Cracks in U.S.-China Relations Are Widening Again in Crisis

Bloomberg News writes about prospects for U.S.-China relations under an Obama administration and amid a global economic crisis:

Mr. Paulson, 62, who visited China 70 times during his career on Wall Street, made improving ties a priority when he arrived at the Treasury in 2006. He advocated diplomacy instead of confrontation, establishing a twice-yearly “strategic economic dialogue” with officials in Beijing, aimed at cooling tensions and deterring Congress from taking up trade sanctions.

The approach produced some results, including a pledge to share data on food safety and agreement to allow foreign mutual funds to invest in China’s stock market. The value of China’s currency, the yuan, rose 21 percent versus the dollar from 2005 levels to redress what American officials saw as an unfair price advantage for Chinese products.

But now, heightened tensions between China and the United States may worsen a contraction in world trade that already threatens to deepen and prolong the economic downturn. The friction comes as President-elect Barack Obama readies a two-year stimulus package worth as much as $850 billion that will require the United States to borrow more than ever from China, the largest buyer of Treasury securities.

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