I. Still in Economic Restructuring Mode
At present, the United States economic situation and the economic development views of the public constitute the most prominent domestic factors influencing Washington’s foreign policy, including its relations with China. These two factors have become top priorities in the United States’ current and future domestic and foreign policies. In “The US-China Public Perceptions Opinion Survey 2012”, the Committee of 100 stated that the American public and elite (including policy makers, business leaders, opinion leaders and other social figures) consider “jobs and the economy” the most severe problems facing the United States. This percentage rose sharply when compared with a similar 2007 survey (prior to the outbreak of global financial crisis and global economic recession). Similarly, economic and trade issues became major topics in the 2012 presidential election affecting the election results, as well as the election debates on issues pertaining to China. Naturally, the United States’ economic growth and the American people’s sense of their economic situation will continue to impact the United States’ diplomatic focus, helping judge gains and losses in the US diplomatic performance.

How should one evaluate the current United States economic situation? Generally speaking, the United States economy has over the past three years orchestrated a rather robust recovery. In terms of its economic growth rate, GDP growth in 2009 was negative 3.1 percent, but in 2010 it was only negative 2.4 percent, in 2011 it was 1.8 percent, and in 2012 it reached 2.2 percent. The economy has continued to maintain a 2.4 percent growth rate in the first quarter of 2013 and is forecasted to reach an annual growth rate of 2.5 percent. Over the past two years, the American labor market has also witnessed some improvements, with unemployment declining slowly from its peak of 10 percent in 2009 to the current level of 7.5 percent. In 2013, the weekly initial jobless claims remained at approximately 344,000 to 369,000, a lower level than February 2008. Based on past experience, a figure of less than 375,000 for initial jobless claims indicates that the job market is picking up and the unemployment situation is becoming stable.[2]

The United States’ economic improvement over the past two years has been attributed to the following two factors:

Firstly, American enterprises, stimulated by cost-reducing and mid- and long-term good news such as technological innovation and the shale gas revolution, have shown an increasing desire to increase investment. American private investment in the first quarter of 2013 grew by 4.3 percent compared with the same period last year, although it decreased a bit compared with the previous quarter. This contributed 1.16 percent to US GDP growth, showing an increase of nearly 49 percent compared with the same period last year. Mid- and long-term positive news also includes United States population growth dividend factors. Compared with other major economies that have seen rapidly aging and even shrinking populations, the United States population will keep growing in future, adding 93 million people by the middle of the century and reaching a total population of 400 million people. The aging population trend in the United States will be slower than other developed economies.

Secondly, some state and local governments have achieved initial success in attracting foreign investment, developing infrastructure and initiating immigration reform and tax regulations. As a result, local economies have started to show some vitality. In addition, at a time when other major economies in the world are still in recession (such as the EU) or suffering from reduced growth rates (such as emerging economies), the United States is witnessing an improving housing market and stock market, thus inspiring more and more Americans’ confidence in the United States’ institutional and economic restorative abilities. Compared with the American people’s sentiments two years ago, the optimism about the United States economy has increased. A poll conducted by the Pew Research Centre showed that by the end of 2009, only 8 percent of Americans felt that “the economy was in excellent or good condition,” but this percentage rose to 16 percent in March 2013.[3]

Although the United States’ economic recovery has gained momentum, the country has struggled to revitalize itself economically after the financial crisis in 2008 and the global economic recession. Three major structural factors will continue to constrain America’s mid- and long-term economic growth.

