China’s future president Xi Jinping met with President Obama this week, with the goal of establishing mutual respect, if not mutual trust. That may be difficult, as there is no shortage of contentious issues between the two sides: including Tibet, North Korea, Iran, Syria, the South China Sea, and a range of thorny economic issues, particularly contentious during this election cycle. The trade imbalance and currency questions plague the relationship, and President Obama and Republican candidates alike have been swift in their condemnation of Chinese trade policies.
Though tensions certainly exist at the top levels of leadership, there is considerable opportunity to create a subnational relationship, or an alternate relationship track, that is focused on ties between Chinese and American cities and province/state governments as well as ties between Chinese and American businesses.
Xi has clearly identified this opportunity: after his stop in DC, Xi visits Los Angeles, California and Muscatine, Iowa, where he was hosted on an exchange trip in 1985. In California, Xi meets with Mayor Antonio Villaraigosa and attend an economic and trade forum.
Businesses and local governments in the United States are less worried about the larger issues that plague the US-China relationship, but instead are more anxious to secure Chinese investment and cooperation. For example, Mayor Villaraigosa is expected to discuss Chinese investment in California’s high speed railway.
Expanded exchanges between American and Chinese businesses, as well as lower levels of government, would have significant positive impacts on both nations.
China’s private businesses are currently suffering from the impact of huge state-owned enterprises (SOEs) that are sucking up financial and government resources, crowding out private enterprises, and creating economic imbalances and inefficiencies. This trend could be slowed through the promotion of private business through joint US-China cooperation. Additionally, these types of exchanges could help China on its path to modernization by promoting the development of more business-friendly policies and reforms.
Additionally, exchanges at levels other than at the highest would help to create a culture of communication and create ties that could pressure American lawmakers to tone down anti-Chinese rhetoric.
Xi should be more than open to these overtures, based on his market-friendly background. He is a noted supporter of marketization due to his time as a provincial leader in Zhejiang, Fujian, and Shanghai, all known for their strong private sectors. Shanghai has often been used as a laboratory for new economic reforms, including RMB convertibility, and Zhejiang is distinctive for its focus on small and medium-sized businesses. In Zhejiang, he is said to have simplified registration processes for new companies, expanded the ability of private companies to obtain loans, and improved protections on private property.
Xi can expect a brief honeymoon period when he takes office that may allow him to push for increased marketization. A focus on local government and business exchanges and cooperation could generate political capital at home for Mr. Xi, especially as he faces powerful interest groups connected with SOE monopolies in China. For the United States, subnational and business cooperation could help resolve some of our urgent economic problems.
Cheng Li is director of research and a senior fellow at the John L. Thornton China Center in the Foreign Policy Program at the Brookings Institution in Washington, D.C.
Eve Cary is a researcher at the John L. Thornton China Center at the Brookings Institution.