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China And The U.S.: The Pressing Issues For The Clinton Visit

The first foreign trip by new U.S. President Barack Obama’s secretary of state, Hillary Clinton, will be a swing through Beijing, Tokyo, Seoul and Jakarta. This underscores the importance of Asia to U.S. foreign policy, as if it could be anything else, especially in the current global economic slowdown.

The trip will force a clarity to the Obama administration’s China policy that has been lacking so far, especially the murkiness over currency manipulation remarks by Obama’s Treasury secretary Tim Geithner during his confirmation hearing and some of the protectionist tinge to the debate in Congress over the U.S. economic stimulus bill.

There are four immediate short-term Sino-American issues that will form the backdrop to Clinton’s visit to Beijing:

First, the level of the yuan. Obama called President Hu Jintao after Geithner’s remarks to reassure him that no preemptory action was likely. We are still of the view that the remarks were an intended testing of the water by the new U.S. administration, but it can push this topic down the road until mid-May when it is next formally required to report to the U.S. Congress on China’s currency policy. Meantime, China has made it clear that the yuan isn’t going anywhere from current levels for as long as the economy is slowing as it is.

Second, the Uighurs in Guantanamo Bay prison. Obama has ordered Gitmo closed down in a year. The 17 Uighurs there have already been cleared for release but are being held for fear they would be tortured if returned to China. The U.S. can’t find third-party countries to take them, and Beijing is again insisting they be returned to China. Human rights took a back seat in the Bush administration’s priorities; it will move further forward in the Obama’s administration’s, though probably not as far forward as climate change.

Third, the strategic economic dialogue initiated by the Bush administration, and led by former Treasury secretary Hank Paulson. Obama’s team has not indicated whether it will continue the process, or at least in the same form. One likely change would be to combine the Treasury-led talks with a parallel but lower-level set on political and security issues conducted by foreign ministry officials, but have them headed up by foreign minister Yang Jiechi and Clinton, or, even more likely, the two countries’ vice-presidents, Xi Jinping and Joe Biden. These could be periodically capped by a G2 summit involving Hu and Obama.

Finally, the new U.S. ambassador to Beijing. If Japan, as seems likely, gets a heavyweight (Joseph Nye, a former Defense Department official under President Clinton, now at Harvard, is the oddsmakers’ favorite) then China will need (and merits) the same. One name being mentioned is John Thornton, a wealthy and close backer of Obama’s and who was chairman of Goldman Sachs Asia during the Asian financial crisis in 1998-99. He is currently a professor at Tsinghua University in Beijing.

If Thornton is appointed and the vice-presidents take over the two countries’ strategic dialogue, it would signal that the U.S.’s China policy is being set more in the White House than the State Department.

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China Tells New U.S. Administration To Step Lightly

His welcome-to-your-new-job call was cordial and formulaic enough, but in his published remarks, foreign minister Yang Jiechi was more forthright towards his new American counterpart, Hillary Clinton, telling her to be careful with sensitive issues that could strain ties between the two nations.

Yang didn’t mention the yuan issue by name (and that isn’t really in the Secretary of State’s purview), but his words came a day after prospective new Treasury secretary Tim Geithner said his boss believed China was a currency manipulator — an accusation immediately denied by Beijing, where there are fears that Geithner was signaling a change in U.S. policy.

This is shaping up as being the most immediate issue between Washington and Beijing, though Taiwan remains ultimately the most sensitive issue that Clinton and President Barack Obama will have to deal with.

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