Five Things the U.S. and China Still Disagree On

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Charles Dharapak / AP

President Obama speaks with Chinese President Hu Jintao at the G-20 summit in Pittsburgh on Sept. 25

Sino-U.S. relations were a rare foreign policy bright spot during President Bush's last term. Amid setbacks in Iraq and Afghanistan, the Administration was able to broaden and deepen ties with China, while keeping longstanding disagreements over issues such as trade and China's human-rights record under control. But that doesn't mean they went away. When U.S. President Barack Obama meets Tuesday with Chinese President Hu Jintao at the Great Hall of the People in Beijing, there are several trouble spots between him and his host, and the good relationship could erode if they aren't managed carefully. Here are five key areas that the U.S. has to worry about:

The democratic, self-governed island is one of Beijing's most important foreign policy considerations. It puts a huge amount of effort into diplomatically isolating Taiwan, which Beijing considers Chinese territory that should be reunified by force if necessary. China maintains an estimated 1,300 ballistic missiles along the Taiwan Strait to be used against the island in event of war. While the U.S. does not have formal diplomatic relations with Taiwan, it remains its biggest ally and protector. Under the Taiwan Relations Act, U.S. law requires that it sell military hardware to provide for Taiwan's defense, which infuriates China. Last year Beijing cut off military-to-military interactions between the U.S. and China to protest an American arms deal with Taiwan.

Those relations resumed in October when Xu Caihou, vice chairman of China's Central Military Commission, visited Washington. "Xu went to America and talked to Obama about arms sales," says Yan Xuetong, director of the Institute of International Studies at Tsinghua University in Beijing. "But the arms sales will continue because of the Taiwan Relations Act. That shows that they can talk nicely, but can't reach an agreement."

Military Relations
Over the past 10 years, military incidents have shown the greatest potential for sending Sino-U.S. relations into an unanticipated tailspin. The U.S. bombing of the Chinese embassy in Belgrade in 1999 and the collision of a U.S. spy plane with a Chinese fighter near China's southern Hainan Island in 2001 both sharply increased tensions between the two sides. This March, Chinese vessels confronted a U.S. Navy surveillance ship that was surveying an area about 75 miles off Hainan, an area many nations consider international waters but China claims as part of its exclusive economic zone. U.S. military officials said that standoff was a sign of increasing aggressiveness by the Chinese military.

China's defense spending has increased by an annual average of 16% over the past 10 years, and on Oct. 1 the government marked the 60th anniversary of the founding of the People's Republic with a massive military parade. U.S. officials often question why China feels its military requires such a sustained modernization program, and a Pentagon report in March said that a lack of transparency from the Chinese side "poses risks to stability by creating uncertainty and increasing the potential for misunderstanding and miscalculation." China rejected the U.S. report as "groundless" criticism and an effort to stir up notions of China as a threat.

During his confirmation hearings in January, U.S. Treasury Secretary Tim Geithner accused China of manipulating its currency, driving down the value of the renminbi to make Chinese exports cheap. That provoked a furious response from Beijing, and since then Geithner has toned down his message. While he expressed a belief commonly held by economists, an official finding of currency manipulation by the U.S. government would trigger negotiations with China and possibly duties on Chinese imports. In October, the Treasury Department said that the renminbi was undervalued, but that China was not a currency manipulator.

Many economists argue the low value of China's currency helped contribute to the global imbalances that precipitated last year's financial crisis. China has rejected that idea, and instead points the finger at the U.S.'s profligate spending and weak control of financial markets. Obama is expected to raise the renminbi issue during his visit to China, but with China trying to prop up an export sector that has suffered from the downturn, there is little hope that it will allow its currency to appreciate anytime soon.

Intellectual Property Rights
Illegal copying of everything from handbags to DVDs to medicine in China is a source of extreme frustration for many U.S. companies. American software and music companies say that more than $3.5 billion worth of their goods are pirated in China each year. The U.S. has pushed China to step up its enforcement of intellectual-property rights, arguing that it's one way to narrow a trade gap that reached $268 billion last year. While the U.S. is unlikely to make any progress on pushing China to allow its currency to appreciate, it could make a stronger case on preventing piracy, says James McGregor, the former chairman of the American Chamber of Commerce in China. As China tries to move beyond cheap manufacturing, its companies will begin to suffer more from poor protection of intellectual property. Piracy "is still a horrendous problem here and it's alarming for the business community," he says. "It's a win-win, because China wants to build an innovation society."

Human Rights
When Obama was awarded the Nobel Peace Prize in October, some Chinese bloggers joked that President Hu Jintao was ecstatic about the decision, because it meant the honor wouldn't go to a Chinese dissident. Now human-rights activists wonder if Obama will use the bully pulpit of the prize to push for the release of dozens of jailed activists being held throughout the country. Expectations aren't high. In February, Secretary of State Hillary Clinton said the U.S. wouldn't allow human rights to derail cooperation with China on issues like climate change and rebuilding the global economy. Then last month Obama decided to postpone meeting with the Dalai Lama, the exiled Tibetan spiritual leader, until after his visit to China. That was widely seen as an effort to avoid upsetting Beijing.

If the Chinese government appreciated the gesture, it chose an odd way to show it. Days ahead of Obama's arrival Chinese Foreign Ministry spokesman Qin Gang said that as a black President, Obama should be especially sensitive to China's position on Tibet. "In 1959, China abolished the feudal serf system [in Tibet] just as President Lincoln freed the black slaves," Qin told a news conference, according to the Associated Press. "So we hope President Obama more than any other foreign state leader can have a better understanding on China's position on opposing the Dalai's splitting activities."