China and the Global Recession: Part II – Relations with the United States

Collin Spears

Collin Spears, BFPR Chief Foreign Policy Correspondent, Washington, DC Bureau

In 2001, the Bush Administration characterized China as a “strategic competitor” to the United States. This may still be an accurate depiction of U.S. – Sino relations, at least as it applies to certain aspects of the multifarious relationship between the two nations. Financially, China and the U.S. have long been symbiotic. Despite the mutual benefits attained from this situation, there have been numerous points of contention, issues that have only been aggravated by the global financial crisis. The U.S. and China will have to find politically palatable ways to work though some of these differences, because the future economic viability of both nations depends on it.

The People’s Republic of China (PRC) is the world’s largest single holder of U.S. Treasury Securities, which total about $700 billion U.S. dollars (USD). China also purchases U.S debt through third countries, which could bring the total closer to $1 trillion as of January 2009 (Shambaugh 2009). Much of these securities are held by China to regulate the Yuan against the dollar in order to ease the flow of the massive amount of trade between the two nations. In 1979, China – U.S. trade was valued at $2.5 billion as compared to over $400 billion in 2008 (Shambaugh 2009).

China and the Global Recession: Part I – The Domestic Situation

BFPR ANALYSIS

By Collin Spears, Chief Foreign Policy Correspondent,
Washington D.C. Bureau

The consensus of mainstream China analysts is that the Chinese Communist Party (CCP) is a unified entity that is destined to guide China into a new golden where it will enjoy global superpower status. This sanguine narrative is maybe challenged as the current global economic recession has served to elucidate the genuine fragility of China’s political economy. Stability in the immediate future, let alone, decades from the present, is not a fact to be taken for granted, but a likely possibility to be continuously observed and evaluated.

The Chinese leadership is less of a cohesive organism than a mixture of overlapping and competing regional, ideological, and institutional interests. This leaves China vulnerable to conflict. The glue that binds the various CCP factions and the monied elites is a vast patronage system made possible by 20 years of unprecedented economic growth, no Maoism or a constitutional “balance of powers”. The Chinese elite are conscious of this. Even President Hu Jintao recognized the importance of various factions to maintaining national stability by designating two possible successors from divergent ideological perspectives, Xi Jinping and Li Keqiang. The CCP has also been touting the phrase “zhengdi tuandui” (team of rivals) in the media, in reference to political cooperation, which seem to be part of President Hu’s larger goal of creating a “Harmonious Society”. China’s ability to realize this harmony is heavily dependent on the financial liquidity that feeds its “Leviathan”.