Written by Laurence Brahm - Published by South China Morning Post on 08/12/2009

An ancient Chinese saying, “to sleep in the same bed but dream different dreams”, describes the Strategic and Economic Dialogue that was held with grand pizzazz in Washington on July 27 and 28.

“We’re turning to China almost like a feuding couple might turn to a marriage counsellor for mediation,” explained Orville Schell, director of the centre for US-China relations at the Asia Society in New York. Not a good prognosis for what many hope will be an intimate and co-operative relationship.

Previous US administrations berated China for its lack of open capital and foreign exchange markets, human rights record, and relations with unsavoury regimes such as North Korea, Iran and Venezuela.

US President Barack Obama’s administration seems to have flipped the relationship. Today, Washington needs China’s foreign exchange reserves to underwrite its own gargantuan debt and to play pivotal roles communicating with those regimes that previous administrations snubbed.

There is another ancient Chinese saying that “two tigers cannot share one mountain”. With both US Secretary of State Hillary Rodham Clinton and Treasury Secretary Timothy Geithner vying for management of the US-China relationship, the former Strategic Economic Dialogue has been expanded and imploded to become a “strategic and economic dialogue”, covering every issu of the relationship. In practical terms this is unwieldy.

Former Treasury secretary Hank Paulson’s original intentionwas focused on capital and foreign exchange market liberalisation. Now, with all issues thrown on the table at once, little of substance can be discussed. For China’s delegation, that’s a good thing, a big show of solidarity and face-giving in a relationship where both parties can find very few points of agreement.

While the meeting staged the importance of the US-China relationship, China’s own observers and analysts are wary and soberly feel that no substance will come through such expanded and media-hyped dialogue. Actually, both parties have very few areas where they can find mutual co-operation and commonality.

China came to the table with two principal concerns. First is the security of its assets, being the largest global holder of US Treasury bonds. Second, Beijing wants US recognition of China’s status as a market economy. There is no mechanism of substance to guarantee China’s assets, and Mr Obama was not prepared to recognise its status as a market economy.

In pushing for a point of common concern, environmental matters have been tabled by Mrs Clinton. Both nations should find a common cause in cutting greenhouse gases. America’s proposed import tax on China’s exports not meeting environmental standards threatens to degrade into another protectionist trade scrap.

On security issues, the US would like to push China into becoming a stakeholder in the Afghanistan conflict. China knows too well – with its sensitive Xinjiang autonomous region bordering Afghanistan – the dangers of entering a conflict from which it cannot withdraw.

Regarding North Korea, China has proved reluctant, unwilling or incapable of bringing Pyongyang back to the six-party talks it abandoned. Clearly, North Korea’s objective is direct bilateral negotiations with the US. Days after the Washington meeting held its grand closing banquet, former US president Bill Clinton flew to North Korea and negotiated the release of two US journalists who were sentenced in March to 12 years’ hard labour.

Given this gesture, it will be difficult for the US to avoid direct talks with North Korea. Is it possible that “Dear Leader” Kim Jongil would have pardoned these journalists without a nudge or at least a nod from China? Maybe the dragon has shown its claws. Clearly, now, it has the upper hand.

Laurence Brahm is a global activist, international mediator, political columnist and author. He is the leading advocate of a fresh development paradigm - The Himalayan Consensus - an innovative approach to development.

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