China's Vice President Xi Jinping, who is on track to take over for President Hu Jintao when he retires, is in the United States this week meeting with President Obama, members of his cabinet and business leaders across the country to set the framework for future bilateral relations.
Zachary Karabell, author of Superfusion: How China and America Became One Economy and Why the World's Prosperity Depends on It, joins The Daily Ticker's Henry Blodget and Daniel Gross to discuss the current state of the U.S.-China relations.
"From the Chinese perspective things are going their way," he says. "[But] from the American perspective not so much." Most notably he's referring to the fact that China is the largest holder of U.S. debt, after the U.S. government, and the fact that the U.S. remains a huge market for Chinese imports.
China owns $1.1 trillion in U.S. treasury securities, or about 7% of the country's debt, reports CNN. And while the U.S. has increased exports to China as part of Obama's initiative to double exports by 2015, the increase has not nearly been enough to make up for the trade deficit we maintain with the country. The U.S. did nearly double the number of exports to China in 2011, but the U.S. trade deficit with China also grew 8.2% from 2010 to roughly $300 billion.
The other hot button issues, as they relate to China, involve keeping the price of their goods low. In the last decade, many U.S. companies struggled to compete with China's cheap labor market, but just could not and either sent jobs abroad or cut jobs all together. The Economic Policy Institute estimates roughly 2.8 million American jobs were lost from 2001 to 2010. In addition, China is widely-believed to manipulate its currency, keeping the price of its goods artificially low compared to the rest of the world.
China seems to be the one issue politicians can agree on as the country has become a punching bag for both political parties. The Senate last year passed a bill that would have put trade sanctions on countries that manipulate their currencies, namely China. That bill died in the House. More recently Obama in his State of the Union Address called for a new unit to crackdown on trade laws while Republican presidential candidate Mitt Romney has ramped up his rhetoric, vowing to outright label China a currency manipulator in his first day in office.
While the tone coming from politicians and the government remains tough, big business is vying for more access to the Chinese market, which seems to be the only market offering substantial growth these days.
Regardless of this less than optimal situation, things are not likely to change soon, says Karabell, and especially not during this visit from Xi. "This administration in running for office is not going to do anything bold, new or public," he says. "This is more of a getting to know you event."