The Future Holds Deeper U.S.-China Ties

Robert Hsu, July 28, 2009

Ever since the global financial crisis started to unwind last year, I've stressed the importance of global cooperation. Back in early November, I even stated to my China Strategy subscribers that in order to boost economic growth in the U.S., American policymakers needed to form close relationships with China and other cash-rich nations. Thankfully, President Obama understands the need for the U.S. to work more closely with China.

Just this week, the United States and China are holding two days worth of bilateral talks in Washington D.C. The meeting is widely regarded as a sign of the steady increase in U.S.-China relations. And when opening the talks, President Obama said, "The relationship between the United States and China will shape the 21st century."

Primarily, the talks have been focused on a long list of priorities -- economic recovery being the primary importance. Climate change, clean-energy technology, counterterrorism, nuclear nonproliferation and humanitarian disasters are also on the list.

While neither country expects the other to agree on every issue, each says that the meetings have been constructive, even if no solutions have been reached in some of the touchier issues, such as climate change, currency exchange rates and human rights. Both do agree that the global economy is on its way to recovery, but stress that it's important to continue to apply stimulus measures and withdraw them carefully when the time is right.

What's interesting is that both sides are providing pointers on how to recover from the global financial crisis and economic downturn. China is urging the U.S. to cut its budget deficit and be mindful of their investments here. The United States, on the other hand, is advising China to shift towards more domestic-led growth, rather than its current reliance on exports.

What's great is that China is already doing this! When the Chinese government started to struggle late last year, the Chinese government implemented its $586 billion stimulus package, which focused on stimulating domestic consumption and investment. Now, domestic consumption has taken over the number-one slot as the leading driver of economic growth in China.

This is one of the main reasons why China is the first economy to recover from the global crisis, posting a whopping 7.9% GDP growth figure in the second quarter.

Overall, I still think it's vital for economies to work closely together, as it would ultimately lead to stronger economies, and it will likely end the financial crisis. China is obviously the most viable choice for renewed cooperation with struggling economies -- it's still flush with cash and posting robust economic growth.

To learn more about the importance of global cooperation and to benefit from China's economic strength, join China Strategy today!

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