First, the US economy is now confronted with a severe “dual-extreme phenomenon.” In terms of its economic structure, the United States is composed of two extremes: the high value-added sectors of financial services, research and development and design industries; and the low-end sectors with relatively low productivities and low added values. As a result, the manufacturing recovery still has a long way to go.[4] In terms of the United States’ labor structure, the work force is moving towards two extremes as well: the highly-educated and highly-skilled are on one end, while the less-educated and poor-skilled are stranded on the other end, resulting in a grave insufficiency of medium and highly-skilled technical workers. After the financial crisis, the manufacturing sectors (including energy and mining) found it hard to recruit qualified workers totaling more than 200,000 every year, and the “shortage of skilled workers” hindered the manufacturing recovery. As for the revenue structure, the gap between high-income and low-income groups is widening, with middle-income groups in decline. Facing an economic crisis and recession, the elderly and young people have become engaged in a competition for employment, welfare and other social resources. Meanwhile, the “rivalry between generations” is still sharp.

Secondly, whether the United States can maintain its fiscal sustainability is uncertain. The debt pressure seems to have relaxed due to the “automatic spending cuts”, and the debt ratio to GDP has fallen to less than 4 percent. At the same time, the structural dilemma of long-term United States debt and fiscal outlook remain intact. At present, with no consensus on cost-cutting between the executive branch and Congress, the government is pushing to increase its health care, social security and other welfare spending. It must do this partly because of the aging population trend and partly due to rising interest rates. As a result, the government’s expenditures on defense, education, research and development and infrastructure will be tightened. This in turn will intensify the vicious cycle of not only living beyond one’s means, but also surviving on excessive debts. The Obama administration, on the one hand, is confronted with a dilemma of cutting government taxes and more government assurances that are demanded by the public, and on the other hand, it must face the difficult task of investing in the future (such as research and development, education, infrastructure, etc) without becoming a “big government”.

And thirdly, a comprehensive revitalization of the United States economy will be an arduous task. Of late, there have been steady improvements in American macroeconomic policy, technological innovation and enterprise innovations that have affected the United States’ economic competitiveness. However, complex tax regulations, an inefficient basic education system, a scarcity of skilled workers and other structural problems have held back American economic competitiveness. In the future, US economic competitiveness will be determined by major reforms on its tax system, immigration policy, and basic education. Although consensus on these three areas of reform is increasing, the federal government is still far from taking action in these fields. In addition, the current political impasse in Washington has significantly hampered the improvement of American economic competitiveness. The American demographic change, however, has forced the Democrats and Republicans to make corresponding adjustments, especially putting more pressure on Republicans to take action on immigration policy reform. Meanwhile, the “negative effects” that might be brought about by the shale gas revolution cannot be neglected. The American reliance on cheap and abundant shale oil and gas could restrict future developments in renewable energy and low-carbon industries.[5]

In short, the United States economy is still at an important juncture of structural adjustment and transformation. At present, positive and negative economic factors are interwoven and their complicated impacts on the United States’ mid- and long-term development prospects are uncertain. Whether a series of major reforms and strategic decisions – in particular, the reforms involving immigration, taxation and education – can be successfully introduced and implemented will decide whether the United States will be able to revitalize itself economically.

II. A Second Term Focused on Domestic Affairs
President Barack Obama will not change his ruling strategy – “reconstructing domestically and readjusting externally” – during his second term. On the one hand, the Obama administration will strive to put its health care reform law into effect while taking action on immigration, gun control, social security and education, making domestic achievements Obama’s legacy and laying a solid foundation for the Democrats in the 2014 mid-term elections and 2016 presidential election. On the other hand, Congressional Republicans will step up their constraints on the President in his second term. The fact that President Obama’s popularity rate has not been affected by recent scandals or controversies suggests that the American people are more concerned with the government’s economic performance. This in turn has further strengthened the government’s confidence in concentrating on the domestic economic development agenda.

