Obama was outwitted by Beijing

China’s main trade partners are deeply worried about the consequences of this continuing imbalance.

They urge China’s government to reduce its export subsidies and to allow the yuan to appreciate, expecting such measures to reduce their trade deficits, help their economies recover, and create more jobs. On this front, however, China’s leaders made no compromise with Obama.

So, on balance, Obama’s first trip to China achieved relatively little. Moreover, what he did achieve looks superficial, while what he gave up seems substantial.

Of course, this is partly because of the changes in the relative economic and political power of the US and China over the past decade, and especially during the current global economic crisis. However, the sizable deficit on the balance sheet of Obama’s China trip could have been much lower if Obama had paid more attention to substance. It seems that Hu is more skillful than the polished Obama at maximizing his gains at little cost.

Zhang Wei is a lecturer in Chinese economy at Cambridge University.

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