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BW Businessworld

Let’s Start Talking, Now

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Barack Obama, re-elected president of the United States, will start his new term in January. Xi Jinping, who will lead China for the next decade, will start his stint soon after. The two will have to become friends if they are to ensure that the global economy’s baby steps towards recovery are not crushed midway.

The US economy is not in a good shape and about to fall off a “fiscal cliff” if the Democrats and the Republicans can’t fix a deal on taxes and spending cuts. If the US does trip and gets into a double-dip recession, China will hurt too and badly due to their close linkages. In the larger scheme of things, therefore, the two leaders will have to find ways to work together even while battling for global influence.

Will it be easy? No, not necessarily, but there is an advantage the two sides are starting with. For the Chinese, Obama is a known commodity. They have dealt with him earlier and mostly know which way he would turn. There is a degree of comfort. Had it been Mitt Romney, who was threatening to brand Beijing an economic enemy on his first day in office, the Chinese crystal ball gazing would have vastly different in nature. Similarly, Obama knows China’s new leaders, which will be helpful.

The Chinese agenda for its dealings with the re-elected US president was set soon after Obama was declared a winner, and on the day the Chinese Communist Party began its meetings to finalise its new leadership. Xinhua, the official news agency, said in a commentary that it was time for the Obama administration to rethink its policy on China as relations between the two countries could decide the future of the world order.

While it is true that ties between what are now the world’s two biggest economies have witnessed massive growth in the past 30 years, the United States has been extremely wary of China’s political and economic rise that threatens its hegemony not only in Asia but the world. China’s situation hasn’t been very different; it continues to eye the US as a challenger even while the Chinese people would want to emulate the American lifestyle.

China’s growth has been stupendous, but its efforts to raise the living standards of its people have been marred by a rising rich-poor gap and a one-party-led political system that doesn’t allow the government’s criticism. Political corruption is rampant and scandals have brought down high-ranking government officials and rattled the Communist party leadership, which understands that it needs to keep people on its side if it has to continue to be in power.

Outgoing President Hu Jintao’s opening speech at the just-party congress in Beijing was telling. While he promised that the country’s GDP would double by 2020, he also specifically dealt with the issue of high-level corruption. Hu said that if the corruption issue were not handled well, it could prove fatal not only for the party but also for the state.

To double its GDP China needs to do two things – push for higher wages so that domestic consumption increases and reduces reliance on exports, and ensure that the external environment is stable so that it can focus on internal problems that need to be tackled urgently. It also needs to restructure its economy – shifting from high-investment in state enterprises to a regime that allows more flexibility. Then there will be pressure to recalibrate its currency, which Beijing will allow only slowly. In effect, China will have enough to deal with as it focuses on its core than periphery in its quest to become a bigger power.

And that’s the message it is sending to Washington: make peace as we are important (and you know it) and willing to work together if the anti-China rhetoric is put to rest as a peaceful world is in each other’s interest. There is also an element of threat in that Beijing would not work with the United States on critical global issues such as environment, North Korea, Iran and the global economy if Washington doesn’t fall in line, or at least show it is willing to take Chinese concerns into account.

A bleeding United States, battling to plug an economic hole, create jobs and find common political ground to address tax increases and spending cuts that could hit people badly, also needs to focus on domestic issues and get its house in order than worry about global problems. Washington’s decision to get out of Afghanistan and keep a low profile on Syria are indications that Obama might want to spend more time worrying about what’s happening on Capitol Hill than elsewhere in the world.

However, Obama’s shift towards greater engagement with Asia and his visit to China’s immediate neighbor Myanmar – the first ever by a US president – could create short-term hiccups. But eventually it will all boil down to the ability to trust each other for long-term gains.

Obama will be starting his last four-year term and will be keen to stamp his legacy on domestic and foreign policy. Xi, on the other hand, will be poised for a longer run. He will still be around six years after Obama’s departure from the global stage. For somebody who’s not from the Deng Xiaoping era and, therefore, free from the past political baggage, Xi will have an opportunity to stamp his signature on China and the world.

Xi and Obama need to start engaging each other on issues that impact the larger world. They have to realize that they can’t just be fair-weather friends or blame the other for their ills. They will have to make compromises give each other space – lots of space as a weakening United States and a rising China slug it out on the world stage. The talking process has to start now.

(The author is President, Public Affairs, South Asia, Genesis Burson-Marsteller and former Editor, Khaleej Times, Dubai. He has a deep interest in China and Southeast Asia. Views are personal)