The administration’s economic policy during Obama’s second term has four priorities: creating more job opportunities is without a doubt number one on this list. According to statistics provided by the US Department of Labor, a total of 6.3 million people lost their jobs since 2008 from the financial crisis. By June 2013, 5 million jobs had been created during the economic recovery but 1.3 million were still needed to match pre-crisis levels. This figure does not include people who have given up hope for work opportunities. Jobless young people are of particular concern. A Gallup survey in June 2013 showed that only 44 percent of young people aged 18-29 years old had full-time work, 3 percent less than the figure in 2012 and well below the level three years ago.[6] Nearly half of the jobless population is concentrated under 34 years of age. The United States has become one of the major developed economies to have very high percentages of jobless young people.[7]

The second priority is improving income distribution in order to prevent further disparities between the rich and the poor. The latest polls show that although President Obama has repeatedly stressed the American middle class dream to rise up the social stratum, the prospects are not very optimistic. The United States middle class has seen a decrease in income as the economy has recovered. According to statistics provided by American research institutions, since June 2009 when the United States government announced its economic recovery effort, the average median household income has decreased by 4.4 percent, now reaching 6.1 percent less than the pre-crisis level in 2007. This shows a declining living standard for ordinary American families. The data provided by the Federal Reserve Bank shows that the average median household’s net assets have fallen by 39 percent since 2009. At the same time, however, America’s most affluent families have watched their net assets rise. If this situation remains unimproved, President Obama’s ruling basis and the Democrats’ election prospects in 2014 as well as in 2016 are bound to be affected.

The third priority is to improve American productivity and enhance its competitiveness in the world. The government’s policies encourage product research and development, investment in education, immigration reform and a decline in corporate taxes. Over the past 20 years, US competitiveness in the world has continuously dropped, but the measures taken by the federal government are still in planning stages with no ​​substantial progress being made. Since more time is needed to make progress on educational reform, corporate tax reduction has been deemed the most effective measure in the short-term to make progress on improving corporate competitiveness and attract more foreign investment.

The last priority is to initiate a proactive trade policy. The Obama administration hopes to get Congress’ “trade promotion authority” (TPA – also known as fast-track trade authority), and has made efforts to promote negotiations on the “Trans-Pacific Partnership Agreement” (TPP) and the “Trans-Atlantic Trade and Investment Partnership Agreement” (TTIP). However, in promoting a more vigorous trade policy, the Obama administration will face great challenges from Democrats who believe in what they call “fair trade.”[8] Trade and investment negotiations concern not only United States employment, but also the country’s future leadership in rebuilding the regional and global economic and trade order.

In his second term, President Obama faces pressure to achieve his objectives at home. The first one is to overcome the intensified constraints of the Congressional Republicans. In order to prevent the Democrats from passing their agenda, the Republican Party has strengthened its discipline and called for Party members to toe the Party line, blown up government-related “political scandals” in an attempt to accelerate a “lame duck” presidency, and made full use of communication platforms such as the internet and new media to fortify the “inherent awareness” of the Republican supporters against President Obama and the Democratic Party.

The second one is greater pressure both at home and abroad on Middle Eastern issues, including the Syrian issue. Given the lessons learned from Afghanistan and Iraq, as well as the war weary sentiments of American public, President Obama would rather pay a certain political price than jump into an intervention in Syria. However, faced with increasing pressure from Republican hardliners and America’s allies that favor intervention, it will be tough for the Obama administration to restrain itself on the Syria question. Washington’s handling of the Syrian issue constitutes a challenge to Obama’s core agenda.

III. New Changes in How America Views China
On the one hand, the outbreak of the financial crisis in 2008 highlighted the economic and trade interdependence of China and the United States, but on the other hand, with the evolution of the economy and overall strength of the two countries in recent years, America has developed new changes to its views on China. The United States’ evolving views on China, in a diversified and interacted way, turn out to be rational and pragmatic. Among those who feel goodwill towards China, there are more ordinary people than policy-makers, and more business people than politicians and academics.[9] Changing opinions among American politicians, businessmen and opinion leaders (especially those within think tanks and academia) merit special attention.

