Can the Summit between Xi Jinping and Obama Crack the Economic Problems between China and the US?

Xi Jinping and President Obama are having a summit in California. The summit between the leaders of the two countries will last two days, a break in the usual routine, and it will be a casual way for the two to discuss security, political and economic issues. In Sino-U.S. relations, economic and trade cooperation is the most important area in the long term; this meeting will boost its development.

This summit will be an unusual learning experience and diplomatic visit between the state leaders. First, this model does not meet the usual summit procedures and is different from the usual talks between national leaders. Secondly, President Obama and President Xi are meeting together for a very long time, in the afternoon of June 7 and on the morning of June 8, allowing more than sufficient time to talk in-depth on different arrangements. There is no history of talks so long and thorough between U.S. leaders and others in recent decades. Finally, the wide array of issues covered, such as security, diplomacy, politics and economics, requires a lot of comprehensive planning and outlining for the blueprint of the future of Sino-U.S. cooperation.

This unusual summit is expected to achieve extraordinary results, like the promotion of Sino-U.S. cooperation in building friendly relations; being able to reach a consensus in many areas will be very important. There is no doubt that in the next decade China and the United States will need to continue to cooperate. Hopefully, this will allow the two countries to turn over a new leaf in their relations. The United States must also form new relations with other major powers in order to achieve the optimal results.

In recent years, a new concept of relations between China and the United States has been built; at its core is competitive cooperation and competitive coexistence. Competition between China and the United States has been growing in recent years, not only in the economic sphere but also in political and diplomatic areas, which can easily upend the friendly relationship between the two countries. The summit will reshape American cooperation between the major powers, redefining the type of relations between China and the United States to best fit this new concept.

A new power relation in trade cooperation between China and the United States is a priority. Although this cooperation has constantly been strengthening and becoming more intertwined, the global financial crisis intensified friction and dispute in areas of trade, investment and finance, making coordination and cooperation even more urgent.

During the global financial crisis, trade between China and the United States dropped significantly. Despite the recent rebound, the situation is still not ideal and problems keep getting traded, one for another. The first major problem is trade imbalance. China has a large trade surplus which has caused American dissatisfaction. Second is that the trade is not high quality and is low industrial level, value-added and less profitable. Third is the United States economy’s entity return plan in regard to Chinese-made products, which has an impact that is not conducive to bilateral trade development. Fourth is that behind China’s service trade, that of the U.S. is not only small, but also has been a deficit for the state. Fifth, the United States’ economic downturn has reduced demand while China is restructuring and upgrading its export trade.

In the field of bilateral investment, the investment of the United States in China has declined since 2002 and, due to the financial crisis, has declined even more. In addition to reducing the scale of investment, the level of investment in industrial areas is not high; the spillover effects in areas like more labor-intensive industries, processing trade enterprises and technology have been small. China’s investment in the United States in recent years has been growing very fast and has developed a good momentum, but there are still many problems. The overall smaller-sized investment business is not ideal and much investment, merger and acquisitions activity is restricted by U.S. law and regulations, making it more difficult to carry out. It also makes such activity subject to various investment barrier limits. Currently, the United States is actively discussing investment agreements, hoping to reach an agreement to promote bilateral investment and development.

Many problems and contradictions in the field of bilateral financial cooperation also exist, such as the yYan exchange rate issue. Although the Yuan exchange rate is in a state of appreciation, the United States still considers the currency to be undervalued and has asked China to open up its capital account, hoping that more American financial firms can enter the Chinese market, which would have a great impact on China.

In short, Sino-U.S. economic and trade cooperation has entered a state that needs to be changed, renegotiated and rebuilt to become more bilateral, which is extremely urgent and important to do. This summit will help negotiate the economic and trade fields as well as a range of other issues. Exploring the common interests of China and the United States in a bid to resolve their differences is bound to promote economic and trade cooperation between the two countries, as well as make a large contribution to development.