President Xi Jinping’s visit to the United States and the United Nations can only be summarized as a personal success. Despite a huge agenda of meetings and meals with U.S. President Barack Obama, businessmen and think tank members, he seemed relaxed and achieved what he and everyone this side of the Pacific wanted — a better understanding with the U.S. on matters that can be agreed on and to work on matters where there are differences. The charm offensive was aided by the grace and panache of First Lady Peng Liyuan, who impressed everyone with her command of English and dignified style.
Despite concerns to the contrary, considerable achievements came out of this trip: agreements on cybersecurity; U.S. support for the Renminbi joining the Special Drawing Rights (SDR) basket, subject to International Monetary Fund (IMF) evaluation; the U.S. considering Asian Infrastructure Investment Bank (AIIB) membership; and Boeing being willing to help manufacture planes in China. The major sticking point was on the South China Sea issues, but there was better appreciation on both sides on where they stand.
Xi’s speech to the UN also marked a shift from those of his predecessors. It was short and to the point, reflecting his no-nonsense style. China will support global development, provide $2 billion aid for poor countries, invest $12 billion in the poorest countries, forgive debt for the smallest and poorest economies that cannot pay, establish a global development knowledge center and explore building a global energy network to promote clean and green electricity supply. In his speech, he repeated his axiom that development is “10 percent preparation, 90 percent implementation.”
Reflecting on this journey across the Pacific and back, one can conclude that Xi stamped his own character on international diplomacy — practical, realistic and yet firm views on what development and national goals are. Obama has less than two years left of his term, while his domestic rivals are already busy preparing for the presidential elections. From Obama’s perspective, it was important to preserve his legacy in foreign policy and not to rock the boat so much that he would have to exercise damage control in his remaining term. In the meantime, the U.S. presidential hopefuls are debating the whole spectrum of policy options, which means that the political temperature and rhetoric will rise in the run-up to the elections.
Foreign policies are proclaimed not to foreigners but to the domestic audience. That is because all politics is local. Having achieved a success on the foreign policy front, Xi must now address domestic priorities, and there are many.
The strong commitment to maintain RMB exchange rate stability in order to sustain global growth and financial stability, particularly by joining the SDR club, means priority will have to be given to painful real-sector reforms. Most U.S. economists know that if the U.S. dollar becomes too strong, there will be negative consequences not only for the U.S. economy, because the U.S. is no longer the consumer of last resort for global growth. It cannot on its own pull the whole world out of secular deflation. The US needs support from its partners, particularly China, even as it regains its growth momentum, hoping to buy time for its other allies, particularly Europe and Japan, to revive their own growth engines.
The emerging markets, which are China’s new trading partners, are going through a turbulent phase as commodity prices sink and capital flows become volatile. This is why China is needed in the SDR club to help the IMF and the Bretton Woods institutions fund global adjustment. They all need more capital. As Xi remarked, the AIIB, New Development Bank and the Silk Road Fund all add new resources for global development.
Thus, maintaining a strong and sustainable growth for China is critical not only for Chinese stability, but also for global stability. Despite the naysayers who repeatedly predict a hard landing, there is no doubt that China has the fiscal and financial muscle, including the political will, to manage its present growth rate of 6-7 per cent.
Xi’s journey to the U.S. therefore was a watershed in big power relations, defined by realistic juxtaposition of different viewpoints, where interests simultaneously converge and diverge.
The world is a safer place because of that common understanding.
This article first appeared in the online edition of the China Daily on October 2, 2015.
The views expressed in this article are the author’s own and do not necessarily reflect Asia Global Institute’s editorial policy.