The evaluations of China’s development and role in the world made by US political figures, especially those in the administrative sector who formulate and implement foreign policy, have become increasingly realistic. Concerning China’s future development, the mainstream view held by the Obama administration, especially the administration’s “China-hands”, holds that China, with a unique historical experience, will continue its Reform and Opening and not follow in the footsteps of the former Soviet Union. China has established an increasingly open and pluralistic social system, proving that the Communist Party of China has a strong ability to reform and adapt.[10] Regarding China’s role in the world arena and its impact on Sino-American relations, the mainstream view held by the Obama administration also believes that China and the United States are neither the so-called “G2” nor a modern day “Cold War”. The relationship is complicated by both competition and cooperation: on the one hand, the United States continues to fully recognize the significance of China’s development in the region as well as the world and it holds expectations for China’s greater international responsibilities. They think that the Chinese government’s concerns focus on enhancing its international status rather than taking adventurous actions abroad, and the United States should welcome China’s rise, as well as its expanding legitimate role. On the other hand, the United States government does not deny that there is difference, contradiction and competition between China and United States in international relations. The US has stressed the management of this competitive relationship via rules, trying to regulate China’s rise with international norms and laws so as to prevent a chaotic or vicious competition between the two countries.[11] The United States’ latest economic recovery has helped increase its confidence, and Washington, in carrying out its China policy, has emphasized that China should act according to rules. Vice President Joe Biden’s opening remarks at the 5th round of Strategic and Economic Dialogue on July 10, 2013 epitomize the government’s position in this respect.[12]

The Obama administration, with its increasingly realistic views on China, has strengthened its pragmatic “two-pronged strategy” towards China. This attitude is also reflected in the American response to China’s initiative to “build a new type of relations among major countries.” Since the Chinese government put forward this initiative in early 2012, American leaders and senior officials, on various bilateral and multilateral occasions, have recognized this objective and its strategic significance. However, the United States has clearly said that the substance of these new relations should include expanding the Chinese market into the United States, increasing the Chinese military’s transparency, and meeting Washington’s requirements on cyber-security and the DPRK nuclear issue. Whether China will meet America’s specific concerns (such as during Snowden affair) is viewed as a “touchstone” to test China’s sincerity in promoting a new type of major country relations.

As for the views of the American business community, the country’s elite holds a mostly positive view of China. A 2012 poll by the Community of 100 on China-US attitudes towards one another shows that up to 72 percent of business leaders have a favorable view of China, while only 55 percent of the general public felt the same way, with 62 percent of opinion leaders and 42 percent of decision-makers also holding a favorable view. Business leaders having favorable views of China has increased by 18 percent compared to five years ago, the highest increase among segments of the population that were surveyed.[13] On the question of China’s future role in the global economy, business elites that were interviewed think that China will most probably play three major roles: the world’s largest consumer market (71 percent), the world’s largest exporter (70 percent) and the key target region for outsourcing in the manufacturing industry (55 percent). Among these areas, those who think China will become the largest consumer market have increased by 19 percent when compared with five years ago.[14]

American businessmen regard China as the investment and export market with the most potential, but at the same time they view it as a strong competitor for American enterprises. A tracking survey made by the US-China Business Council (USCBC) on American enterprises in China shows that under a fragile and unstable global recovery, the steady growth of the Chinese market is very attractive to American companies. According to the “2012 China Business Environment Survey” released by the USCBC, among 240 American companies investing in China, nearly 90 percent of them turned profits in 2011. This was the highest percentage recorded by the USCBC’s surveys over the past seven years. Of these, 75 percent of the enterprises were optimistic about next year’s earnings, while another 75 percent said that their profitability in China was better than or equivalent to other global markets. Lastly, two-thirds said they would continue to invest more during the next year in China.[15] Despite the fact that current Chinese economic growth is changing speed, the vast majority of American firms investing in China, especially large firms, still view China as an “important emerging market for a long time to come”.[16] In addition, the attractiveness of the Chinese market to American firms is reflected in the increase of United States exports to China.[17]

