A Year of US-China Discord?

NEW YORK – In 2009, Forbes magazine named US President Barack Obama and Chinese President Hu Jintao the “world’s most powerful people.” In 2010, we will discover that neither has the power to keep US-Chinese relations on track. That is bad news for those who believe that US-China cooperation is essential for reviving the global economy, meeting the challenge of climate change, containing threats of nuclear proliferation, and managing a host of other problems without borders. It is also bad news for America and China.

Ten is the number to watch: America's 10% unemployment and China’s potential 10% GDP growth are set to collide like weather fronts generating a storm. American populism will meet Chinese pride. And the fevered political climate created by US mid-term elections means that the world’s most important bilateral relationship is headed for real turbulence this year.

America and China now live with a kind of mutually assured economic destruction, and both presidents know it. The US needs China to finance its mounting debt, and China needs Americans to buy its products.

Indeed, the short, sharp shock that China absorbed from the financial crisis has proven that its economic growth still depends on consumer demand in America, Europe, and Japan – and will for some time to come. Chinese leaders would like to shift China’s growth model toward greater reliance on domestic consumption, but that is a long-term project. For the foreseeable future, they will depend on local manufacturers to create the jobs that protect both China’s development goals and the Communist Party’s monopoly on domestic political power.