Summit meetings, in particular those with 20 heads of state in attendance, are usually scripted, staid affairs. That's especially true when these get-togethers involve Chinese President Hu Jintao, whose private persona varies little from his public style. As befits someone who is running the world's most populous country, he is intensely disciplined and extremely cautious. On Tuesday, he will meet one on one with U.S. President Barack Obama on the sidelines of the U.N. General Assembly in New York City before heading off to Pittsburgh, Pa., for the G-20 summit on Sept. 24-25. This is what a more relaxed Hu might say to Obama, whose first major decision on trade was to slap a 35% tariff on tires produced in China an action that generated a flurry of stories in the media about the possibility of a U.S.-China trade war:
"One of my aides handed me something before our meeting. It's a quote from one of the more popular online chat rooms in China, and I'm told it reflects pretty accurately the prevailing sentiment in my country in the wake of your decision to discriminate against tires made there. (U.S. companies, by the way, produce two-thirds of those tires. We all had a good chuckle about that in the Politburo. Here I am, the head of the Communist Party in the People's Republic of China, and I'm apparently more of a capitalist than you!)
"Anyway, back to what this netizen said: 'To fight enemies, you don't get any advantage by appearing weak!' So now I'm accused of being weak at home because I didn't go tit for tat with you on trade, and you're accused of being the 'enemy' a common refrain, by the way, in the increasingly xenophobic quarters of our central government's propaganda department. That's O.K. for now. We easily could have immediately stopped imports of U.S. chickens or auto parts or anything else by concocting some health risk or claiming a failure to meet Chinese safety standards. Instead, we kicked the can down the road, launching an 'investigation' about possible trade violations one that will be long forgotten by the Chinese public by the time it's completed months from now.
"The fact is, despite what the headlines in your financial press might say about China's 'strong' growth, our economy is still hurting thanks to the financial collapse your country inflicted on the world. Our export sector is particularly suffering, so the last thing anyone needs is for us to go all nationalistic and start a trade war. We understand we need the U.S. market, and we also have a desire for stability right now more so than usual. Next month is the 60th anniversary of the founding of the People's Republic of China, and then in November you are coming to Beijing. So I thought it best to keep things on an even keel and let this tire thing go.
"But before you thank me for that, I wanted to mention a couple of things. Your Treasury Department has thus far been good at keeping its mouth shut about the value of our currency. As I said, we need our export sector to recover late last year I had more unemployed workers in one province (Guangdong) than you have in your entire country so forget about pressuring us to revalue the renminbi. We allowed it to increase in value against the dollar during the Bush years, but until there's evidence of a global economic recovery, we're not budging on currency. So continued silence on that front is golden, got it?
"Second, we still buy a whole lot of your Treasury debt, though this is less of a weapon than is often portrayed in your press. (We have to recycle the dollars we earn from trade somewhere, and your Treasury market remains the largest and most liquid in the world. Plus, we, like the Japanese before us, have no real interest in seeing your interest rates rise and growth slow, particularly not now, and that's what would happen if we went on a T-bill buying strike.) But holding your debt does give us leverage, and we have some decisions to make now. Specifically, we'd like to diversify our purchases because the dollar is getting weaker by the day and we want hard assets. Companies, land, buildings, amusement parks, golf courses, whatever. Our sovereign wealth fund the China Investment Corp. is already looking at possible investments, as are some of our state-owned companies. A few years ago, one of our better-run companies, CNOOC, tried to buy a second-tier oil company in Los Angeles, UNOCAL, but backed off after your own xenophobic politicians created a ruckus. We hope that in the future your Administration will help explain to the American people not to mention the members of Congress in both parties that increased direct Chinese investment in the U.S. is in both our interests. We have so many dollars piling up, we're going to be buying your stuff for years to come.
"Finally, about North Korea. I've been as annoyed as you have by the Dear Leader, Kim Jong Il. But last week I sent my personal envoy, Dai Bingguo, to Pyongyang, and we told him again that the time has come to sit down and negotiate with you directly. We'll host the talks in Beijing to give you a fig leaf of multilateralism, if you still care about that. But I'm assuming you'll now get on with the business of ... how did your Defense Secretary, Mr. Gates, put it? Oh yes: 'Buying the same horse twice.'
"I think that covers it. Thanks for meeting me in New York City by the way; it saves me time later in the week. I would say I'm looking forward to going to Pittsburgh, but I'm not much of a football fan, and my staff tells me you can't get a decent Chinese meal there to save your life."