Issue brief: China

Chinese and U.S. flags are displayed on Constitution Avenue in Washington, Tuesday, Jan. 18, 2011, ahead of the arrival of China's President Hu Jintao for a state visit hosted by President Barack Obama. (AP Photo/Charles Dharapak)
AP Photo/Charles Dharapak)

The Electoral Issue:

China is projected to become the world's largest economy in a few years, limiting America's global influence and jeopardizing American economic and political security.

The Challenge:

To manage China's rise constructively, welcoming them into a global leadership role while safeguarding the United States' economic, political, and human rights interests.


American Debt Held by China

America owed $1.164 trillion dollars to China in June 2012, making the Chinese government America's largest foreign creditor. To put that number in perspective, China's share of our debt is about 22 percent of the total American debt owed to foreign creditors.

In the aftermath of America's 2011 credit-rating downgrade, the Chinese state-run news agency published a piece admonishing the U.S. to "live within its means" and explaining, "China, the largest creditor of the world's sole superpower, has every right now to demand the United States to address its structural debt problems and ensure the safety of China's dollar assets." Apart from this embarrassment, China's ownership of American debt prevents America from more aggressively cracking down on China's currency manipulation and unfair trade practices. If China ever decides that American debt is not a sound investment, ceasing their purchase of U.S. treasury bonds, it could severely weaken the U.S. dollar, sending borrowing costs skyrocketing.

Trade Deficit

The value of Chinese exports to America far exceeds the value of American exports to China. Simply put, they don't buy as much from us as we buy from them. If America can't increase the value of goods and services it exports to the world's most-populous and second-largest economy, its economy will not perform at full potential. One study from the Economic Policy Institute, a labor-allied think tank, estimated that between 2001 and 2011, America's massive trade deficit with China caused job losses totaling 2.7 million, with 77 percent of the job loss borne by American manufacturing.

Currency Manipulation

One reason behind China's prolific exporting is the Chinese currency, the Renminbi, which many experts believe is significantly and intentionally undervalued. The exchange rate - about 6-7 renminbi for 1 American dollar - tilts the trade balance in China's direction, making everything they buy from us more expensive, and everything we buy from them less expensive. The trade deficit described above is one result.

In a rare bit of agreement, policymakers from both parties have condemned China for what they call "currency manipulation," or taking active steps to devalue the Renminbi by selling it in the international market and buying reserves of foreign currency, particularly the American Dollar. The increased supply of the Renminbi drives down its price (and therefore the cost of Chinese items priced in Renminbi) and the increased demand for the American dollar drives up its price. The Chinese, in turn, have accused the United States of hypocrisy, arguing that the Federal Reserve's "quantitative easing" policy - basically printing money - has a similarly depressive effect on the value of the U.S. Dollar.

Human Rights & Political Freedom

Despite the significant progress China has made in moving their population up the economic ladder, the country remains a one-party state, ruled by a central Politburo committee and almost completely closed to popular sovereignty.

This is not the China of Tiananmen Square. The state is more quietly than aggressively oppressive - political violence is rare, but censoring access to the Internet, restricting public protests, limiting press freedom, and quashing dissent are regular features of Chinese political life.

In one recent episode, Chinese dissident Chen Guangcheng, a democracy and civil rights activist who was arrested because of a lawsuit he filed against China's one-child policy, escaped from house arrest and sought asylum in the American Embassy in Beijing. After negotiations between the two governments, Chen was allowed to enter the United States as a student. The incident, though resolved peacefully, provided a revealing window into the continued pattern of political repression that characterizes modern China. Due to press censorship, many Chinese citizens remain unaware of the dust-up over Chen Guangcheng.

North Korea, Iran, and Syria

North Korea is a pariah state - a dictatorship with a rogue nuclear program and no regard for human rights or international norms. Its most meaningful international ally is China, which sees North Korea as a valuable buffer between the Chinese mainland and the U.S. forces in South Korea. China's position on the United Nations Security Council enables them to veto or water down any U.N. attempt to censure North Korea for their frequent provocations.

China causes similar problems in U.S. policy toward Syria and Iran, using its perch on the security council to prevent the United Nations from more directly intervening in Syria's massacre of its own people and Iran's nuclear program.

Aggressive Territorial Claims

China has claimed wide swaths of maritime territory off the Chinese coast, including all of the South China Sea, an oil-rich body of water that is also claimed by adjacent states Malaysia, Vietnam, and the Philippines, among others. The move has sparked fears in Pacific rim states that China is becoming more territorially aggressive as its global clout increases in tandem with its economic power.

The claim to the South China Sea, which could have as many as 213 billion barrels of oil, is seen as a move to secure energy independence. But examined together with China's claim of the East China Sea and the Yellow Sea, the big picture begins to look like an effort by China to extend its sphere of influence, pushing American naval assets away from Taiwan and the Chinese mainland, and positioning itself as a regional power. Some analysts worry that China's audacity, coupled with its rapidly increasing military budget, will spur an Asian arms race in which the rest of the region intensifies military spending to mediate Chinese influence.

Jargon Watch:

"Crack down on cheaters like China"

Bromides like this are feel-good sloganeering, but they ignore the complex economic and political issues involved in the American-Chinese relationship. Presidential candidates frequently talk tough on China, promising aggressive action on behalf of American interests, and backpedal when they reach the Oval Office, recognizing that the sound-bytes of campaigning are rarely conducive to the delicate dance of international diplomacy. Candidates that talk tough about "cracking down on China" must explain how they would crack down - tariffs, World Trade Organization sanctions, etc - and how they hope to avoid the diplomatic reprisal that would likely result.

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