The good news is that the Chinese have decided to try to resolve the dispute between our two countries over their tire exports at the World Trade Organization, meaning "the disagreement may be containable," as the Journal puts it today. (For those just tuning in, the administration announced Friday it was imposing a tariff of up to 35 percent on imports of Chinese tires after the U.S. International Trade Commission found that the tires "disrupted" the domestic market.)
The bad news is that the financial relationship between our countries has created a stubborn underlying tension--driven largely by domestic politics--which the tire back-and-forth has highlighted. The Times Hong Kong correspondent, Keith Bradsher, got at this nicely in his piece yesterday:
China had initially issued a fairly formulaic criticism of the tire dispute Saturday. But rising nationalism in China is making it harder for Chinese officials to gloss over American criticism. ...
The Chinese government sometimes organizes blog postings to defend its own policies. But some postings on the tire decision have been implicitly critical of the Chinese government, making it unlikely that they are part of an orchestrated effort.
“Why did our government purchase so much U.S. government debt?” said one posting signed by a “Group of Angry Youths.” It continued, “We should get rid of all such U.S. investments.”
It seems pretty clear that Beijing wanted to avoid escalating over the tires but felt it had to take a harder line in response to the domestic reaction. Which gives me a chance to plug my piece from this week's print issue, which is partly about the deep frustration among ordinary Chinese with the enormous dollar reserves their country has accumulated, and how this looms over the entire U.S.-China relationship. Here's a brief taste:
Perhaps more to the point, the Chinese leadership is highly sensitive to such pressure. "Americans make mistakes when they think that politics don't exist in China, that these guys don't have to pay attention to what the Chinese people are saying," says one Treasury official. "Their room to maneuver is constrained by public opinion." Outside the obvious ways, bureaucratic politics in China isn't so different from its American counterpart. Shih explains that rivals of senior government officials--like prime minister Wen Jiabao, or vice premier Wang Qishan--will often point to the unpopularity of certain economic policies to weaken their standing internally.
Also, for what it's worth, I spent some time talking to Treasury Secretary Tim Geithner for the piece, and got him to reflect a bit on his own experiences with China, dating back to the summers he spent there in college:
Still, the otherworldly weirdness of the experience was sometimes inescapable. On most days, the water in the dorm Rudelson and Geithner shared was ice cold. But, about once a week, the hot water would flow, as if by divine intervention. The first time it happened, the steam from the shower made the bathroom's paint transparent, exposing red Chinese characters that read: "Overthrow the American imperialists and their running dogs." "It was Cultural Revolution rhetoric," Geithner says with a laugh. "The running dog stuff--that stuck."
You can see how it might!