President-elect Barack Obama on the streets of China. The new President will bring a new face to Sino-US diplomacy. Phot courtesy Jerry Socoa/flickr.com

Chairman Mao Zedong famously told President Richard M. Nixon in 1972: “I voted for you during your election,” adding: “I like rightists.” Whether that sentiment would be echoed today in China is doubtful. Public opinion polling in the country in the weeks immediately before the November 4 US election suggested that most Chinese, among the very few that had an opinion on the topic at all, wanted Barack Obama to win. The figures differed depending on whether the (mainly western) pollsters focused on the major urban areas or the countryside, but the results nonetheless showed that two-and-a-half to three times as many Chinese said they would prefer Obama to John McCain in the White House. This mirrors the public attitudes that were expressed in several other East Asian countries, with Indonesians unsurprisingly offering the one-time resident of their country the highest levels of support. Interestingly, however, few in China thought the outcome of the election would actually make much difference to their country.

Many among the Chinese non-governing elite who think about the US-China relationship are similarly impressed by Obama but take a longer perspective on their ties with America. Some note that these ties tend to move in cycles of difficulties at the start of any new US administration before things eventually stabilize. Others among them argue that relations now have reached a level of maturity sufficient to give some order and predictability to the regular encounters across a wide range of policy areas. It matters less than it once did whether a Republican or Democrat ends up in the White House, and it is significant that China policy did not become a major issue in the 2008 US electoral campaign.

From Tension to Stability to Institutionalization

There is historical basis for both of these perspectives held by Chinese elites. At its start, the Clinton administration attempted to link China’s Most Favoured Nation trading status with human rights improvements, only to later cast aside that linkage in 1994 and improve relations to a level where summit meetings could be exchanged in 1997 and 1998. Relations between the Chinese government and the first term of the George W. Bush administration began unpromisingly. Bush gave prominence to the idea of China as a competitor with a dismal human rights record and three months into his administration, he presided over a major crisis involving a crash between an American surveillance plane and a Chinese jet.

After 9/11, and a corresponding shift in US priorities, Sino-American relations improved markedly. Good, reasonably productive dialogue with China was necessary to the management of a raft of issues secondary to the focus on countering terrorism: developments in Taiwan, North Korea, and Iran among those secondary though important concerns. By the end of the Bush period, the Chinese and US governments had institutionalized the relationship in some realms and had set up a number of bilateral dialogues. None was more important than the Strategic Economic Dialogue between the US Treasury and its Chinese counterpart. This led to the signing of a 10-year energy and environment cooperation framework in 2008. A Senior Dialogue involving the Chinese Foreign Ministry and US State Department also represented an important innovation, allowing for regular discussion of “big picture” strategic issues such as North Korea, Iran, Sudan, Burma/Myanmar, and UN reform. Certainly, China would like the institutionalized arrangements set up in the last few years to continue. For these reasons, the Chinese government might stand virtually alone in mourning the ending of the George Bush era.

The current global financial economic crisis could cement this maturing bilateral relationship. It seems obvious that there has been no de-coupling of the Chinese economy from that of the United States’ over recent years. China has been financing Washington’s budget deficit and US citizens have been buying cheap goods from China (too many, from the US government’s perspective). Those purchases have contributed to China’s strong trading surplus and vast foreign exchange reserves. However, the drawbacks associated with that positive economic outcome for Beijing are plain. China's vast reserves are predominantly held in US dollar-denominated assets. It is dependent on high growth and, to a significant degree, this comes from sustaining high levels of exports, largely those to the American market. Already, Chinese levels of growth are dropping quickly; with these drops have come increased fear of a loss in domestic political support, sufficient to engender serious levels of social unrest. This sense of vulnerability among the Chinese leadership, and the loss of economic momentum that is already apparent, should give pause to those who argue confidently about a shift in power from Washington to Beijing.

If the Chinese government is fearful about the state of its economy, much Chinese commentary has also focused on the challenges that the incoming US administration faces, as is true of public commentary elsewhere in the world. Obama’s acceptance speech and its emphasis on “two wars, a planet in peril, and the worst financial crisis in history,” point to the constraints under which his administration will labor. Chinese leaders rightly assume that these three issues will be top priorities in the first years of an Obama administration, and Beijing’s job will be to reinforce the understanding, as it did under Bush, that the Chinese government can be helpful in managing some of these challenges. This ought to mean more than waiting for America to act on these issues; it ought to include constructive Chinese contributions to the debate on what needs to be done.

More of the Same

An emphasis on managing bilateral ties rather than significant change seems, then, to be the broad expectation in China, even if the few among the general public who offered an opinion said they preferred Obama over McCain and were as excited as many others in Asia on election night. More of the same also means, though, that the issues that have long strained the relationship will remain on the table. Indeed, some of them are connected with the priorities that Obama has identified. For the Chinese public, it is US policies towards Taiwan and Tibet that are potentially the most explosive, but the Beijing government's agenda goes well beyond these two topics. Though the prospects of war between China and Taiwan have diminished markedly in recent years, Taiwanese domestic politics, Chinese military strategies, and further US arms sales to the island all remain capable of raising tensions. China’s increases in military spending are likely to continue—perhaps at a reduced level—sparking renewed calls for greater transparency from Washington. The US trade deficit with China, which Obama claims to be caused by China's currency manipulation and failure to expand its domestic market, becomes even less acceptable at a time of recession in the United States. As Obama put it: “Central to any rebalancing of our economic relationship with China must be change in its currency practices,” and he promised to use “all the diplomatic avenues available” to persuade China to allow its currency to appreciate. We should expect currency valuation to be the source of considerable tension. Trade protectionist sentiment in the United States is strong in some sectors—particularly among Democrats in the House—and Obama’s campaign statements suggested he sympathized with those views. He may be even more open to those views if China refuses to budge on currency values.