As the United States and China focus on managing their wide-ranging trade and economic disputes during President Hu Jintaos visit to Washington this week,one new idea is gaining a bit of traction. According to US Treasury Secretary Timothy Geithner,the Obama Administration might be willing to let China buy US high-technology products if Beijing addresses Washingtons concerns on access to Chinese domestic markets.
Many in Washington and Beijing have long argued that increasing high-technology US exports to China could be one way of addressing at least some of the problems defining the complex interdependence between the two countries. According to some estimates,the US now contributes only 7 per cent to the Chinese advanced technology imports.
Washington concedes American exports to China are rising twice faster than exports to the rest of the world. But the persistently high unemployment rates in the United States have put the Obama Administration under some pressure to show that it is creating jobs. In early 2009,the Obama administration announced it would double US exports during the next five years to revive its economy. Meanwhile Hu will be pressing Obama to relax controls on high-technology exports to China.
As we saw during the US presidents visit to India last November,business deals and jobs will be right at the top of Obamas talks with Hu at the White House on Wednesday. As in Mumbai,so in Washington,Obama will make an appearance with Hu in front of major American CEOs on Wednesday. Hu is taking a large delegation of businessmen,who have already fanned out to major American cities and are announcing deals and highlighting the potential for job creation in the United States.
India which focused so much on getting Obama to liberalise high-technology exports,will be watching what kind of success Hu might have in Washington. While Obamas political logic of job creation is relentless,Hus visit comes at a time when concerns about shifting military balance of power have gained some intensity in Washington.
The one area where the US retains an edge over China is in a few sensitive high-technology areas. The big question,then,is how Obama might resolve the tension between long-term US interests and immediate questions of trade imbalance. While the US business has long been a champion of trade with China,some corporates are worried that as a rising technological power,Beijing will simply outsmart them after gaining access to American technology.
GEs Avionics
One set of deals that is indeed going through relates to the US giant General Electric. In the past GE had complained about the increasing difficulty in doing business in the Middle Kingdom,but has decided that being in China is far more important than staying out. GEs China deals to be announced during Hus visit cover energy,railway locomotives,and avionics. Drawing most attention are GEs plans for a joint venture with a Chinese aerospace company.
In the proposed partnership with the Aviation Industry Corporation of China,a state-owned company,GE will transfer its most advanced avionics and related technologies to China. That could help accelerate Beijings plans to build its own commercial airliner,C-919.
Some American analysts point to the risk of doing high-level business with China by saying that GE could help China catch-up in military aviation. Beijings demonstration of the prototype of its stealth fighter J-20 earlier this month has generated much anxiety in Washington. Those fears were obviously not powerful enough to stop the GE deal.
Chinese FDI
Besides demanding greater access to US high technology markets,Hu also wants the Obama Administration to lift the many barriers against Chinese investments in the United States erected in the name of national security. In contrast to massive Chinese exports,its FDI in the United States stands at a paltry $1.4 billion. The largest chunk of Chinas FDI,about $34 billion,goes to Hong Kong. Beijing argues that its investments can surge in the United States and help revive its economy if only Washington can bring openness and transparency to its laws on foreign direct investment.
raja.mohan@expressindia.com
