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Announcing New US policies with China are Essential for US Economic Recovery

A White Paper for the Presidents of America and China used by President Hu Jintao's preparations for the November 17-18, 2009 meetings with President Obama has been posted for free download at It summarizes the new conceptual framework, grand strategy and agenda needed to create a profoundly better and fundamentally different relationship using a "New School of US-China Relations" created by the publication of eight books in English and Mandarin in the America China Partnership Book Series announced in Foreign Affairs, Sept/Oct 2009.

The new relationship is needed because the US’s financial and economic crises that triggered the global crisis are too big to be fixed by conventional US policies. There cannot be a sustainable “V,” “W,” “U,” or even “L” of American economic and unemployment recovery until President Obama announces his administration embraces new policies towards China that astonish and then restore global capital market and American consumer and business confidence. Today we are still in the early stages of what is a collapse (“X”) of confidence in the viability of the global financial system, economy, trade and many governments’, including the US’s, ability to govern.  

The enormous economic losses in the intensifying, multi-stage financial and economic crises simultaneously damaging all nations are already too large. What is worse, they are unquantifiable and therefore of an unmanageable magnitude. That must be recognized for a collapse to be prevented. For example, before Federal Reserve Chairman Bernanke and Treasury Secretary Paulson announced the American financial crisis on September 16, 2008 the annual aggregate GDP of all nations was about US 60 Trillion. At that time the US housing sector had a market value of US $ 594 Trillion, which dropped 23% or US $ 148.5 Trillion in the first year of the interacting financial, economic and unemployment crises. Over approximately 23% of American homes have mortgages larger than their market value and estimates suggest that will increase to 50%. American unemployment nationally is at 10%, and increasing. These initial elements of the crises are too large for the American economy to handle.

The crises are relentless also because US policymakers do not have a sustainable solution to either the financial and economic crises nor to the long-term nexus of what now must be acknowledged with hindsight were inadequate US economic and foreign policies. President Obama’s administration is currently continuing ineffective, and now profoundly dangerous conventional US policies. But President Obama knows that new policies are essential. In addressing the US economic crisis he declared on June 2, 2010, "What we can't do is go back -- now that we're starting to climb out of this hole that was dug for us, we can't go back to the very same policies that failed us in the last decade; the same policies that led us into that hole," the Washington Post reported. President Obama initially announced on May 29, 2009 that he was launching a “new era of partnership.”

A new era requires new policies. A leading US scholar, Daniel Drezner, commented in Newsweek on May 20, 2009: “Our current generation of leaders and thinkers are simply unprepared for the idea of other countries taking the lead in matters of the global economic order.” On January 7, 2010 a retired State Department official commented, "The United States is now dealing with a global superpower that unlike the Soviet Union is in a position to out-produce it, out-spend it and out-arm it over the next decade and we simply don't know what to do about it.” 

Chinese policymakers need to help US policymakers to step back from the abyss and look at the 21st century’s big picture. Even before the US’s unsustainable economic policies became self-evident,
Business Week estimated in 2004 that America’s percentages of global GDP of 28% would be 27% in 2025 and 26% in 2050 and that China’s would increase from 4% to 15% and then 28%. India’s would grow in similar magnitude. Even before the current crises America needed to align its economic growth with China’s. Because of the crises, China has become the major engine of global economic growth. 

The increased debt the US government has incurred to temporarily stimulate the US economy is not sustainably increasing employment or US business, consumer or investor confidence and the US’s debt cannot be repaid. The only thing that will restore confidence is a “massive jolt to the system” that Fareed Zakaria called for in Newsweek sixteen-months ago. To Chinese policymakers the obvious and compelling solutions are unthought-of or unthinkable to US policymakers. What is required to manage the US’s growing financial, economic, unemployment and government debt crises, balance US-China trade, manage the climate change crisis, repair failed and failing states, and establish a successful new era of partnership is to align US and China’s economic growth and national security. The US policymakers must encouraging Chinese imports from the US by not blocking Chinese exports to the US, open up to Chinese investment and acquisitions, and lift US restrictions on technology exports, recognize that there must never be a war with China, accept the legitimacy of the Chinese government and cease trying to interfere in China’s internal affairs. US policymakers need a new mindset, economic policies and military strategies towards China based on the collaboration of civilizations instead of a clash of civilizations.



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