What Will Vice President Biden Find In China?
Evan A. Feigenbaum reports in his blog, Asia Unbound, on Vice President Biden’s recent talk at the opening session of the 2011 U.S.-China Strategic and Economic Dialogue. Feigenbaum identifies five fundamental Chinese policies America should be concerned with. CNN reports:
1. Biden will find a China whose rise depends on economic growth but whose growth model is no longer sustainable.
Bluntly put, China’s leaders know that their capital-intensive, export-oriented approach is delivering diminishing returns and threatens to become a major political vulnerability for the government. The global economic crisis provided clear evidence that China’s export-driven economy is vulnerable to dips in demand in the rest of the world. Meanwhile, its dependence on investment has introduced distortions and imbalances into the Chinese economy.
Why should this matter to Biden and the United States?
Washington has spent years urging China to “rebalance” its economy: China produces much and consumes little, while the U.S. consumes much and wants to produce more (in part to sell to China). The bottom line is this: Beijing lacks the political stomach to undertake the toughest rebalancing steps (for instance, a rapid appreciation of the renminbi) but the good news is that, for self-interested reasons, its leaders are committed to rebalancing and will take some steps that are in the U.S. interest. And ironically, it’s probably worth asking whether, from a Chinese perspective, the ongoing U.S. debt crisis may even create some additional incentives to reckon with China’s own imbalances. To use the pregnant phrase from a Reuters article this morning, could China now “reprice U.S. risk”?