ASG Principal Amy Celico in Bloomberg Business on the Upcoming China and U.S. Discussions Over Cybersecurity

President Xi Jingping Looks for Show of Respect on U.S. Visit

By Dexter Roberts, Peter Robison, Nicole Gauette, and Mike Dorning

On his first state visit to the U.S., Chinese President Xi Jinping will have two goals: to reassure executives that China is still a good place to do business, and to secure for China the respect due a state equal in stature to the U.S.

Xi arrives in Seattle on Sept. 22 and then heads to Washington, D.C., on Sept. 24. In Seattle, he’ll give a major policy address at a dinner organized by various U.S.-China trade groups and local and state officials. The Chinese president will join a roundtable discussion hosted by former Treasury Secretary Henry Paulson. Xi will see Microsoft co-founder Bill Gates, Apple’s Tim Cook, and various top execs. Alibaba founder Jack Ma, Baidu President Zhang Ya-Qin, and founder Richard Liu will be in town. The president was invited to dine at Gates’s house, but he opted to attend a low-key reception for the Chinese community, according to one person familiar with the planning. Crammed into his stay will be a tour of a Boeing factory: The Chinese may announce some big orders.

“The Seattle visit is primarily intended to reassure American businesses increasingly skeptical about China’s treatment of foreign companies,” says Jeffrey Bader, a senior fellow at the Brookings Institution who advised Obama on Asia policy during his first term. Xi will repeat that message in D.C., where he will be playing to a tougher crowd. Tensions over cybersecurity, disputed territory in the South China Sea, and China’s arrests of rights activists have hurt the relationship. The U.S. government wants China to speed up its financial reforms so there’s no repeat of either this summer’s Chinese stock market crash or the poorly managed devaluation of the yuan—events that shook world markets. For its part, Beijing resents what it sees as U.S. efforts to slow China’s inevitable rise.

“The relationship is not great and has been getting worse,” says Orville Schell, the Arthur Ross director of the Center on U.S.-China Relations in New York. Zhu Feng, a professor of international relations at Nanjing University, agrees. “A lot of things have piled up, and the stakes have never been higher to deal with these accumulated concerns,” he says.

Xi will get an official welcome in Washington with the U.S. Army Old Guard Fife and Drum Corps performing on the South Lawn, a meeting with the president in the Oval Office, and a state dinner at the White House. Yet the administration appears far from ready to treat China as an equal. “What with the U.S. economy doing better, with the energy renaissance, there is a sense that China needs to recognize that America is not at all in an equal position with it, that the U.S. is in the superior position, and that China should take actions to mend the relationship,” says Douglas Paal, vice president for studies at the Carnegie Endowment for International Peace. “The Chinese are looking for validation of Xi Jinping as an important leader. But the American side is looking for very practical things,” he adds.

These include progress in curbing cybercrime, protecting intellectual-property rights, securing broader access to China’s markets for U.S. businesses, and reducing tensions in the South China Sea dispute, among others. “What’s been surprising to the Chinese government has been how specific the U.S. government has been about what they’d like to discuss and make progress on,” says Amy Celico, a China expert and former official at the U.S. Department of State who’s now a principal at the Albright Stonebridge Group, a consultant in Washington.

Concerns about cyber espionage emanating from China reached a new high after a breach of the U.S. Office of Personnel Management exposed the records of some 20 million current, former, and prospective federal employees. In August, U.S. officials privately told reporters that the government was preparing sanctions against Chinese companies and individuals who hack into corporate networks to steal commercial information. The sanctions would freeze the guilty companies’ or individuals’ financial assets and block business transactions with them. Cyber attacks from China “are not acceptable,” President Obama said on Sept. 11, speaking at Fort Meade in Maryland. Political analysts see Obama’s comments and the reports of possible sanctions as a warning to the Chinese government.

No one expects a breakthrough on the issue during Xi’s stay, despite meetings September 9-12 in Washington between Meng Jianzhu, a high-ranking member of the Communist Party and Xi’s special envoy, and an array of U.S. officials. “I predict that in 10 years, nothing will have been resolved with cybersecurity,” says Shen Dingli, Fudan University’s vice dean of its Institute of International Affairs. “We are nation-states, so we have to do espionage.”

Chances that a bilateral investment treaty to provide open access to each other’s markets will be signed during Xi’s visit look slim, says Kenneth Lieberthal, a senior fellow at the Brookings Institution. More likely, he says, the two sides will announce incremental progress, with Beijing further narrowing its “negative list,” which specifies which Chinese industries are closed to foreign business. “China and the U.S. will continue to be the two big drivers of global growth,” says John Frisbie, president of the U.S.-China Business Council. “The question is whether U.S. companies will be able to access that growth in China.”

Obama and Xi will probably tout progress on meeting joint climate change goals. Cooperation on nonproliferation in Iran and North Korea will be stressed, says Lieberthal. On a state visit, “everyone wants to get something really important done that shows that when the leaders get together, positive things happen,” he says. “But I don’t think this is one of those meetings.”

Link to full article here