around artificial islands China claims. His remarks failed to budge Xi, however.
China, which in the past was subject to invasions by foreign countries, is highly sensitive to issues associated with its sovereignty. Making concessions to the U.S. on such issues, including another territorial dispute with Japan over the Senkaku Islands in Okinawa Prefecture, is not one of China's options.
On the issue of cyberattacks, the two countries agreed to set up a new mechanism for ministerial-level dialogue. In this arena too, the Chinese side's astute maneuvering behind the scenes was noticeable.
China attached to the launch of the ministerial-level cyberattack dialogue conditions regarding the treatment of Chinese nationals arrested in relation to attacks on U.S. computer systems. The five are Chinese military men whom the U.S. Department of Justice arrested in May 2014 for allegedly hacking computer systems at U.S. companies. China denounced the accusation, saying it was based on "fabricated" facts. With the start of the ministerial-level dialogue mentioned in a joint statement issued after the summit talks, speculation is rife that the U.S. may have assured China that it would take positive steps regarding the five Chinese.
Meanwhile, the start of the ministerial dialogue mechanism does not guarantee that China will rein in its cyberattacks. At the summit, Obama directly conveyed to Xi his serious concerns about cyber threats posed by China, only to see the Chinese president hold on to his often-expressed assertion that China is also a victim of cyberattacks.
Xi calls the current U.S.-China relations "a new type of major-power relationship," in which both sides agree to differences between them and avoid an all-out confrontation. At the summit, the two countries agreed to work together in areas such as climate change and the prevention of air-to-air military mishaps.
In the U.S., which is facing a presidential election in November next year, there are growing calls for a tougher stance against China. From an economic perspective, however, the country cannot help but opt for cooperating with China, with U.S.-China trade amounting to $550 billion a year. When Xi visited Seattle before the meeting with Obama, the Chinese president announced a plan to buy 300 airplanes from Boeing. Extravagant purchases like these have put pressure on the Obama administration.
Obama has only a year and a half left in office, and so Beijing is apparently rushing to make its expanded maritime rights a fait accompli, expecting Obama's successor to assume a more rigorous stance toward China.
Quiet on the yuan
The yuan issue did not turn out to be a major focus of the Sept. 25 summit. China's devaluation of its currency in August sent stock markets worldwide lower, and anger against China's opaque monetary policy is still simmering in the U.S. Sensing this atmosphere, Xi declared at the talks with Obama that there will be no grounds for China to continue devaluing the yuan.
Coinciding with the summit, the White House publicized on Sept. 25 an outcome document on achievements in U.S.-China economic cooperation. As for China's enlisting cooperation from major countries in its efforts to include the yuan in the International Monetary Fund's basket of reserve currencies, the U.S. showed understanding, saying it supports the Chinese attempt as long as China meets the IMF criteria.
China has been asking for other countries' support of its bid to make the yuan an IMF reserve currency, part of the Special Drawing Rights system, within this year, before Beijing hosts the Group of 20 summit in 2016. While European nations are largely willing to comply, the Obama administration has not yet committed itself. The outcome document only said that the U.S. would support the Chinese bid if China fulfills the IMF criteria.
The IMF executive board plans to decide at a meeting in November whether to add the yuan to the SDR basket. However, as the U.S. Congress is becoming increasingly critical of China over cyber espionage and the South China Sea territorial issue, some believe it will be difficult for the U.S. to favor the Chinese bid at the IMF meeting.
The U.S. outcome document noted that China understands the importance of securing the same degree of transparency for the yuan as for the U.S. dollar and other reserve currencies if it is to internationalize the yuan. The document adds that China intends to open up economic and financial data to foreign countries through the IMF by the year-end in an effort to improve transparency. It also said the U.S. and China will continue talks to build a mechanism for trading and settling transactions in yuan in the U.S.
Referring to a U.S.-China bilateral investment treaty, for which the U.S. business community has lobbied strongly, the outcome document said some progress had been made. However, a U.S. government source indicated that the stalemate in negotiations on the issue has worsened. Regarding the 2016 G20 summit in China, the document says the U.S. and China will work closely to bolster the world economy through financial and monetary policies.
