Xi’s Seattle Stop Sets Up His D.C. Drop In

President Xi Jinping of China is no Hu Jintao. His speech yesterday in Seattle was full of wit, literary references, and personal reflections. He also directly responded to a long list of concerns across the policy spectrum, from the economy to security to human rights. Some will be reassured by his style and promises and see in his performance signs of the new style of reformist leader many had hoped for when he assumed power in November 2012. But others will find his speech, which admitted no fault in any of his own policy positions or actions and placed all of the burden on improving the chilly relationship on the United States, wanting to say the least. He may make it out of Seattle unscathed, but President Obama should expect more when Xi gets to the White House.

Xi’s mentions of Sleepless in Seattle, House of Cards, The Old Man and the Sea, and mojitos will be long remembered, but the core of the speech was a vigorous defense of every aspect of his governance and the many areas where the United States and China are at loggerheads. To wit:

The anticorruption campaign has been necessary to strengthen governance and is not the result of any sort of factional power struggle. China is still on a reformist path toward a more market-oriented economy and stronger rule of law. The stock market intervention in July was required to avoid a systemic risk. The renminbi was liberalized to promote financial reform, not to revive exports. China opposes currency wars, and there is no reason the renminbi should depreciate further. Openness to foreign investment and trade will continue and expand further, and China hopes to sign a far-reaching bilateral investment treaty with the United States. China has never engaged in cyber theft of commercial secrets, would prosecute anyone found doing so, and is ready to engage the United States in a high-level dialogue to develop broader rules of the road on cybersecurity. Foreign nongovernmental organizations (NGOs) will continue to have freedom to fulfill their missions in China provided they follow the law. China’s strengthened military is for defensive purposes, and the country will never engage in expansionism or threaten its neighbors. China seeks reform of international economic regimes to make them more just, but it is in no way challenging the foundations of the system or “setting up a separate kitchen.” A precipitous decline in U.S.-China relations would be a disaster for China and the world.

These are all meant to reassure a skittish business community, a restless White House and Congress, and a skeptical American public. A recent Pew survey found that only 38 percent of Americans view China favorably, down from 51 percent just four years ago. But just as President Obama has found, a good speech is far from enough to persuade doubters.

When the Chinese delegation arrives in Washington, President Obama would do well to use the Seattle speech to dig deeper and probe President Xi on several questions.

First, it is only very recently that China has justified its July stock market intervention as a response to “systemic risk.” What was the nature of that risk—margin lending by banks to investors that choked off liquidity, declining balance sheets of listed state-owned enterprises, or something else? And given these risks, does he regret permitting a string of policies starting in 2014 meant to push up the market, which was the source of the bubble in the first place? Looking ahead, will the Chinese government remove all support for the stock market, including permitting the China Securities Finance Corporation to unload the $500 billion in stocks it reportedly has soaked up to keep to the market afloat, and going forward focus on making the market more fair and transparent, not keeping it at a certain level?

Second, is President Xi’s view that the renminbi is not overvalued premised on the analysis that China is still growing at 7 percent? If it turns out that growth is actually less robust, as markets seem to suspect, would he consider a substantial devaluation, either through the process of a free-float or a one-time adjustment by the central bank; and might he justify these steps not as an effort to encourage exports but to bring the currency more in line with China’s macroeconomic trajectory?

Third, President Xi clearly asserted that China is a victim of hacking and that the government does not carry out or condone cyber theft of commercial secrets. If the United States or others discover such hacking, determines that the source is from within the Chinese People’s Liberation Army (PLA), intelligence community, or politically connected Chinese companies, how will China respond to the presentation of such evidence? If China does not prosecute such activity, will it recognize that the United States may have no choice but to institute sanctions or other measures? And since the president’s remarks did not address more traditional intelligence gathering via cyber means or cyber war, is China will to commit to any constraints on such activity?

Fourth, President Xi and other officials have not had a consistent position on the presence of the U.S. military in East Asia, with some suggesting that “Asia is for Asians” and that the U.S. military is no longer welcome in the region. Is President Xi prepared to reaffirm publicly that the United States is an Asia-Pacific nation, with deep and legitimate regional economic and security interests, and that the presence of its military in the Asian theater, including the ability of the U.S. Navy to ensure freedom of navigation, contributes to the maintenance of peace and stability in the region? Relatedly, how could the Chinese and U.S. militaries both contribute to cooperative security in the region?

And finally, President Xi has clearly heard the numerous worries expressed about the proposed Foreign NGO Law, whose most recent draft changes regulatory responsibility from the Ministry of Civil Affairs to the Ministry of Public Security and institutes a rigid set of guidelines for registration and operation. What revisions has the National People’s Congress made to the law, and what steps is China prepared to take if implementation of the law leads to a reduction in NGO activity and less support being provided to address China’s needs in education, the environment, health care, and disaster relief?

This is a long list of questions, and it is highly unlikely the two leaders will address them all during their private dinner on Thursday evening or during the formal discussions on Friday. Yet for this visit to be successful and the relationship return to a more stable path, credible answers to these questions are vital. If China does not do more to reassure the U.S. government and public, then we may no longer remember this visit for the reference to Sleepless in Seattle. Another movie title, the Big Chill, may take its place.

Scott Kennedy is deputy director of the Freeman Chair in China Studies and director of the Project on Chinese Business and Political Economy at the Center for Strategic and International Studies (CSIS) in Washington, D.C.

Commentary 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).

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Scott Kennedy
Senior Adviser and Trustee Chair in Chinese Business and Economics