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On Asia Tour, Obama Faces A Stronger China

President Obama departed Thursday for a swing through Asia, where he will face a number of daunting challenges, from trying to contain North Korea's nuclear ambitions to wooing a new Japanese government that is more skeptical of the close alliance between Tokyo and Washington.

But nothing looms bigger than China, which has become the largest holder of U.S. debt and is starting to exhibit a newfound confidence on the global economic stage. When Obama sets foot in China for the first time ever Sunday, he will confront a dramatically altered balance of power between the two nations.

President Obama waves from Air Force One prior to departing Thursday from Andrews Air Force Base in Maryland. Obama is stopping in Alaska on Thursday before an eight-day trip to Japan, Singapore, China and South Korea, his first visit to the region as president.
/ AFP/Getty Images
AFP/Getty Images
President Obama waves from Air Force One prior to departing Thursday from Andrews Air Force Base in Maryland. Obama is stopping in Alaska on Thursday before an eight-day trip to Japan, Singapore, China and South Korea, his first visit to the region as president.

The seismic shift, driven by China's astonishing economic growth over the past two decades, has only accelerated in the wake of the protracted U.S. financial crisis.

"China is feeling more equal with the United States than it ever has before," says David Lampton, who runs the China program at Johns Hopkins University's School of Advanced International Studies. "It recognizes it needs to cooperate with the United States, but it won't do so on bended knee."

The Obama administration is anxious to obtain key concessions from Beijing to help feed the nascent recovery of the U.S. economy. At the top of the wish list: a rebalancing of the exchange rate between the Chinese yuan and the dollar to help boost U.S. exports to China.

Ebbing American Leverage

But analysts and U.S. officials alike concede that America's leverage over China has diminished dramatically.

"We're not in a position to be asking China for a lot of things," says Adam Segal, a senior fellow for China studies at the Council on Foreign Relations.

It won't be an easy adjustment for U.S. officials, who usually arrive in Beijing with a long list of demands, exhortations and complaints.

Already, Obama has been blasted by critics at home for breaking with presidential tradition and declining to meet with the Dalai Lama during his recent visit to Washington. The White House was apparently hoping to win some favor with Beijing ahead of the trip, but Chinese rhetoric over the Tibetan spiritual leader only seemed to stiffen after the concession.

Obama is still expected to raise sensitive issues, including China's human rights record and the ballooning trade imbalance, but the atmospherics of Obama's meetings in Beijing will likely be different from those of his predecessors' encounters.

"The reality is that China's rise has been much faster than anybody had expected," says Minxin Pei, a professor of government at Claremont McKenna College in California.

Pei points out that when Bill Clinton was elected president in 1992, Chinese gross domestic product was less than 7 percent of America's GDP. By the time George W. Bush was elected in 2000, the figure topped 12 percent. When Obama won the election in 2008, the Chinese economy had grown to equal more than 30 percent of U.S. output.

A Stronger China, Despite Recession

China has emerged from the global economic downturn in an even stronger position. China's explosive growth did slow down, but unlike most developed economies, China never entered a recession.

New data released Wednesday show that China's economy is on track to grow more than 8 percent in 2009, driven by high industrial output and retail sales.

U.S. officials acknowledge that they have an uphill battle when it comes to how the upcoming encounters will be viewed by the public.

"I think it's a common perception in the region that U.S. influence has been on the decline in the last decade, while Chinese influence has been increasing," says Jeffrey Bader, the senior director for East Asian affairs on Obama's National Security Council. "One of the messages that the president will be sending in his visit is that we're an Asia Pacific nation, and we are there for the long haul."

When it comes to economic matters, Beijing has been increasingly assertive, pushing for more influence in international bodies like the World Bank and the International Monetary Fund.

"In the past, I don't think China fully understood what interests it had in a stable international system," Lampton says. "China's becoming more economically involved in the world has led it to a broader definition of its interests." As an example, he points to the presence of Chinese naval ships in the Gulf of Aden to help protect Chinese ships from pirate attacks.

But China's political rise has been tempered by the reluctance of its leaders to take unnecessary risks or accept new international responsibilities.

Where Does China Stand?

"It's been a very slow coming-out party for China on the global stage," Pei says. "Organizing a very successful Olympics is one thing, but knowing where it stands in relationship to Uncle Sam and to the rest of the world is a very difficult challenge."

In many areas, from North Korea to Afghanistan, China appears content to have the United States playing a leadership role, leaving Beijing to assert itself more subtly and usually behind closed doors.

For one thing, Chinese leaders are far more focused on their own daunting set of internal challenges. The world's most populous country, with 1.3 billion people, needs to maintain a high level of economic growth simply to offset its growing population, but it will struggle to match the high growth rates of the past two decades.

Beijing also has to cope with simmering ethnic disputes, a quickly aging population, environmental degradation, and a growing middle class that could eventually push for a loosening of the political system.

But analysts say the global financial crisis only served to reinforce the convictions of Chinese leaders that they need to maintain tight control over the country's economy and its politics. The Chinese Communist Party was able to mount a surprisingly effective stimulus program to jump-start the economy precisely because it remains so powerful, but that tight level of control could also become a problem.

"The larger issue is that the system is growing so complicated, both economically and politically, and they haven't made any real progress on transparency and rule of law," Segal says. "The party is incredibly worried about corruption and how that reflects on the leadership, but they haven't made any progress on that."

An Interdependent Relationship

Still, the relationship between the U.S. and China goes both ways. China may hold the largest chunk of U.S. debt, but it also remains dependent on the massive U.S. market to fuel its economy.

Some Chinese leaders have begun talking about the need for the world to reconsider its reliance on the U.S. dollar as the main international reserve currency, but few analysts expect them to make any drastic moves away from their current position.

"The Chinese have put their money in the United States because, all things considered, we're still the safest, most liquid place to put their money," Lampton says. "The Chinese didn't put it here as a favor to us."

Lampton says Obama needs to be careful not to look weak during his meetings in China.

"What we're in is an interdependent relationship," he says. "We both need each other."

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Kevin Whitelaw
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