At US-China summit, trust is the issue

When President Obama and Chinese President Xi Jinping sit down in the California desert for a rare working summit meeting this weekend, they are not likely to spend much time talking about ham. But that will be on the minds of tens of thousands of American workers who may soon have a new Chinese boss.

Residents of Smithfield, Va. – a charming river town in rural southern Virginia  – do not yet know what to make of the Chinese buy-out of Smithfield Foods, the town's largest employer and the biggest pork producer in the United States. 

Some shrug off the multi-billion dollar takeover of Smithfield by China’s Shuanghui International – the largest purchase so far of an American company by Chinese investors – as business as usual in a time of globalization. Others see the proposed deal as threatening the security of America’s food supply chain and as a betrayal of a historic Virginia brand that proudly traces its roots to the earliest English settlers on the nearby James River four centuries ago. The buy-out will more than double the number of Americans working for Chinese companies on US soil.

This foreign acquisition of this Fortune 500 company represents a new phase in US-China economic ties. Chinese investment dollars are beginning to flow more strongly after years of controversy and uncertainty. With $3.4 trillion in China’s foreign exchange reserves looking for a landing spot, more such large corporate bids by Chinese investors are likely to follow.

Yet there is too little strategic trust between the two governments and the world’s two largest single-country economies to welcome such deeper economic integration without strong reservations. Hence the urgency of this weekend’s summit at a luxury ranch in southern California between Mr. Obama and Mr. Xi.

The leaders face a crowded agenda ranging from cybersecurity and trade imbalances to North Korea’s nuclear ambitions, maritime conflicts in East Asia, and China’s ongoing human rights abuses. White House officials say no pre-determined results are expected as they talk through the issues and explore what China’s new leader means in calling for a “new type of great power relationship” with the US.

For the Obama administration, the meetings have a clear but not exclusively domestic relevance for American jobs and the nation’s fragile economic recovery. Yet even in commercial relations where the mutual benefits are obvious, there are stubborn gaps in fair treatment, reciprocity, and consistent policies that chip away at mutual trust.

For example, near the top of the American agenda is a volatile issue barely mentioned two years ago when Xi’s predecessor, Hu Jintao, made a state visit to Washington: the massive cybertheft of commercial and military technology that a recent presidential commission estimated has been worth hundreds of billions of dollars over the past 10 years. The commission estimated that the cyber-intrusions continue to drain $300 billion annually from the US economy.

Despite the difficulties in pinpointing their origins, the evidence of Chinese culpability appears so convincing that Beijing has little plausible deniability. Even the most China-friendly observers say the Chinese behavior is profoundly destabilizing to foreign commercial relations. NBC News reported this week that Chinese hackers even penetrated the computer systems of both US presidential candidates in 2008, spying on their policy positions and campaign activities.  

While the two sides have recently agreed to hold regular talks on cybersecurity beginning in July, assurances at the highest level of more responsible conduct are needed to reign in the criminal behavior and erosion of trust that stifles commercial and political ties. Xi is reportedly ready for that, and the world awaits his words – and deeds.

Huge trade barriers continue to frustrate the Obama administration as it seeks to export more to Asia, especially China. US imports from China have exceeded exports at a ratio of nearly 4 to 1 since the beginning of Obama’s presidency.

Interestingly, China’s currency policy is no longer so alarming. China is trying to position its currency as freely convertible in international markets, and Beiing has resumed appreciating the yuan against the dollar, easing allegations of unfair manipulation.

More difficult topics include the global relationship Xi expects with the US during the next decade of his presidential term as he seeks “the great rejuvenation of the Chinese nation.” These topics include more aggressive political and security moves in East Asia that have shaken American allies and friends.

North Korea’s belligerence under its inexperienced young dictator Kim Jong-un may have softened in recent weeks, as Beijing rebuked its ally and prepares to host the South Korean president on a state visit later this month. But Pyongyang’s nuclear weapons and missile programs remain in place and threaten much of the Western Pacific, frustrating diplomatic efforts to de-nuclearize the Korean Peninsula.

Beijing’s pressure on North Korea to return to the six-party talks is not an adequate response. After a decade of little progress, Washington has lost faith in that process, and the issue needs discussion and fresh approaches that do not rely so heavily on China.

Beijing’s own bullying of its neighbors in the South China Sea and East China Sea over maritime territories, though on a smaller scale, signal that China, too, is ready to disrupt the peace with its nationalistic displays of new military capabilities.

Two months ago, Chinese maritime forces took control of islands within the exclusive economic zone of the Philippines, a US ally, and they routinely provoke Vietnam and Japan with assertions of control over other disputed islands. And China asserts its claim to democratic Taiwan with a massive deployment of missiles, fighter jets, and naval forces across the Taiwan Strait. The Chinese military continues to grow this threat to regional stability, regardless of improved commercial and civil relations between with two economies.

Inside China, the human rights situation has sharply deteriorated, especially across the Tibetan plateau where Tibetans continue to burn themselves to death in grisly protests against Chinese denial of their constitutional right to autonomy and to cultural and religious freedom. A powerful new documentary released this week, “Fire in the Land of Snow, Self-Immolations in Tibet,” offers a grim look at Chinese repression and the tragic spike in Tibetan protests, especially since 2009.

China’s preening nationalism and great-power ambitions have aspects that are deeply worrying. Yet global security concerns and unprecedented international commerce in goods and services are keeping Washington and Beijing fitfully engaged in ways that still signal hope for significant cooperation and collaboration.

If the residents of Smithfield, Va., and workers for the town’s namesake pork company across several dozen states are conflicted in their views of a deceptively mundane corporate takeover, they are only the latest in a growing number of deeply conflicted observers. Relations with China are suddenly becoming more local, more personal, and more fraught with questions for nearly everyone.

Discovering whether Presidents Obama and Xi can ease these anxieties will require more than personal chemistry. Trust and trustworthiness across the broad landscape of private and public institutions need building on a vast collective level.

Julian Baum is a journalist formerly based in both Taipei and Beijing.