No doubt the yuan will grab the headlines–and provide the showboating opportunity for U.S. legislators–at the latest round of Beijing and Washington’s biannual bilateral talks, due to be held in Washington on Monday and Tuesday, but it is the inclusion of senior military figures in the Strategic and Economic Dialogue for the first time that strikes this Bystander as most significant.
The modernization of the PLA is being watched warily in Washington (and beyond), while the PLA’s strengthening voice at a time of leadership transition has been accompanied by some more strident projections of regional power and given succor to more nationalistic voices in the country. Including the military in the framework of a dialogue intended to manage bilateral friction points, is no bad thing. As former U.S. president Lyndon Johnson famously said about FBI director J Edgar Hoover, “it’s probably better to have him inside the tent pissing out, than outside the tent pissing in.”
As for continuing business, Washington will continue to find itself pushing on a door ajar as far as the yuan’s appreciation is concerned. The U.S. will encounter greater resistance to its pressure for more liberalization of China’s financial system. Beijing will call for the roadblocks to be removed that are preventing China’s giant state-owned companies from investing in U.S. industrial and financial companies. In return Washington will raise its belief that China’s government procurement and support for “indigenous innovation” makes it difficult for U.S. companies to compete in China.
Criticism by Beijing about Washington’s budget mess and by Washington about Beijing’s current crackdown on dissent will be carefully measured, particularly in public. In private both sides will want to deflect the issues into generalities, knowing both are domestic issues beyond solving in two days of international discussion.
China Bystander 
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