Andrew Quinn: Risky business as US talks tough on China but is anyone in Beijing really listening?

PRESIDENT Barack Obama’s sharp words on China may burnish a tough image as the United States heads into the 2012 election, but they carry risks as both Washington and Beijing face a tricky period of political transition.

Mr Obama used the Asia-Pacific summit in Hawaii to pile pressure on China, declaring it must play by global trade rules and act like a “grown up” – words bound to sting in Beijing, where the millennial sweep of Chinese history is a major point of cultural pride.

The president’s remarks followed a series of strong US pronouncements on China, with secretary of state Hillary Clinton and other top officials laying out points of contention, ranging from Beijing’s currency and intellectual property policies to its human rights record.

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But political analysts said the Obama administration had few tools to bring China quickly to heel, particularly at a moment when the US economy is fragile, the global economic outlook remains bleak and Beijing is the US’s No 1 foreign creditor and third largest export market.

While US officials hope to use existing structures such as the World Trade Organisation to hit back against what they see as unfair trading practices, such as Chinese government subsidies to state-owned enterprises, progress can be slow.

Unilateral measures such as punitive sanctions in response to China’s currency policy – which Washington has long said keeps the yuan artificially undervalued against the dollar – could bring Chinese retaliation and spur fears of a trade war.

That has not stopped leading Republican presidential candidate Mitt Romney from saying that, if elected next year, he would designate Beijing a currency manipulator and threaten trade sanctions, echoing US public concern over China’s economic and military growth.

White House officials say Mr Obama told Chinese president Hu Jintao that American business and American people were “impatient and frustrated” with China’s economic policies, but Beijing has shown no public sign of backing down.

A senior Chinese diplomat at the Asia Pacific Economic Co-operation summit in Hawaii said Beijing would abide by rules made collectively but would not be dictated to when it came to international trade rules.

Political analysts said China’s leaders, preparing to install vice-president Xi Jinping as Mr Hu’s successor in the second half of 2012, are under their own domestic political pressure and unlikely to cave in to US demands.

Mr Obama’s itinerary this week, which takes him to Australia and then to the East Asia Summit in Bali, will give him more opportunities to make common cause with other Asia-Pacific nations unnerved by China’s rising profile.

He is likely to stress the importance of stronger regional trade and security ties, but some analysts said his visit was aimed at making a longer-term point about US policy rather than scoring individual points against China.