China-US ties entering a more delicate period

Updated: 2015-01-26 08:26

By Dan Steinbock(China Daily)

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As Obama put it: "No foreign nation, no hacker, should be able to shut down our networks, steal our trade secrets, or invade the privacy of American families." Washington sees itself as a victim of "commercial theft", while Beijing and many other countries, even US allies, believe they are under incessant cyber intrusions conducted by the US National Security Agency.

In 2014, bilateral optimism climaxed at Beijing, where Obama and Chinese President Xi Jinping reiterated their commitments to fulfilling the new China-US emission targets. But while China may stick to its climate pledge, the Sino-US deal is leading to a political showdown between Obama and the Republican Congress.

In the third quarter of 2014, US growth intensified to 5 percent, the strongest in 11 years. But despite all the rhetoric about "austerity" and "rebalancing", the US' debt burden today exceeds $18 trillion, which makes it almost $1 trillion more than US' GDP despite the Federal Reserve's lifeline of $4.5 trillion over the past half a decade.

As Obama will leave the White House in two years, US growth will steadily decelerate to 2.3 percent by 2020. In contrast, China's real GDP growth is likely to remain around 7 percent in 2015 and decelerate to only 5 to 6 percent by the end of the 2010s. And since the US' growth is fueled by foreign investment, the US dollar as the de facto global currency and an unsustainable debt burden, this overstretch will come under increasing pressure in the latter half of the 2010s.

Given the above facts, Beijing must prepare for a more divided Washington, mixed policy messages and potentially confrontational policies from the US in the post-Obama era.

The author is research director of International Business at US-based India China and America Institute and visiting fellow at Shanghai Institutes for International Studies in China and the EU Centre in Singapore.

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