Meanwhile, during the past few years, the US business community has felt increasingly competitive pressure from China. The Committee of 100, in its survey of American business elite, says that two-thirds of respondents think that China’s economic emergence will pose a serious or potential threat to the United States, including in job losses caused by a persistent trade deficit and outsourcing. The concerns over China’s insufficient protection of intellectual property rights ranks first among these worries.[18] Recently, groundless accusations by the United States that China is “stealing American business secrets through the internet” also reflect American fears that its technological advantages are weakening as Chinese technology upgrades. According to the “2012 China Business Environment Survey” by the USCBC, the Chinese market poses an increasing challenge to American companies: these challenges are the increasingly fierce competition in human resources, constraints caused by administrative approval system, increasing competitiveness from Chinese companies, rising operational costs and the protection of intellectual property rights. These challenges make nearly 45 percent of US firms in China think that competitive environment is becoming more severe than it was three years ago.[19]

United States think tanks and academia constitute an important force that influences American public opinions regarding China. In a nutshell, these views are diversified and relatively positive. However, with the rise of China’s overall national strength and setbacks suffered by the United States during the financial crisis, the opinion of “China’s assertiveness” is prevailing. Some think tanks and scholars believe that China’s perspective of “a declining United States” has boosted China’s “excessive confidence”, while China’s need for “stability at home” requires an “assertive posture abroad”. Harvard University professor Alastair Iain Johnston, in analyzing “Chinese assertiveness,” pointed out that the prevailing view from US academia advocating an “assertive” China policy is very much swayed by the media (including the new media), and these opinions often “lack clear definition, let alone precise comparisons”. These represent excessively strong reactions from the US rather than China’s assertive policy. He is concerned that opinions of “Chinese assertiveness” may further squeeze the space of American public opinion on China’s foreign policy, weakening American scholars’ sensitivity on new ideas and new policies related to China’s diplomacy.[20]
The above view can be proved by the mixed reactions garnered by China’s initiative to build a new type of major country relationship between China and the United States. China’s proposal of building a new type of major country relations is based on “no conflict and confrontation, mutual respect and win-win cooperation”, and it has received a positive response from the Obama administration. It has also attracted gradual attention from American academics and scholars. However, quite a few American think tanks and scholars are skeptical as to whether the two countries can build a new type of major country relationship. The first question concerns putting the United States at a so-called “disadvantage”. It means the Chinese proposal is to pursue “equal footing” with the United States, and Washington’s content of the proposal is to unilaterally accept Beijing’s claims on its core interests.[21] The second question concerns the so-called “skepticism”. It means that the coexistence of competition and cooperation between the two countries will gradually be replaced by more competition than cooperation. Therefore, in the future, China and the United States should focus on competition or even conflict management rather than talking slogans and principles.[22] In addition, another predominant opinion is that systemic political and ideological differences between China and the United States will increase conflict between the two countries, and that this increase is more or less inevitable.[23]

IV. The Future of Sino-US Relations
America and its economy are now in the middle of a readjustment and reform period after going through the financial crisis. Since winning reelection, the Obama administration has continued to focus on revitalizing the economy, increasing job opportunities and improving America’s economic competitiveness in the world. At the same time, maintaining a stable Sino-US relationship will not only help solve domestic problems but also make up one of the prerequisite conditions for the Obama administration to concentrate on “reconstructing domestically and readjusting externally”. Before the most recent US election, there was a widespread consensus that the US government would take the opportunity to promote stable and healthy Sino-US relations. Therefore, over the upcoming next few years, China, in handling its relations with the United States, should keep a balance between “opportunity management” and “rational expectations”. On the one hand, China should actively make use of the positive results achieved at the Annenberg Summit to build up the future bilateral relations agenda, including adding more topics to the Sino-US Strategic and Economic Talks and improving the negotiation process. On the other hand, China should fully anticipate the complicated domestic situation that President Obama will face during his second term and the implications of this interference on Sino-US relations. Therefore, China should not have excessive and unrealistic expectations for bilateral relations; instead, China should strive to create a positive environment for the betterment of bilateral relations.

