Nathan Andrada’s Blog

The world watches as the two superpowers, the United States and China, talked about economic matters in a time when their leadership is highly sought by the rest of the world amidst a crippling global economic and financial crisis. The third edition of the China-US Strategic Economic Dialogue in Beijing this week did just that. But the question is, was there enough substance that this summit produced to make any significant impact if at all.

It is the first time Chinese and American finance officials met since the crisis began in October. Both understood now each country is a dependent entity of the other at least in terms of trade. The crisis bared how the decline of US consumption can have adverse effects to China’s mass production. Thus, the summit tackled the issue of economic growth balance which has for years gone to the favor of the Chinese. China has also committed to improve their food and consumer goods safety standards in light of the recent troubles Chinese manufacturers faced abroad with their products from milk to toys, all involved in cases of health hazards.

But what analysts are most interested in is how the two sides are going to address the current crisis that would benefit not only their economies but hope to stimulate the entire world economy back on track. The Americans are mulling for a stronger RMB, China’s currency, in order to make US goods more competitive in the Chinese market. However, their Chinese counterpart is inclined to depreciate their currency because they need to save their rapidly declining export industry, which according to Chinese Premier Hu Jintao has lost its competitive edge.

It’s obvious that the Chinese are facing massive pressure inside because of the rate manufacturing companies are closing shop all over the mainland. Many, however, dispute this notion as nothing but political rather than economic because it is not that the Chinese exports have lost competitiveness but it is the overall fall of American consumption. Since no one is buying their goods, it is just imperative that their exports are expected to fall and a depreciated RMB is not likely to make any difference.

Many believe that the Chinese are simply positioning themselves politically over the Americans since they know the US has not much leverage coming into these talks. They would rather deal more constructively with the next officials of the new Obama administration rather than push for something concrete with a lameduck Bush administration.