If US election opinion polls are anything to go by, Mitt Romney will not get a chance to rock the
boat of US-Chinese relations from November 2012 onwards. Most (moderate and well-informed)
analysts and commentators agree that this is good news given Romney’s announcements on how
he and his aides would be dealing with what they call a protectionist ‘currency manipulator’ trading
unfairly and threatening US jobs. To be sure, while Romney’s populist anti-China rhetoric is nothing new and has been on the agenda of the country’s China-bashers for years, it has been dealt
with less noisily by the current US administration throughout US President Obama’s first tenure.
Indeed, urging China to reduce its massive trade deficit with the US through amongst others currency re-evaluation and the further opening up of various sectors of the Chinese economy to foreign investors has been a very central issue on Obama’s China policy agenda.
Labelling China a ‘currency manipulator’ on his first day in office if elected as Romney has announced
in parrot-style over the last months would turn out to be counterproductive and almost inevitably lead to
Chinese retaliatory policies. American banks and insurers know that Beijing could too easily respond in
kind and e.g. once again reduce the recently expanded access to the Chinese banking, insurance and
financial markets. Indeed, it comes as no surprise that Romney threatening to impose tariffs on goods
made in China if elected is-to say the least-not met with much enthusiasm by US business leaders and
bankers with increasing interests and very lucrative investments in China.
What often gets lost in the heat of the partisan debate on China in the US is that the American (and
also European for that matter) trade deficit with China is largely produced by multinational companies
producing and assembling goods and products for the US and European markets. Indeed, more than
60% of exports out of China are shipped by China-based multinational companies-very many of them
And there is more Romney and like-minded US China hawks and self-declared experts ‘forget’ to
mention: the Chinese renminbi has risen in value by 12% between June 2010 and February 2012,
40% on an inflation-adjusted basis since 2005. While the Chinese government will continue to reserve the right for itself (like other governments too, e.g. Japan and Switzerland) to control the
value of its currency through massive and indeed controversial market intervention, there is a nearconsensus amongst economists that a more expensive Chinese currency will in the long run be in
China’s interest, creating the incentives for the envisioned qualitative transformation of the Chinese
economy away from its ‘assembling-factory-of-the-world’ status. Hence, China will most probably
continue to let its currency re-evaluate, albeit slowly and not without the occasional interruption,
especially in view of slowing economic growth. In 2012, the Chinese economy is expected to grow
by less than 8%, the first time since 1999.
Like it or not (and Washington does not), the US economy will continue to depend on China to buy
its debt in the form of US Treasury bonds. While Beijing has never published figures and data documenting how many US bonds it holds and buys on a daily basis, non-Chinese sources estimate
that Beijing holds US Treasury bonds worth $1.2-1.3 trillion (little less than 10% of the US total debt). While China will in the years ahead continue to de facto remain obliged to buy US debt on a
massive scale to place its enormous trade surplus on international markets, confrontational US
trade and tariff policies announced by Romney would undoubtedly accelerate Chinese ambitions to
diversify its investment away from the US and towards other financial markets.
To be sure, China is in many sectors protectionist, tightly controls access to markets and its companies continue to violate intellectual property rights and trademarks. However, these issues are
being dealt with aggressively between Washington and Beijing even if results continue to remain
more often than not very limited or indeed absent. Amongst others, Beijing continues to ‘hide’ behind its ‘developing country’ status when explaining why the adoption of universally acknowledged
trade and investment norms and rules in China continues to be slow or indeed non-existent.
As regards Washington’s security and defence policies in Asia in general and towards China in
particular, the Obama administration is everything but weak or soft as Romney and his followers
claim. In fact, US Secretary of State Hillary Clinton has made it clear on many occasions over the
last 18 months that US security engagement in East and Southeast Asia is and will remain strong.
In fact, unlike previous US administrations, Clinton and other US policymakers have more than
once confirmed on the record that Washington is very determined to have and voice an opinion on
Asian territorial disputes, be it in the East China Sea or South China Sea (where Beijing has territorial disputes with Vietnam, Malaysia, Indonesia, Taiwan, Brunei and the Philippines). The Obamainduced strengthening of military presence in Asia (Japan, Korea, Singapore, Australia) and the
expansion of the US-led security and military alliance system in East Asia confirm that voicing such
opinions will continue to be backed up by regional military presence. Beijing for its part has numerous times declared that pretty much all of the
South China Sea is de facto Chinese territory and has equally often ordered its navy to undermine its territorial claims by showing presence
around and increasingly in disputed waters. Beijing’s rhetoric and also
actions in the South China Sea have become more and more uncompromising and also aggressive and judging by its actions on the ground there
are justified doubts in and beyond the region whether Beijing will continue
to stick to a multilateral regional code of conduct to resolve territorial disputes without military force.
As regards Japanese-Chinese territorial conflicts in the East China Sea,
Washington has confirmed that the defence of the Japanese-controlled
(and Chinese-claimed) Senkaku Islands is part of US-Japanese military
cooperation as formulated in the US-Japan Security Treaty. Indeed, it
does not get much clearer than that and there is realistically very little in
terms of determination and sometimes hawkishness a Republican-led US
administration could add to the discourse and US security engagement in
East and Southeast Asia. US President Obama is-unlike his predecessor
Bush-very popular in Southeast Asia and his policy to re-focus US global
security on East and Southeast Asia has been welcome and endorsed by
the large majority of East and Southeast Asian governments. East and
Southeast Asia want an ‘offshore balancer’ keeping Chinese growing political and military assertiveness in check and Washington is just that.
In sum, US China policies are currently in good (Democratic) hands and Romney would have to
come up with much more in terms of substance and contents to be able to plausibly explain why
his China policies are better than the ones Obama has been adopting over the last four years.