By Zhao Minghao Source: Global Times Published: 2016-6-5
The eighth China-US Strategic and Economic Dialogue (S&ED) convenes on Monday. Among the more than 90 government-to-government communication mechanisms between Beijing and Washington, S&ED is a "flagship dialogue," according to US Assistant Secretary of State Daniel Russel. As it has in the past, the dialogue is expected to relieve the increasing tensions between China and the US.
Back in 2009, the yuan exchange rate was a major issue. But now, many US economists oppose Washington`s tactic of bashing China by labeling it as a "currency manipulator." In recent years, the yuan has appreciated significantly against the US dollar, and it has been incorporated into the Special Drawing Rights basket by the International Monetary Fund.
However, as the Federal Reserve plans to raise interest rates in June, it is uncertain whether the yuan`s exchange rate will experience drastic fluctuation. Given that the Sino-US relationship is crucial to the stability of the global economy, the S&ED will focus on how to increase the predictability of currency policies.
The Bilateral Investment Treaty (BIT) will also be a priority for the S&ED. According to Rhodium Group, a New York-based advisory firm, Chinese companies` direct investment in the US will reach $100 to 200 billion by 2020. Investment is becoming prominent in maintaining a positive Sino-US economic relationship.
There have been 24 rounds of negotiations over the BIT since 2008, and China and the US have twice exchanged their "negative list." If approved, the treaty will not only facilitate Chinese companies when they invest in the US, but also advance China`s market reform. Both sides are trying to ink an agreement before the end of US President Barack Obama`s term.
Steel trade disputes are new on the agenda of the S&ED this year. As the biggest steel producer and consumer, China`s total crude steel capacity stands at 1.13 billion tons, and its production accounts for almost 50 percent of world steel production. China believes that the overcapacity of steel is a repercussion of depressed global demand. There is not a single country that should take the blame, and trade remedies shouldn`t be abused because no one will benefit from such disputes.
The US government has misused trade protection, the root cause of losses in the US steel industry, which won`t help steel companies out of their troubles.
Strategic and security issues also drew heated discussions in the S&ED. During the Shangri-La Dialogue, US Secretary of Defense Ashton Carter, not surprisingly, denounced China`s South China Sea policy once again. More intensive discussions can be expected in the S&ED. Policymakers from both Beijing and Washington know clearly that no one wants the Sino-US relationship to get off track.
Thanks to the S&ED, China and the US have improved their military interactions. The Chinese military will join the Rim of the Pacific, a military drill led by the US, this month, and Carter will visit China this year. China and the US will also engage in more cooperative military programs to enhance their capabilities of avoiding clashes.
The S&ED covers a wide range of topics, from UN`s multilateralism and South Sudan crisis to poaching and maritime protection. The S&ED shows the world that China and the US are seeking to cooperate in many areas.
The most important bilateral ties in the world shouldn`t be dominated by the South China Sea dispute or a "third party." As pundits from both countries debate about the future of the Sino-US relationship, the US will have a new president early next year. The Sino-US relationship seems to be at a crossroad. Beijing and Washington should set up a new mechanism for risk control as soon as possible in case of emergencies that could upset the entire world.
The S&ED is not a perfect system; more than 100 high-ranking officials cannot have in-depth discussions during such a short session. More dialogues should be held by think tanks to support the S&ED. Policymakers from both countries can better understand each other through more casual occasions.
The author is a visiting fellow at the Chongyang Institute for Financial Studies at Renmin University of China.