The latest meeting between President Xi and President Obama on the sidelines of the G20 summit in St. Petersburg, Russia was the second in three months after their talks at the Annenberg estate in California in June. During the meeting, President Obama said that he and Xi "have agreed to build a new model of great-power relations based on practical cooperation and constructively mending differences". This is the first time that President Obama has ever utilized the terminology “new model of great-power relations” as a positive response to President Xi’s appeal for the historic mission. Obama’s emphasis on the practical cooperation as a principal way to build such a new model is mainly related to the economic and trade issues. Obviously economic cooperation is a basic connotation for building the new model of US-China great-power relations. I would like firstly to explore the challenges and opportunities for US-China economic relationship and then touch on what should a “new model” economic relationship look like.

Economic challenges and opportunities
One point is that the U.S.-China’s economic relations are positive but still complicated.  Both sides need to appropriately consider the concerns from the other sides. The U.S. and Chinese economies are the first and second largest economies in the world respectively. Not like the previous relationship between former Soviet Union and the U.S., now the U.S. and China are heavily interdependent.  To ensure the heavily interdependent economies to be in a “healthy economic competition”, both sides need to appropriately handle some issues and consider the concerns from the other side. China is still on a process of developing and transforming economically. The US, however, is different. Like two climbers, the U.S. is on the peak of a mountain but China is still climbing. Those who are the top will be appreciated if they patiently give some instructive and kindly extend their hands to assist. 

Another point is that Chinese side wants to make contributions to global rebalancing. China is now adjusting its development model. We can see the 12th five year plan emphasizing the strategic adjustments including slower GDP growth, boosting domestic consumption, increasing the service sector’s contribution to GDP, expanding urbanization, stressing some strategic industries including the environmentally sustainable growth, moving away from labor intensive low end manaufacturing. As President Xi Jinping remarks at G20 Summit that China has confidence in conducting China’s economic development with a healthy and sustainable approach. This will supply more opportunities for Sino-US cooperation.

The third point is about state owned enterprises (SOEs). The new administration under the leadership of Xi and Li has not only talked about furthering reform but walked, making endeavors to implement domestic economic reform. Monopoly activities by SOEs are unwelcome and it is indeed an issue necessary to be solved. As one of outcomes of the fifth S&ED Dialog, both sides resume the negotiation on U.S-China bilateral investment treaty (BIT). The negotiation is based on pre-establishment and negative list. This is a good start for American companies to do business in China. I believe that further reform programs cannot without touching on monopoly activities.

The fourth point is about intellectual property rights. also in St Petersburg, President Obama raised the issue and I think it is also connected with Cyber security issue but with an emphasis on commercial secrets issue. From some Think Tank reports in US, it is called Cyber-enabled theft of commercial information. I understand that is a rapidly growing and critical issue in the U.S.-China relationship. It is hard for me to accept the accusation from the U.S. government, who for the first time publicly pinned responsibility on official Chinese actors in May 2013. My understanding is that the official actors cover all activities from Chinese governmental departments. From the outcomes of S&ED the Chinese government has made and will make every effort to combat piracy and US side understands that. Even under the pressure, China agreed to set up a working group on cyber security under U.S.-China Strategic Security Dialogue framework to tackle the issue.

The fifth point is about the bilateral trade relations. Trade between the United States and China has expanded dramatically in the years since China acceded to the World Trade Organization more than ten years ago. The size of the U.S. trade deficit with China has risen with the greater volume of trade although the figure seems different from both sides. The result cannot be used only for accusing China of unfair trade practices and undervalued currency. This accusation is unfair. We need to admit part of the trade deficit is stemming from the United States, who controls exports of advanced technology and does not want to relax the control for a long time. Besides, Chinese enterprises feel unhappy over the American political check for their investment.

Those challenges are prominent but opportunities also exist for both sides to work together, particularly in the economic track. What is most important for us the remember is the current cooperative foundation. Now the size of China’s GDP is almost half of that of the U.S., and their interdependence has been ever closer than any other countries in history. For instance, the U.S. and China’s two-way trade in 2012 was $536 billion and China becomes the second largest trading partner to the U.S. Although the U.S. goods trade deficit with China was huge, U.S. exports to China totaling $128 billion, already doubling its trade within the Obama Administration’s goal.

China wants to have the Chinese dream come true and is committed to realizing the dream through peaceful development, which is a good opportunity for both China and the U.S. to utilize for the “new model”. Actually, Chinese dream is consistent with the American dream. These are bases that the Obama Administration has sought to cooperate with China in rebalancing the global economy and solving the job issue. China would like to work together with the U.S. in the field of economy. From the U.S. China Strategic and Economic Dialog, the most significant outcome is that both sides agreed to resume but actually entered into the stage of “substantive” negotiations over a bilateral investment treaty (BIT). All those economic contributions could be regarded as a bright signal for building the new model of U.S.- China great country relations.

What should a “new model” economic relationship look like?
We need to recognize some basic and essential contents and principles for bilateral economic relationship under the new model of great countries relations between China and the United States.

The first is the guidance of the economic relationship is not confrontation but win-win cooperation. With that said, we need to consider a cooperation plus competition relationship. Peaceful competition and cooperative competition is necessary. Using Chinese words, we need to show the world the positive energy with developing cooperation without confrontation.

The second is mutual respect. China needs respecting the US and learn from the US in many economic aspects, particularly, China must learn from American successful experiences in economic development, scientific management. Meanwhile, the US needs to understand China’s reality and respect China’s rational demands.

The third is on the cooperation in regional and global economic affairs. At present time, both sides seem standing on the different tracks to seek regional economic integration, that is, the U.S.-led TPP negotiation process and China leading role’s Asia trade track like RCEP. But China does not want to confront the United States in the process but work together with the United States. At the present time what some academia concern is that TPP is a part of American rebalancing strategy, which is viewed as targeting China. China and the U.S. need to have a far reaching vision but not an immediate merging with one another. Probably the two tracks will be united under APEC framework in five and ten years.

The fourth is about a road map for updating the economic cooperation to fulfill the new model of U.S.-China great country relations. We need to make full use of Strategic and Economic Dialog mechanism to plan how to build a new model of great power relations. Maybe we can make a roadmap for that vision. Then both sides can make full endeavors to hasten the pace of negotiation on bilateral investment treaty (BIT). Meanwhile both sides can open an new track on FTA negotiation talk to enhance both economic relations. Finally, both sides can consider taking coordinative actions how to process the cooperation and convergence of TPP and East Asia Track into one system in Asia Pacific.

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