Posted by: Bruce Einhorn on November 24, 2009
A week after President Obama’s trip to China, relations between the two countries have taken a new hit. Today’s China Daily, the government’s official English-language newspaper, has a story filled with quotes slamming a report by a commission appointed by Congress that, among other things, accuses China of conducting cyber spying in the U.S. A spokesman from China’s foreign ministry denounced the U.S.-China Economic and Security Review Commission (USCC) as “this so-called commission.” The spokesman went on to say “this report disregards the facts, is full of bias and has ulterior motives,” and the newspaper cited so-called “commentators” (see, two can play at that game!) alleging the report is just a response to falling approval ratings for Obama.
It’s easy to see why China’s government is upset. According to a statement on the USCC website, the Report lists a series of Chinese sins. “Despite evidence that global economic imbalances helped fuel the financial crisis, China persists in maintaining a wide variety of industrial policies to support an export and investment-led growth model. China continues to accumulate record sums of foreign currency reserves as a result of large trade surpluses. These surpluses result, in part, from China’s extensive web of subsidies to favored industries, which include tax rebates, low interest loans from state-owned banks, discounts on land, electricity and fuel, and a currency that is pegged to the U.S. dollar at an artificially low rate.” The USCC goes on to describe “stepped up efforts by China to penetrate U.S. computer networks, particularly those of the U.S. government and contractors, and to obtain information by increasingly sophisticated espionage methods.”
To be fair, the Chinese government does have a point: The USCC is biased. Under both Democratic and Republican presidents, the USCC has tended to take a harder line on China than the administration. That’s natural, since congressmen and women from both sides of the aisle typically feel freer to take aim at Beijing than officials from State, Treasury, Defense or the White House. The 2000 law that created the USCC calls for it, among other things, to focus on issues such as proliferation, WTO compliance and “the implications of restrictions on speech and access to information” in China.
Still, the USCC doesn’t have any actual authority, and Beijing is probably counting on Nancy Pelosi and other Congressional leaders to file the report away somewhere and ignore it. That Chinese strategy seems to have worked fine in the past: This is the seventh report by the USCC, after all. With the unemployment rate above 10% and an election year approaching, though, the latest report by this “commission” might prove to have legs. There’s a lot of anger in America and voters might feel inclined to support candidates who want Washington to be more combative toward Beijing. China’s government should keep that in mind in the weeks ahead as it follows up on Obama’s visit by deciding whether or not to let the currency appreciate. Movement on the yuan would give Obama and his supporters on the Hill a chance to argue that the president’s less confrontational approach to China makes more sense for the U.S.