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Jon Talton

Analysis and commentary on economic news, trends and issues, with an emphasis on Seattle and the Northwest.

May 25, 2010 at 11:05 AM

China’s more important to stability than ever; does Beijing know it?

It may be months before we know what was accomplished by the large, high-level visit of American officials to Beijing. China will not be pushed, certainly not in public, and the delegation led by Secretary of State Hillary Clinton knew this. Things were pleasant and low-key.

What America views as economic progress will come slowly. President Hu has indicated some adjustment to the renmimbi exchange rate will be forthcoming. It won’t be enough to satisfy critics who accuse Beijing of currency manipulation. The huge imbalances in trade and debt remain, and neither party quite knows how to get out of the mess. China appeared to give a little on so-called indigenous innovation rules, otherwise considered protectionism, and government procurement that shuts out U.S. firms. If this is real, it’s a significant breakthrough. But it will come slowly.

There’s little indication the delegation made any progress in stemming software piracy, a concern to Microsoft. Climate change? Peak oil? China will move at its own speed, despite Commerce Secretary Gary Locke’s arguments for the two nations to partner.

I took much heat for writing a column about China being a major threat to global stability. There were probably better ways to phrase it, but the salient points remain. China plays by one set of rules; the industrialized world which it increasingly influences operates by another. The tensions and imbalances are inherently destabilizing. America is no slouch in this department, either, with its vast appetite for debt and cheap goodies at Wal-Mart, as well as its military overstretch and agricultural subsidies.

President Obama sent such a big delegation of cabinet secretaries to Beijing recognizing that China is the emerging superpower of the 21st century. If America and China can’t work together, we’re in big trouble. Yes, we have our own troubles to fix at home. But Beijing is reluctant to take on the responsibilities that come with power. Example No. 1 is crazy North Korea, threatening war.

On the other hand, China’s form of state-directed capitalism seems ascendant. It came through the Great Recession far better than the West. Of course, what has emerged here over the past 25 years is less the capitalism that contributed to the American Century than a casino. So pot, meet kettle, duly noted…

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