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Obama Makes First China Tour as Economic Interdependence Grows

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When U.S. President Barack Obama arrives in China later this month, he'll head first to its booming commercial capital Shanghai. U.S.-Chinese economic ties are increasingly important to the two countries' overall relationship, so much so, that some believe Washington purposefully avoids raising contentious issues with China in an effort to curry favor with its leaders.

Most reliable customer

From shopping malls in the United States, stocked with Chinese-made goods, to busy Chinese factories where the goods are made, it's evident the two countries rely heavily on each other.

And despite the global financial crisis, the United States remains China's most reliable customer, and Beijing, the world's biggest buyer of U.S. government debt.

Nicholas Lardy, an economist and senior fellow at the Washington-based Peterson Institute, says China's unwillingness to adopt derivative loans and other high-risk financial products helped to shield it from the impact of the world economic downturn.

It also dramatically changed its relationship with the United States.

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"Now of course the Chinese are beginning to lecture us, about how we need to balance our budget, and preserve the value of the dollar and avoid inflation... So, in a sense the shoe is really on the other foot," he said.

Key player

This year, China's economy is expected to grow by more than eight percent, and its overall resilience to the global financial crisis, has brought with it increasing confidence in the international arena.

Beijing is increasingly seen as a key player in dealing with global issues, be it helping to resurrect the global economy or combating climate change. With such growing clout, some believe the Obama administration has gone out of its way to avoid offending Beijing.

Critics note that when the Dalai Lama recently visited the United States, President Obama delayed his meeting with the Nobel peace laureate until after his upcoming trip to China. They also say Washington has avoided the tough talk of previous administrations about the value of China's currency.

"I think that they are taking a calculated risk and it is one that I would not advocate myself," said Randy Schriver, who heads the research group Project 2049, which focuses on issues in the Asian region and the rise of China.

US approach may not pay off

He says the Obama administration's approach may not ultimately pay off.

"It's a presumption that these are obstacles to cooperation, which in fact I think China has enough of their own interests and equities in - for example the economic situation - to cooperate irrespective of what we do on some of these other issues," he said.

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The value of the Chinese currency has long been a divisive issue, with China frequently accused of undervaluing its yuan to make its exports cheaper.

On the campaign trail, Mr. Obama accused China of currency manipulation. After stepping into office the Treasury Department has avoided harsher accusations and only expressed "serious concerns" about the "flexibility" of China's currency.

Yet Nicholas Szechenyi of the Center for Strategic and International Studies says Washington's softer approach is not all soft.

"It certainly seems, that the administration is trying to address issues of human rights a little less, to work more on economic issues, and other global issues such as climate change," he said. "On the other hand, you do have this strong push on tires and perhaps even steel on the trade front. So I think it is a question of balance. And what you choose to engage the Chinese on," he said.

Trade war?

In September, Washington slapped tariffs on tire imports from China, and just last week, imposed new duties on the import of a key Chinese steel product to the United States. China retaliated with a tariff of its own, and has also launched probes of U.S. imports of chicken and auto parts.

Some warn the measures could trigger a trade war. Others say they represent more normal trade relations.

Either way, it raises the question of which country needs the other more?

Douglas Spelman of the Woodrow Wilson International Center for Scholars says both need each other.

"You know frankly, 10 years ago, I would have said that China needed us more than we needed them. I think now that it is a genuinely interdependent relationship, certainly on the economic front," he said.

Still, Mr. Obama's critics say his trip to China will be a test of whether the U.S and China can develop better ties, and whether American acquiescence on some issues will produce concrete results on others.