This weekend, President Obama and China's new leader Xi Jinping will meet at a retreat outside of Los Angeles. The two men are scheduled to spend six to seven hours covering a range of issues that confront the two countries, from the increasingly fraught issue of hacking and cybersecurity to what to do about an evermore unpredictable and rogue North Korea. The summit was arranged only recently, almost impromptu and more casual and low-key than the pomp and circumstances state visits of the past decade. That should in no way, however, obscure just how important the meeting is.
Rarely in history has an emerging power met an existing power without mayhem and conflict ensuing. China today is clearly emerging, with an economy that will soon be larger than the U.S.'s, though the income of Chinese citizens will remain far behind their U.S. counterparts for many years to come. In spite of recent stumbles, the U.S. remains the only country with global reach both economically and militarily.
Yet tensions notwithstanding, by any historical standard, the U.S.-China relationship has been managed remarkably well, and this casual but symbolically significant summit between the two leaders is yet another indication of that. We focus habitually on all that is going wrong in the world, yet for now at least, the China-U.S. relationship is going right. That's not because either country and its people like the other or trust the other, but it is because we need each other.
Regardless of the outcome of the summit — and in truth, there is likely to be very little substantive public outcome — how this relationship is managed matters more to the long-term health of both the United States and China than what, say, the Fed does or does not do in the coming months. For more than ten years, the China-U.S. relationship has been an anchor of economic growth and the fulcrum of the global economy. And that is likely to be true for the next decade as well.
The importance of China to the United States, of the U.S. to China, and of the two to the world has, if anything, increased in the past two years as the European Union has sunk ever more deeply into recession and disillusion. For much of the early 2000s, you could credibly say that there were three pillars of the global economy. Now there are two.
Five years ago, China was the topic du jour for Americans, and the U.S. was a central concern of the Chinese government. Today, Americans are once again focused on domestic issues, whether it's the Fed, Washington scandals, or the long-term challenge of structural underemployment. China is no longer front and center, except when it touches national security nerves. The past months have seen increased tension and heightened rhetoric about the threat of China cyber-espionage, which has now supplanted intellectual property infringement as the hot button issue. China, in turn, sees these issues through a lens of increased U.S. resistance to China's rise as the preeminent Asian power, and as a double standard that treats Chinese hacking as a grave violation of international standards but sees no issue with the substantial and sophisticated electronic surveillance system overseen by the U.S. National Security Agency.
The relationship between the two countries has rarely been anything other than fraught. In each presidential election since 2000, one candidate or both has sought political advantage by assailing China for its political system, its undervalued currency, its human rights record, or its theft of intellectual property. Chinese blogs are full of national rhetoric accusing the United States of seeking to keep China bowed and humbled. Yet in spite of such unease, the economic relationship has only deepened, with trade expanding each and every year even in the heart of the financial crisis, and reaching an astonishing $500 billion this year. U.S. exports to China are growing at a more rapid rate than imports, and that doesn't even include the considerable surplus in services trade that the United States runs with China. (For instance, every time a Chinese tour group books a hotel in San Francisco, that counts as a U.S. service "export."). What's more, China is no longer simply seeking American markets and American investment; it is looking to invest more heavily in the United States, as the recently announced plan by Shuanghui International Holdings to purchase U.S. pork conglomerate Smithfield Foods for $4.7 billion demonstrates.
The relationship over the next decade will change regardless of whether Obama and Xi relax by the pool and have a heart to heart, or bristle at the other's priorities and personality. Yes, a constructive working relationship between the two leaders is preferable to a frosty one, but the structural bonds that now link the two economies are deeply embedded in both societies. Hundreds of the largest U.S. companies depend on China as a market, from General Motors now selling more cars in China than in the United States to Nike becoming an iconic Chinese brand.
Thousands of Chinese companies depend on the U.S. market, and on continued exposure to American businesses as they turn to serve a burgeoning domestic Chinese consumer market. And while China remains the largest consistent buyer of U.S. debt, its currency remains pegged to the dollar. That means that far from being a liability for the United States as China becomes wealthier, more powerful and more confident, the link between the currencies is a double-edged sword greatly reducing whatever leverage its U.S. debt holdings could give the Chinese government, while also bringing the two economies closer.
The endless argument about whether this relationship is harmful or helpful will not be settled this week, or perhaps ever. Many people are convinced that China is a dangerous emerging competitor; many Chinese will never trust America. Yet the ties continue to deepen because the mutual need is greater than the mutual suspicion.
All of this may change in the decades ahead, especially if the United States fails to reinvigorate itself or China's experiment in state-run capitalism runs awry. For now, however, it is a unique example of concord between two global behemoths, one at the apex of its power and one seemingly ascending. At the very least, we should give thanks that today's perils don't involve a conflict between the two nations most capable of upending global stability.
(Zachary Karabell is a Reuters columnist but his opinions are his own.)
(Zachary Karabell is president of River Twice Research and River Twice Capital. A regular commentator on CNBC and a contributing editor for Newsweek/Daily Beast, he is the coauthor of "Sustainable Excellence: The Future of Business in a Fast-Changing World" and "Superfusion: How China and America Became One Economy and Why the World's Prosperity Depends on It." )