China: Engagement or Containment?
WSJ.com
THE MAIN EVENT
President Bush is in Beijing to urge Chinese President Hu Jintao to continue moving toward greater economic and political freedom.
At a time when U.S. businesses increasingly embrace China, both as a venue for low-cost production and as a market for their products, the U.S. government is taking a much more confrontational stance. Here is a look at some of the issues causing tension between the U.S. and Chinese governments.
Currency: U.S. Treasury Secretary John Snow and Federal Reserve Chairman Alan Greenspan visited China last month and had a strong message: Let the yuan, the Chinese currency, float more freely on exchange markets.
In July, China loosened its decade-long peg to the dollar but allowed the yuan to move upward by only 2.1% against the U.S. currency. The U.S. says that isn't enough and still enables China to sell its goods abroad at artificially low prices. A congressional panel urged the Treasury Department to label China a "currency manipulator" unless it adjusts the yuan by another 15% to 40%. But the Bush administration rejected that and is asking the International Monetary Fund to pressure Beijing on the currency front.
Senators Chuck Schumer (D., N.Y.) and Lindsey Graham (R., S.C.) have threatened to slap a 27.5% tariff on Chinese imports if China doesn't revalue the yuan at least 27.5%, but they have agreed to shelve their bill for now.
Trade: Since China was allowed to join the World Trade Organization in 2001, its exports to the U.S. have increased 81%. Chinese exports to the U.S. outpaced U.S. exports to China nearly 6-to-1 in 2004. This month, the U.S. and China reached a watershed deal limiting the amount of clothing and textiles that can be shipped to the U.S. But experts doubt that will alleviate the swelling U.S.-China deficit, which reached $162 billion in 2004. China says it had a surplus with the U.S. of about $80 billion.
Intellectual property: Every year, piracy of everything from DVDs and software to pharmaceuticals and automobile designs costs U.S. business about $250 billion, according to the U.S. Chamber of Commerce. And increasingly, the U.S. is blaming China for part of this loss. As much as 90% of the software and motion pictures sold in China are pirated, according to the U.S. U.S. Customs officials say almost two-thirds of all seizures of fake products come from China.
At the WTO meeting in Hong Kong next month, the U.S. will ask China to outline specifically what steps it has taken to curb piracy. At home, the Bush administration is asking Congress to increase federal penalties for trading in pirated intellectual property.
Security: As China's economy grows, so does its military. China has about 2.3 million active military personnel, while the U.S. currently has 1.4 million active military personnel.
China announced this year that it would increase its defense budget to $29.9 billion, a 12.6% increase over last year and double the amount in 2000. The U.S. says that even this figure is grossly understated. China is quick to point out that its 2004 military budget -- $27.5 billion -- was less than 6% of what the U.S. spent that year.
Human Rights: Under increasing pressure by the international community, Mr. Bush is moving human rights in China up on the agenda. Earlier this month, he met with the Dalai Lama at the White House -- a clear swipe at China, which has banned expressing loyalty to the religious leader in Tibet. Followers of the Chinese sect Falun Gong also want Mr. Bush to ask the Chinese president to lift the ban on the group. The president plans to attend a Christian religious ceremony on Sunday to demonstrate his support for more religious freedom. |
