By Sam Hocking -

On Sunday, President Barack Obama paid his first visit to the world’s most populous nation, home to one in every five human beings. While in China, the president visited cultural landmarks, such as the Great Wall and the Forbidden City, albeit exposed to a sanitized version of these important sites, one absent their normal bustling foot traffic.

Obama exhibited a cultural sensitivity and understanding of China uncharacteristic of American executives. In this vein, he also acted with greater flexibility on American values, pressing less for concessions that former presidents have been eager to attain. While Bush heckled the Middle Kingdom about the artificial devaluation of its currency and Clinton harped on the human rights abuses perpetrated by the Communist regime, Obama appeared less intent on asserting an American agenda and more interested in setting a modest tone for relations between the two countries.

In his summit with China’s paramount leader, Hu Jintao, both men conceded that the two powers needed to “deepen bilateral strategic trust” and “take concrete actions to steadily build a partnership.” However few details materialized. China stood firm on its insistence that environmental reforms must not come at the expense of economic advancement and offered no concrete support for anti-proliferation efforts. In an attempt to appease a testy China, the American delegation shied away from sensitive topics such as territorial issues surrounding Xinjiang, Tibet, or Taiwan. Language regarding these issues was confined to phrases such as respecting “territorial integrity” and sovereignty, code words for permitting China to handle internal disputes as it sees fit. China covets such acknowledgements, conscious of the potential objections its treatment of restive regions could arouse in the international community.

Despite such political sensitivity, the Chinese public appeared staid on Obama’s arrival, a stark contrast to the ebullience of many European populations and even the Japanese. With rising nationalist sentiment at home, fueled in part by the ambitious agenda of those in power, there was no outpouring of affection as China welcomed the president. At a town hall in Shanghai, stocked with party affiliated youths, students had the opportunity to ask questions of the president. However, the discussion was mild and heavily censored by the Chinese media.

Although he appeared ready to meet many of China’s demands on the policy front, Obama achieved little for America in terms of concrete policy objectives. Unable to illicit commitments to fair trade policy, greater respect for the environment or for human rights, the specifics of the visit come as a disappointment to many who hoped for a new era of Sino-US relations.

The Obama administration’s approach suggests it is prudent for the US to kowtow to China, given their status as our biggest creditor. Yet, media coverage has thoroughly criticized Obama for his unwillingness to broach controversial issues. His apparent reluctance stems from the commonly accepted assertion that America’s economic performance depends on China’s generous financing of US debt. The reality is more complex.

Although China’s purchasing of American treasury bills has kept yields on bonds low, and debt therefore affordable for the US government, this also allows China to exchange dollars for renminbi, the Chinese currency. These transactions keep China’s foreign reserves large and its currency inflated relative to the dollar, allowing China to price its imports much more competitively than if its currency were denominated at its true, much higher value.

Economists agree that this imbalance has many negative consequences. Although it allows the US to borrow more, America simultaneously accrues a trade deficit of increasing magnitude. Likewise, China robs its competing developing nations of potential exports and props up its economy with a strategy dependent on foreign consumers. Although such an arrangement is unsustainable in the long run, neither nation has addressed it.

On multiple occasions, China and the US have both demonstrated resistance to dialogue over such issues, although China has expressed concern over a growing government deficit and policies that could contribute to more inflationary bubbles in the long run. Exemplary of each nation’s reticence on economic topics, when Obama recently approved a tariff on Chinese tires, much longed for by automotive unions, China retaliated with threats to restrict American poultry and steel imports. Greater communication over economic policy might avert such disputes.

Obama’s visit to China was eventful, but potentially inconsequential. China showed that it can sit at the negotiating table with the US as an equal partner, but not necessarily a cooperative one. Prominent Obama aides such as David Axelrod have stated that with this visit, the president only intended to set the stage for a positive long term relationship. With a summit in Copenhagen to discuss climate change shortly following Obama’s departure, the consequences of the visit will be immediate.