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Aug 19, 2011 | 19:33 GMT

Agenda: The U.S. and China Find Common Ground

STRATFOR's Vice President of Strategic Intelligence Rodger Baker reviews U.S. Vice President Joe Biden's speech in Beijing and discusses China's dilemma over social networks.

Editor’s Note: Transcripts are generated using speech-recognition technology. Therefore, STRATFOR cannot guarantee their complete accuracy.

Colin: The vice presidents of the United States and China have been finding common ground in talks in Beijing this weekend. Joe Biden is saying that a close relationship with China is of the utmost importance. The Chinese side of the three-day talks appear to agree, drawing back from sharp criticism of America in recent weeks. But does the dialogue spell improving relationships between the world's two biggest economies? Welcome to Agenda, and joining me this week is Rodger Baker. Rodger, let's just hear a short extract from Mr. Biden's speech in the Great Hall of the People. Biden: As the two largest economies in the world, at the moment when the world economic circumstance is uneasy, I think we hold the key together to not only our own prosperity but to generating growth in jobs worldwide. Colin: Rodger, is this just another meeting or a real turn for the better? Rodger: I think when we look at this relationship we really have to look both at the public perception and at the realities that underlie it. On the public front there certainly is a lot of apparent ups and downs in how well the Chinese and the U.S. interact and how well they cooperate and whether they seem to be on some sort of collision course or whether they seem to be working together. Underneath it, there's a fairly strong economic link between the two. That link doesn't necessarily guarantee good relations between them. Sometimes the more closely you are linked economically the more tension you're going to have between each of the countries. What we're seeing I think in Biden and Xi Jinping's meeting and in the comments that they're making is maybe not so much any fundamental or a rapid alteration of the real interaction between the United States and the Chinese, but more a reflection of a concern that globally there's a sense of economic instability — we see problems in Europe, we see problems in the U.S. stock market, we see problems even in Asia in economics — and they're both trying to get a sense of reassurance and a sense that at least there is an element of stability between what are now the world's two biggest economies. Colin: And will that stability include China keeping its huge investments in U.S. treasuries rather than moving funds out as some in Beijing and elsewhere have suggested? Rodger: I think that the talk about pulling Chinese investment out of U.S. bonds out of U.S. treasuries is more rhetoric than anything, although certainly there are elements within China that are raising that up. In the public sphere in China we see that being played around. But I think Beijing tolerates that in public discourse because it puts attention on U.S. economic policies rather than Chinese economic policies, and the Chinese government in some ways says, "See our policies are good and stable even if they don't necessarily benefit every person." But in the end, the Chinese really have two questions: One, who's going to buy their stuff if they yank all these savings out of the U.S. and if they contribute to the crash of the U.S. economy. And the second would be who in the world is going to buy all of these if they try to dump them on the market and sell them, there have to be buyers out there. Colin: Of course China has it's own problems, increasing signs of social unrest albeit scattered. Rodger: Yeah. The U.S. and China are both heading into a sensitive political period. We're heading into very clearly the election cycle in the United States. We're heading into the political transition in China with the leadership. We also do have a lot more economic stress in China than really is apparent from the surface level. I think you're seeing that it in these elements of unrest that are bubbling up, in these these different rallies and protests and even some of the problems were seeing now stirring back out in Xinjiang, and maybe even on the edges of Tibet, so we're seeing a lot more going on in China that are suggesting that things are things are fairly uncertain domestically. And while the Chinese are moving into this this transition between the current leadership and the next leadership, including Xi Jinping's taking over as the president, they're doing everything they can to put a lid on the sense of domestic instability and to try to manage the relationship with the United States so that it U.S. or other outside powers don't try to exploit this moment that that may be perceived as weakness in China. Colin: I've spotted two other trends you might like to comment on: There seems to be a significant drop in students from the provinces enlisting in the better universities. It also looks as if Beijing is planning a new crackdown on bloggers and social networks. Rodger: These again are those reflections of some of the internal problems in China. We see with the students of course that there is a potential decrease in the number of rural students attending universities that suggests a widening coming down the road of the social and economic gaps that we have in China, which could increase tensions there. It may also at least to some degree reflect the push towards urbanization that China has been doing and trying to move people out of the rural areas and into the cities, but that in of itself is going to create a new set of difficulties and problems. With urbanization, comes an increase in social services and finding ways to fund those social services. So those who live in cities actually gain more social services in China in the current system then those who are living in the rural areas. When we look at the social networks this is really been a mixed issue for the Chinese. Colin: Yes, and there was the situation in Dalian, where blogs drew thousands of protesters on a pollution issue. Rodger: We had — by the reports — more than 10,000 people show up, all to protest against the danger of a chemical factory that could have leaked toxic materials amid a natural disaster. The government ultimately agreed to close that. That got people off of the streets. That was probably a good decision on the part of the government. They made the right decision that would get people off the streets and the appearance of social instability, but in doing so, the alternate element is that it may empower other people to follow a very similar path because they have seen that this as a potentially successful path to get the government to take action against something that they don't like. So long as they don't criticize the government directly, as long as instead they can focus on something that's a little bit more acceptable to the government, like pollution or health issues, things of that sort. Colin: So they see pluses as well as minuses. Rodger: On the one hand, being able to allow their citizens to kind of display their frustration or express themselves through these social networks has been a way to reduce potentially some of the steam that would build up in China that could ultimately kind of explode out against the government. In this way they can kind of gripe together, and that's fine, but the same networks are also being used for organizational purposes and as we've seen in Dalian it's very similar in the methodology of organization that we saw in the Jasmine protests. And the Chinese are very aware of that and they're looking at ways to on the one hand limit the ability of these networks to be used to bring people out on the streets, and on the other hand exploit these networks to create a pressure release valve for the population. Colin: Rodger, thank you. I've been talking to STRATFOR senior East Asia analyst Rodger Baker. And of course you can read our regular files on China on our website. I'm Colin Chapman. Thanks for being with me today. Goodbye.
Agenda: The U.S. and China Find Common Ground
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