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A Storm Is Brewing Between Washington and Beijing: Niall Ferguson

Daily Ticker

Secretary of State Hillary Clinton and Treasury Secretary Timothy Geithner are headed to China this week for annual meetings, and several contentious issues including China's currency manipulation and human rights record are likely to be discussed at the high-level talks. Niall Ferguson, author of Civilization: The West and the Rest, says there is a "storm brewing" between Washington and Beijing and "this is beginning to build up into quite a dangerous time for U.S.-China relations."

Ferguson says China's economic policies will also be on the table when senior American diplomats meet with their Chinese counterparts. China's economy, the second largest in the world, hit its slowest pace of growth in three years in the first quarter of 2012. But manufacturing numbers out Wednesday show things may be starting to pick up. A survey of purchasing managers in China rose for the fifth-straight month in April to 53.3 from 53.1 in March.

The Western media has become too focused on whether China will experience a soft or hard economic landing, says Ferguson. The slowdown there has been "over sold," he tells The Daily Ticker's Aaron Task at the Milken Institute's 2012 Global Conference in Los Angeles. "It was actually in the 5-year plan so it is not exactly a surprise, and indeed, if you look at the latest growth numbers, it is really business as usual post-the real estate bubble."

Ferguson is more concerned about the rocky political and strategic issues facing China than its economy. And, in recent days, there have been several headlines highlighting a potential political upheaval in the making:

  1. The spectacular fall of Bo Xialai, party chief in Chongqing, whose wife is being investigated in the death of a British businessman. He is also under investigation for involvement in a wire-taping scandal that involved the Chinese President Hu Jintao.
  2. Blind activist Chen Guangcheng's escape from house arrest. He is now seeking asylum at the American embassy in China.

According to Ferguson, Bo had been running a "racket" in Chongqing but it's been reported that the longtime surveillance and bugging operation has ended. "I think this is a relatively contained crisis," he said.

However, Ferguson is very concerned about the case of dissident Chen who is now seeking U.S. protection.

"This is very very problematic for Secretary Clinton," says Ferguson. "You know she is on the record of calling for sort of a Jasmine Spring and political moves to democracy in China, something that I thought was rather ill-advised."

On Monday, President Barack Obama urged China to ease up on its human rights policies and signaled Clinton would bring up this issue during her trip. But he did not specifically address the case of Chen.

"It is the one thing you do not do in China: intervene in their domestic and political affairs and criticize them on human rights issues," says Ferguson. "To get into an argument about one dissident is a high-risk strategy."

All eyes will be watching how the U.S. handles this very delicate situation later this week.