Lee Kuan YeW MrNrsrER MENToR oF srNGApoRE
Current Events
U.S.-China Relations
DURING AN IMPORTANT POLICY CONFERENCE PRESIDENT
Barack Obama said the Chinese yuan (RMB) is kept at an artifi-
cially low level, giving China an unfair advantage in selling its
exports. Obama did not call China a currency manipulator, but
he said the U.S. has "to make sure that our goods are not artifi-
cially inflated in price and their goods are not artificially deflated
in pricei' U.S. exports to China in 2008 were $69.7 billion com-
pared with imports of $337.8 billion, a deficit of $268 billion.
Imports were five times the value of exports.
Chinahas resisted calls to up-value theyuan, suspectingthese are
attempts to slow its growth. Yet Westem economists unanimously agree
that the yuan is undervalued by 24o/o lo 40o/o and that the currencies
of Hong Kong Malaysia Thiwan and Singapore also need to rise in
order to correct their trade imbalances with the U.S. But the
as long
yuan doesnt appreciate neither can the currencies ofother East Asian
countries, unless they're willing to lose their market share in exports.
Premier Wen ]iabao of China has said, "We will not yield to any
pressure of any form forcing us to appreciatel'China has urged the
U.S. to maintain the value of the dollar and has reduced its holdings
in U.S. Treasuries by 3.7Vo, or $34 billion. China attacked the
policyofselling arms to Thiwan, threatening sanctions againstAmer-
ican firms and noncooperation on international issues. Thus, China
resistedAmerican initiatives on climate change in Copenhagen and
has not backed tougher sanctions against han. Beijing has also ex-
pressed great anger over President Obamais meeting with the Dalai
Lama at the White House, issuing a terse statement that the U.S. had
"grossly violated the norms governing intemational relationsl'
At the Copenhagen summit on climate change Western media
reported that Premier Wen refi.rsed to attend a meeting of keylead-
ers calledbyPresidentObama" sendingVice Foreign Minister He Yafei
inhis stead. This meantthatObama aPresident, hadto callonWeq
apremier. The Financial Times ran a front-page photo capturing the
moment: a U.S. President leaning forward with arms outstretched,
apparentlypleading with a Chinese premie6 who remained seated with
hands folded and fingers interlaced;looking stone-faced Xrkun" ffinris
leading newspaper, knew the picture did not show China in a good
light it ran a photograph of Premier Wen looking less imperious.
What has changed in U.S.-China relations? The U.S. economy
has tanked, with China holding more than $2.4 trillion in U.S.
Treasuries and other assets, which means the U.S. needs Chinals
cooperation in order to stabilize its economy.
The increase in tensions between the two nations caused an
American leader close to the White House to ask me why China's
Lee Kuan Yew, minister mentor of Singapore; David Malpass, global economist, president of Encima Global LLC; Amity Shlaes, senior fellow in
economic history at the Council on Foreign Relations; and Paul Johnson, eminent British historian and author, rotate in writing this column. To see past
Current Events columns, vistt our Web site at www.forbes.com/currcntevents.
14 ro RBEs AstA ApRtL2oto
posture has changed. I could not explain why. So when I met the
Chinese state councillor in fanuary, I showed him the FTphoto.
The state councillor responded that it was a misunderstanding.
I then added that foreign ofiicials, including Singapores, in ne-
gotiatingwith Chinese officials on joint statements have found them
to be pushier and tougher to deal with. The state councillor responded
in succinctChinese, "Whenwe are notstrongwe should notbeproud,
and when we are strong we will still not be proudi' I agreed and com-
plimented him on his speech in ]akarta in which he had pointed out
that Chinais per capita GDP was modest, ranking l?4thintheworld"
Tit for Tht
Meanwhile, various commercial disputes have arisen between
as China and the U.S., making people wonder if these developments
will lead to more protectionism and affect the global economy.
The issues include antidumping duties on U.S. chicken products;
levies on Chinese-made tires and oil well pipes; allegations by the
U.S. that China has raised the international prices of several raw
materials through export restrictions while keeping input costs
U.S. lower for manufacturers in China; and China's censorship of
Google and whether that constitutes an unfair barrier to trade.
In its quest to become a world power China has chosen to
take the path of the 'peacefirl risei' It projects the image of a cud-
dly Chinese panda, compared with the fierce American grizzly
bear. Chinese leaders are in the midst of finding the right balance
between keeping a low profile and exerting their growing influ-
ence. As a result, astute observers find China fumbling from time
to time in its reach for the right balance in its public positions.
Deng Xiaoping summed up the U.S.-China relationship in an
epigram in the 1980s: There are inherent limits to better relations
and inherent limits to bad relations.
With its rapid economic growth andthe concurrent shiftin the
balance of powe6 Chirn has become more strident in its protests against
U.S. arms sales to Thiwan and the President's meeting
with the Dalai
Lama- ButAmericans expect thisand are taking these barbs in stride.
They know that the fundamentals ofthe two countries joint strategic
interests will prwent the complek swering of cooperation. China needs l
the U.S..export market, investments and technology; America needs
thelow-cost dailynecessities made in Chinato fill its Wal-Mart stores.
The world's monetary and political problems require both
countries to take parallel policy paths. Cooperation and compe-
tition will continue, and relations will move forward, regardless
ofperiodic conflicts.