The Economic Relationship Between China, U.S.

NPR's Robert Siegel speaks to Albert Keidel, a senior fellow at the Atlantic Council, about the complex economic relationship between the U.S. and China — and the likely challenges that relationship will face next year.

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ROBERT SIEGEL, host:

This week, with an eye toward the new year, we're hearing about some of the big challenges the country faces in its dealings with other countries. We've heard about counterterrorism in Afghanistan, Pakistan and elsewhere. Today, our complex relationship with China. The Chinese lend to us, sell to us and, to a lesser degree, buy from us. They compete with us for global resources and often for influence in the countries that posses those resources, and we seek the support of China in our dealings with North Korea and our attempts to sanction Iran.

What are the likely challenges next year? Well, we're joined now by Albert Keidel, who is senior fellow at the Atlantic Council.

Welcome to the program.

Mr. ALBERT KEIDEL (Senior Fellow, Asia Program, Atlantic Council): Thank you very much, Robert. Delighted to be here.

SIEGEL: First question about U.S.-China relations. Do you think we're likely to see any movement in the argument over whether China's currency is undervalued?

Mr. KEIDEL: I think they'll be moving back and forth. But by movement, I presume you mean that will U.S. government do something to discipline China in some way or try to discipline it. There, I think, we will not. There will be some rhetoric. I think it's not an election year in a large scale in the United States, so it's no longer such an important issue for politicians to protect themselves from.

SIEGEL: The currency question relates closely to trade. We buy a lot more from the Chinese than they buy from us. Is that likely to be the case for years to come, do you think?

Mr. KEIDEL: Well, it is. It depends on how you measure it, of course. If you just measure the bilateral trade data, which is what the Commerce Department announces every month, it looks like China has a huge imbalance with us. But China actually has deficits with lots of other countries. So what we need to look at is China's global balance compared to the U.S. global balance, and there, China has really declined a lot since it was feeding the huge U.S. spending bubble before the crisis.

SIEGEL: It's now buying more things from abroad?

Mr. KEIDEL: It's buying more things from abroad, and that's part of the adjustment. China had for 30 years controlled how much it bought, and suddenly, it had more money than it knew what to do with and couldn't spend it all well.

SIEGEL: Over the past couple of decades, Chinese by the tens of millions, if not the hundreds of millions, I guess, have moved out of agrarian rural poverty into urban life; a change that, for most, represents a huge improvement. Is that process likely to continue, and can it continue and exclude political democratization at the same time?

Mr. KEIDEL: It can continue. It will continue, and I think political democratization of the kind that we're familiar with here will not merely be a part of it, and the pressures will only grow from dissatisfaction if the Chinese don't continue to do what they have been doing so successfully which is building the water and the sewer and the public transport and the buildings, the structures, the middle-income housing, all of the kinds of what would we call public investments or basically public investments that make urbanization a success and, of course, the jobs.

SIEGEL: People in China perceive a system as delivering a phenomenal improvement, you're saying, in their everyday lives?

Mr. KEIDEL: Absolutely. They see it as something that is a huge improvement in their children's lives as well, with the spread of education, but the urban life is extremely popular.

SIEGEL: On the one hand, obviously, China is deeply self-involved in this enormous transformation that this huge country has being going through now for quite some time. They're also a more and more consequential nation on the world stage as the country becomes wealthier. When you talk to Chinese or when you read what they say, do they talk about a new era of China being a superpower on the world stage?

Mr. KEIDEL: Well, that really depends on who you listen to. You'll find a lot of bloggers, a lot of pundits and even some sort of retired military officials who have grandiose ideas that were only fueled by China's success during the last financial crisis, in contrast to the U.S. and Western European difficulties.

But if you listen to what the government officials are saying who have serious responsibilities, they know that they have a long way to go, and that their modernization is going to be difficult and that the challenges they have to face will require U.S. collaboration with them.

And so they'll say to me - that the senior people that I talk to - things like, you know, you're big brother. You're so far ahead of us. That it's going to take us a long, long time to be considered a challenge.

SIEGEL: They see themselves in some ways still us a developing economy.

Mr. KEIDEL: Well, they are. If you think their per capita output is $4,000 to $5,000, we're over $40,000. So it's a - we're at a magnitude of 10 to one in terms of every person's output and resources available. So they have a long way to go, and their model, if you will, or their way of developing their economy is appropriate for where they are and isn't a competitor with our model of more freely creeping into the frontiers of world economy. They - there's a very easy path for them to see where they have to go, and they're just doing it.

SIEGEL: Well, Bert Keidel, thank you very much.

Mr. KEIDEL: Thank you very much, Robert. I was delighted.

SIEGEL: Albert Keidel, who is a senior fellow at the Atlantic Council, talking about our relations with China.

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