Google And The Sino-US Relationship

Google’s withdrawal from China and the relationship between the United States and China is on everyone’s mind these days. Sam Gustin, a senior writer for Daily Finance, AOL’s money and finance site, called last weekend and asked a series of questions about both issues. Sam wrote up our conversation in an article that appeared in Thursday’s edition of the on-line publication.

Whatever one thinks of the Google issue, it seems to have marked a high point in tensions between the United States and China. Both sides have played a role in escalating the debate in recent months. China’s rapid recovery from the global economic crisis, and its emergence as the world’s newest “superpower,” have given it a significant confidence boost, and some would argue that the country is now overplaying its hand, flexing its muscles so to speak. At the same time, and as I discussed with Sam, the United States needs to change its mindset with respect to China. China is not the same country it was before the crisis, an event which accelerated its emergence on the world stage.

Just when the situation seemed darkest, though, there is now some hope that the relationship is thawing. The Chinese government announced on Thursday that President Hu Jintao will attend a nuclear security summit meeting in Washington later this month, hosted by President Barack Obama. As reported in The New York Times, the two leaders spoke for about an hour by telephone on Thursday night, with both expressing an interest in healthier ties between the two countries.

President Hu’s visit may also signal reduced rhetoric on the currency issue. My friend Andy Rothman, the China Macro Strategist for CLSA Asia-Pacific Markets who is usually right about such matters, believes that Hu’s visit “almost guarantees that the White House has decided not to conclude on April 15 that China has manipulated its currency with nefarious intent.” Andy believes it would be a political insult for the United States to do so just days after President Hu leaves Washington. In Andy’s view, this will pave the way for China to resume a gradual appreciation of the yuan against the dollar this summer.

The relationship between the United States and China has tended to ebb and flow over the years. Let’s hope that we have now seen the worst in this cycle, and that the two countries begin working together to address the difficult issues which face the world today.

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