The U.S.-China Strategic and Economic Dialogue

Q1: What is the U.S.-China Strategic and Economic Dialogue?

A1: The U.S.-China Strategic and Economic Dialogue (S&ED) was established by President Barack Obama and President Hu Jintao during their first meeting in April 2009 and represents the highest-level bilateral forum to discuss a broad range of bilateral, regional, and global issues between the two nations. The upgraded mechanism replaced the earlier Senior Dialogue and Strategic Economic Dialogue, which were initiated under the George W. Bush administration. By merging the economic and security tracks, the Obama administration seeks to break down the barriers inside both the U.S. and Chinese governments to more effectively tackle cross-cutting issues such as climate change, development, and energy security. The S&ED is convened semi-annually and alternates between the U.S. and Chinese capitals. The third meeting of the S&ED will be held in Washington, D.C., May 9–10, 2011. Secretary of State Hillary Clinton and Secretary of the Treasury Tim Geithner will cochair the dialogue with Vice Premier Wang Qishan and State Councilor Dai Bingguo. Meetings over the course of the two days will consist of large plenary sessions, informal dinners with the senior-level participants, separate economic and strategic track meetings, and small break-out sessions. The senior members of the Chinese delegation will meet separately with President Obama. Sixteen U.S. government agency heads will comprise the U.S. delegation, including Fed Chairman Ben Bernanke, Commerce Secretary Gary Locke, Labor Secretary Hilda Solis, and SEC Chairman Mary Schapiro.

Q2: What will be discussed in the Strategic Track?

A2: The issues that will be addressed in the strategic track at the upcoming meeting include North Korea, Iran, Sudan, as well as Pakistan and Afghanistan. There will be efforts to follow up on discussions between Presidents Hu and Obama a few months ago during Hu’s state visit on how to respond to North Korea’s uranium enrichment facilities, which are clear violations of UN Security Council resolutions, and how to create the circumstances for resumption of the Six-Party Talks. The United States also plans to discuss recent developments in the Middle East, including U.S. and Chinese shared interests in counterterrorism. U.S. concerns about human rights in China, which were the focus of a bilateral dialogue held in Beijing at the end of April, will also be raised.

A new component at this S&ED is a joint civilian-military dialogue called the Strategic Security Dialogue (SSD). The goal of this mechanism is to build more understanding on issues in the bilateral relationship that have the potential for miscalculation and accident. Secretary of Defense Robert Gates made public a proposal to launch this dialogue when visiting Beijing this past January, although it has been discussed between the U.S. and Chinese governments for almost two years. The issues that will be discussed in the upcoming round are likely to be drawn from the list that was tabled by Gates, which included nuclear, missile defense, outer space, and cyber security. The Chinese side will also raise issues that it is most concerned about, such as U.S. arms sales to Taiwan and U.S. maritime surveillance in China’s 200-mile Exclusive Economic Zone. The representation of the Chinese military to the S&ED will be upgraded for the SSD to a four-star general. Though it is unlikely that any breakthroughs will be made in this first round of the SSD, the creation of a joint high-level civilian-military mechanism is a major achievement that could over time contribute to greater strategic trust between the two countries, as well as promote more effective coordination between the civilian structures and the military in the Chinese system.

Q3: How about on the economic side?

A3: The two sides are treading water a bit on the economic front. Much of the bilateral discussion has China on the offensive, with Beijing concerned about the U.S. commitment to maintaining the value of the dollar and anxiety about perceived U.S. restraints on Chinese inbound investment and technology transfer. While Beijing is still concerned about potential U.S. legislation to correct for perceived competitive disadvantages resulting from China’s undervalued currency, the Obama administration has demonstrated patience and recognition that China will move to liberalize its currency regime on its own terms and at its own pace. The United States would like to see a greater demonstration of commitment from Beijing to rebalance its economy to be less investment and export dependent (a result that would be aided by currency appreciation), but overall the specifics of any collaborative effort on rebalancing are elusive. Finally, the administration has received a host of requests from U.S. firms to support market-opening efforts (on financial services, in particular) and prevent anticompetitive behavior (in technology, primarily) in China, but these efforts are unlikely to bear much fruit. At the end of the day, the administration can read the tea leaves: Beijing is embarking on a political transition to 2012, something Washington understands implicitly, a state of affairs that virtually assures no significant movement on economic policy issues of import to U.S. interests.

Q4: What are the expected outcomes of this S&ED meeting?

A4: A document will be issued that identifies more than 50 new and ongoing areas of cooperation between the United States and China. Some of these include cooperation between law enforcement agencies, coast guards, and new eco-partnerships. Much of the laundry list of outcomes will relate to previously announced efforts. That significant “deliverables” from the S&ED are hard to come by should not surprise anyone, however, and does not undermine the importance of the meeting. The S&ED has nonetheless come to represent a node in an ongoing dialogue that aims to support the concept of cooperation, even if the results of that cooperation are less substantial than many in the United States might hope.

Charles W. Freeman III holds the Freeman Chair in China Studies at the Center for Strategic and International Studies (CSIS) in Washington, D.C. Bonnie S. Glaser is a senior fellow with the CSIS Freeman Chair in China Studies.

Critical Questions
is produced by the Center for Strategic and International Studies (CSIS), a private, tax-exempt institution focusing on international public policy issues. Its research is nonpartisan and nonproprietary. CSIS does not take specific policy positions. Accordingly, all views, positions, and conclusions expressed in this publication should be understood to be solely those of the author(s).

© 2011 by the Center for Strategic and International Studies. All rights reserved.

Charles Freeman
Senior Adviser (Non-resident), Freeman Chair in China Studies

Bonnie S. Glaser