There are many questions that concern American people from all walks of life in the United States: how to strengthen the symbiotic relationship between China and the United States, especially how to upgrade the mutually beneficial and win-win economic and trade relations? How to prevent economic and trade frictions from hurting and even poisoning the overall bilateral relations? And how to make the economic and trade ties continuously play a role of “ballast stone” and “propeller” in the bilateral relations? The United States business community has shown more and more concern regarding the possible challenges to American industrial competitiveness posed by China’s upgrading economy. At the same time, they also have high expectations for Chinese investments in the United States, and they attach great importance to how China’s ongoing Reform and Opening will create more market opportunities for American firms. Therefore, China should closely combine the upgrading of the Sino-US economic and trade relationship, the acceleration of its own market system improvement and the promotion of more equal and open access to the American market. In order to pursue these objectives, China should do the following:

First, in pushing forward talks on investment agreements between the two countries, China should not only see the mutual opening of both markets as a diplomatic maneuver, compromise and swap of interests. It must also regard this as a self-imposed pressure mechanism and a strategic opportunity for China to build its own market system and undergo a new round of Reform and Opening (in areas such as the financial and service sectors, intellectual property protection and SOE reform, among others). By doing this, China can build consensus at home and stimulate Chinese companies to cultivate international competitiveness in a more open environment. Second, China should make good use of the urgent need for Chinese investment in the United States and learn from the successful investment experiences of other countries. In the course of trade and investment talks, China must work hard to change the current investment situation in the United States; namely, there is more investment from China in the financial sector and less in economic entities, there are more Chinese investments in mergers and acquisitions and less in factory construction (also known as “green-field investment”), and there is more investment in wide-ranging sectors and less in creating jobs. All companies should be encouraged to expand direct investment in factory-building in the United States and increase areas and scales of employment. This will create more jobs and brand enterprises that could be symbolically important and strategically significant in the further development of Sino-US relations. Third, a research team composed of officials, entrepreneurs and scholars from the two countries should be formed as soon as possible to research the building of a new type of economic relations between the two countries. This entity should submit a policy roadmap to the two governments for negotiation, such as the Sino-US FTA talks, China’s participation in the “Trans-Pacific Partnership Agreement” negotiations, the promotion of healthy interactions among the RCEP, TPP and Asia-Pacific FTA, and issues concerning regulations on cybersecurity.

Considering the ongoing economic recovery, improving economic optimism among the people and in particular expectations for more investment from China, people have, to a certain extent, eased their concerns that China was the cause of the United States’ job outflow. This helps create a more favorable public opinion for enhancing Sino-US economic and trade exchanges. Meanwhile, at a time when America’s views of China are becoming diversified, rational and pragmatic, public opinion has emphasized that China’s development is uncertain and unknown. In the process of vilifying China’s development, some people go further and argue that China would make full use of its nationalism to ease domestic social contradictions. The view that China will remain unbridled in its assertiveness to the outside world is still prevalent. Traditional media has lost its dominant position in shaping the American public’s view of China. Now the internet and new media have an increasing influence on young people. Sources of information in the Chinese language have a limited impact on American people’s views of China, but English-language media still has a decisive influence. As such, China should intensify its public diplomacy efforts in the United States and help Americans of all backgrounds view China in a more objective and balanced way. Opportunities for direct contact and exchange should be bolstered, and Chinese leaders should meet with the American media, including print media and TV media. In particular, top-level official visits to the United States should be used to introduce the internal and external policies and governing concepts of China’s new leadership. In addition, academic diplomacy should be promoted between think tanks and scholars from the two countries. Influential think tanks should be encouraged to conduct joint studies pertaining to the “building a new type of major country relations between China and the United States”. Through these studies, the various parties will form similar viewpoints on core concepts and basic logic. They will realize that their relationship can be developed into a strong, “like-minded community” – a new and unprecedented type of relationship between China and the United States.

Source of documents：China International Studies