American Engagement of China

Henry Paulson is the secretary of the US Treasury and his article on the Foreign Affairs Magazine for the September/October 2008 Issue shows a perspective that the prosperity of the United States and China depends heavily on helping China further integrate itself into the global economic system through trade, investments and the integration of the financial markets. According to Paulson, the launch of the U.S. – China Economic Dialogue (SED) was an important step taken in 2006 by President Bush and Chinese President Hu Jintao in expanding the relationship of these two superpowers over the long term. Despite the long history of interaction between the two nations, they both have had misunderstandings in various areas. Thus the SED began to play a big role in enabling policy makers from both sides to meet each other as equals and to work toward a strategic goal. Early on, China always was very defensive of its national interests, especially against foreign demands thus the US, in particular, was perceived as arrogant aggressive bully in China even when these foreign powers were legitimately pursuing their interests with China. However, since the creation of the SED under President Bush, legitimate high level avenues of diplomatic contact was made possible for China and the US to corporate and avoid such misunderstandings.

After its creation, the SED began to focus on a number of issues including the rising growth imbalances, US-Chinese economic relationship, energy security, environmental sustainability, trade and investment issues, product safety and China’s position in the global economic system. Unlike the image the Americans have about China, china is actually facing a growing crisis behind all the façade of power. The same reason that spurned growth in China is now becoming an obstacle to Chinese social stability and sustained economic growth. The Chinese growth was all based on exports and investments in its capital, which has led to rise of rapid energy consumption, environmental damage, an unequal amount of infrastructure in the coastal China compared to inland China and increasing tensions with trade partners due to Chinese market policies and trade surpluses. China also faces a population crisis as the traditional source for retirement benefits were their Children but the one child policy and the dangers in society have drastically made China’s biggest resources – their children a scare resource. So now China must find a way to help the rapidly aging population with retirement and health benefits.

As two of the biggest consumers of oil, China and the US share a large interest in energy security and developing alternative energy sources. Chinese policy to set price caps on subsidized oil and electricity to promote stable social life has failed as it led to wasteful consumption. Now the control of energy demand has become a growing concern in the country among the middle and upper class. The US also has begun to address the issue of inadequate protection of intellectual property rights in China through the SED and also began to press China into opening its closed market practices to foreign businesses. In the years to come, three possible choices exist for Chinese – US relations: robust engagement, dispute resolution through multilateral and bilateral enforcement measures and punitive measures – being that the first two tend to work better with China than punitive measures.