Rift Grows as U.S. and China Seek Differing Goals

By Edward Wong | The New York Times
February 20, 2010

When President Obama met with the Dalai Lama in the White House on Thursday, he was following a tradition that all recent American presidents had dutifully honored.

Yet, to some Chinese Mr. Obama's support of the Dalai Lama represents something more troubling and disrespectful. The meeting, while low-profile, and the routine announcement last month of American arms sales to Taiwan, were taken as the latest signs that despite China's rapid ascent, the American government still refused to compromise on issues that China considered sacrosanct: matters of sovereignty and territorial integrity.

On Friday, the Chinese Foreign Ministry called in Jon M. Huntsman Jr., the American ambassador here, to lecture him on the Dalai Lama, the exiled spiritual leader of the Tibetans, whom China considers a separatist.

"At this time, China and the U.S. cannot find any agreement on strategic issues," said Yan Xuetong, director of the Institute of International Studies at Tsinghua University.

Few American officials would disagree. The rift in United States-China relations has arisen in part because the two countries have completely different items at the top of their foreign policy agendas and are talking past each other, American officials say.

They say that China emphasizes sovereignty issues while refusing to give any weight to the Obama administration's two top priorities in the relationship: containing Iran's nuclear ambitions and rebalancing currencies and trade. The Americans have also highlighted issues of Internet censorship and security.

"There's not a lot of overlap in the Venn diagram," an American official involved in China policy said on the condition of anonymity, following diplomatic protocol. "What's really the most worrisome is the degree to which we have that disconnect."

Those tensions are likely to worsen in coming months as domestic pressures in each country push the governments to assert their agendas more boldly, and as China's confidence in its economic system continues to grow.

On the American side, a struggling economy is forcing the Obama administration to make currency valuation and market liberalization top priorities. With an unemployment rate of nearly 10 percent and midterm elections coming up, American officials are aware that pushing China to raise the value of its currency, the renminbi, and allowing American companies greater access to some Chinese markets could be important political victories for Mr. Obama and his party.

"We've got to look at the risk of a more populist American public and the U.S. Congress deciding that China is the reason our economy isn't growing enough," the American official said.

Economists say the renminbi is undervalued by 25 to 40 percent, a wider gap than at any other time since 2005, when, under pressure from the Bush administration, China decided to allow the renminbi to float in a narrow band against the dollar and other currencies. The renminbi appreciated 21 percent, but has not moved at all since July 2008. This month, Ma Zhaoxu, a Foreign Ministry spokesman, rejected an unusually public call by Mr. Obama for China to revalue its currency, saying that "the value of the renminbi is getting to a reasonable and balanced level."

>> Complete Report