January 22, 2011 / 12:28 AM / 7 years ago

Tough issues to test U.S.-China summit glow

<p>China's President Hu Jintao and U.S. President Barack Obama look at each other at the conclusion of an official South Lawn arrival ceremony for Hu at the White House in Washington January 19, 2011. REUTERS/Larry Downing (UNITED STATES - Tags: POLITICS)</p>

WASHINGTON (Reuters) - The presidents of China and the United States showed they can sing a summit duet in relative harmony but relations overall will remain more like two orchestras bickering over what score to play.

Getting North and South Korea back to the negotiating table was the biggest accomplishment of Hu Jintao’s choreographed four-day visit to the United States and there were warm words about more cooperation between the economic powers.

Contained, but not resolved, were rifts over trade flows, currency policy and human rights.

Domestic politics, with U.S. President Barack Obama facing re-election in 2012 and Hu preparing to hand off the presidency in early 2013, hang over the prospects for major advances.

“The talk was largely about cooperative and shared long-term interest but there wasn’t a clear path to reconciliation of short-term interests where there are conflicts,” said Eswar Prasad, a Brookings Institution economist and former International Monetary Fund official.

But Prasad and other analysts saw a new maturity in the relationship after a rocky year as both sides seemed able to set out their differences without falling into confrontation.

The Washington stop was designed to benefit both leaders. It offered Hu the symbolism of a state visit, a White House dinner and chats with top American executives and gave Obama an opportunity to speak out on the importance of human rights and a level playing field for trade.

It was also a bit of a victory lap for Hu, who has seen China grow into the world’s second-largest economy during his time as leader. As China ascends, the United States struggles to recover from its deepest downturn since the 1930s.

“BACK TO REALITY”

“I would separate how the two countries and leaders feel about each other and the relationship, and what is actually being done,” said Stephen Yates of DC International Advisory, a former security adviser in the George W. Bush administration.

He said with any fresh tensions -- between the two Koreas, at sea between China and the United States or its allies South Korea and Japan or over a new U.S. arms sale proposal for Taiwan -- “all of that feeling dissipates like the morning fog and we are back to reality.”

In a speech in Washington on Thursday, Hu seemed to anticipate this problem, saying: “We should prevent our relations from being affected or held back by any individual incident at any particular time.”

Obama, in a news conference with Hu, spoke forcefully of the need for China to raise the value of its yuan currency, reduce import barriers and take stronger steps to stop piracy and counterfeiting of U.S. goods.

In contrast, Hu did not mention China’s concern about U.S. fiscal and monetary policies -- including the printing of billions of dollars as part of a stimulus program -- that Beijing has argued are fueling global economic imbalances.

Hu also said nothing in public about the yuan. Nor did he emphasize the power and responsibility that China holds as the largest foreign holder of U.S. government debt.

But the sharp drop in China’s overall trade surplus last year shows it is shifting away from export-driven growth and makes it harder for Washington to blame its trade deficit on Beijing, said Yukon Huang, a senior associate at the Carnegie Endowment for International Peace.

“Currency will always be contentious because it’s an easy mark” for U.S. lawmakers worried about job losses, said Huang, a former director for China at the World Bank.

Obama touted the $45 billion in business deals announced at the summit as a way to create American jobs as the U.S. unemployment rate remains stubbornly above 9 percent.

The deals, even if they live up to the headline figures, do not really address Chinese trade barriers and other policies that contribute to a U.S. trade deficit with China of about $270 billion, by Washington’s count.

But Huang said this week’s big export deals may help change American perceptions that economic relations with China are a “win-lose” proposition. “I think China genuinely wants to import more from the United States,” he said.

MUTUAL WARINESS STILL STRONG

The trip reduced tensions between the two countries, said Shi Yinhong, head of the Center for American Studies at Renmin University in Beijing.

But the commitment by Hu and Obama to forge more steady relations will be tested by companies, soldiers, politicians and citizens often wary of the other power. Some senior U.S. lawmakers, for example, declined invitations to meet Hu.

The Global Times, a popular tabloid published by China’s Communist Party, praised Hu’s diplomacy but warned that Obama’s welcoming of China’s ascent “has not been widely accepted in the United States.”

Hu’s Communist Party faces the expectations of nationalistic citizens and military officers eager to demonstrate China’s growing power, which some of them overestimate while overstating U.S. weaknesses.

The Chinese military itself remains a wild card, despite agreements by Hu and Obama to step up contacts between the armed forces of the two countries.

But North Korea remains the biggest unknown, warned Yates, who said revelations of Pyongyang’s uranium enrichment program made “2010 a profoundly bad wake-up call” about China’s promised help.

“Consider me skeptical about the proceeds of happy talk at meetings until we see real change on the ground in North Korea,” he said.

Additional reporting by Doug Palmer and Glenn Somerville in Washington and Sui-lee Wee and Ben Blanchard in Beijing; Editing by John O'Callaghan

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