Wen Jiabao Worries Aloud – A Negotiator’s Perspective

Last week Premier Wen Jiabao confused and alarmed many people by stating that China policymakers have reason to be concerned about the safety of Chinese assets already held in the US. “We’ve lent a huge amount of capital to the United States, and of course we’re concerned about the security of our assets. And to speak truthfully, I am a little bit worried,” said Wen at a press conference after the close of the annual parliament session. (http://www.chinadaily.com.cn/china/2009-03/14/content_7578931.htm)

Let’s look at Wen Jiabao’s recent statements from a negotiating perspective. The bottom line may well be that Wen doesn’t plan on being saddled with the cost of a US recovery. Beijing may even plan on pulling some Chinese government money out of US treasuries if China needs it at home – or if the situation in the US looks like it will deteriorate further. There’s a good chance that he is just laying the groundwork for a Chinese policy response at the upcoming G20 meeting in London next month (April 2, 2009)

From a negotiating perspective, he’s doing some things right – but making a couple of key blunders

What is he doing right?

    Setting the agenda pre-emptive & proactively.
    The global recession has taken everyone by surprise with its intensity and duration. But the Chinese perspective is bit different from that of the US. Washington is taking the view that “we’re all in this together and we’ll all have to make sacrifices”. Wen Jiabao clearly and succinctly stated the Chinese position a few months ago (well before the first G20 meeting) when he said, “What we can do now is to maintain China’s strong, stable and relatively fast growth and avoid big fluctuations. That is the biggest contribution we can make to the world economy under the current circumstances,” ( http://www.reuters.com/article/worldNews/idUSTRE48Q1O220080927 )

    As often happens when Americans and Chinese negotiate, the US side assumes that any differences in position result from Chinese misunderstanding or misapprehension of the facts. If we just speak louder and slower, eventually the Chinese will ‘get it’. Sec of State Clinton has introduced global cooperation approach as a trial balloon on her recent visit to Beijing, and the business media has been all too happy to treat this as the new orthodoxy of economic recovery. “They are the G-2,” says Fred Bergsten, director of the Peterson Institute for International Economics in Washington. “In particular,” he said, “they’ve been growing more rapidly than anyone else. So it really does fall on the U.S. and China to lead the global recovery.” ( http://www.npr.org/templates/story/story.php?storyId=101888053 )

    I’m not sure that China has much interest in filling this role – and Wen’s recent statements may be a subtle attempt at forewarning key G20 decision-makers of that possibility. The London G20 meet may give us all a clearer view of China’s willingness to sacrifice domestic interests for the sake of the global economy – or we may have to peel the onion of vague policy statements for the foreseeable future. Either way, it would be presumptuous to assume that China will accede to a US blueprint for global action without some push-back.

    Talking the bad news to death.
    If China does plan on charting its own recovery course and letting the western nations do the heavy lifting in their own backyard, it will inevitably lead to conflict and recrimination. A tried & true tactic among Chinese policy-makers is to float multiple trial balloons to desensitize stakeholders to the possibility of bad news. If Wen and other Beijing spokesman continue to allow phrases like “worried about US assets” creep into their public statements, it may foreshadow a shift in policy. They may invest at a slower rate – or they may plan on repatriating Chinese assets to deal with internal Chinese problems.

    Controlling expectation.
    Beijing may merely be talking down expectations ahead of the G20 meeting in London. The goals are lofty and the price tag huge – but China hasn’t necessarily bought in yet. I’m sure that Beijing is proud of its new position as a global leader – but China’s senior policymakers are doubtlessly sensitive to the fact that they are being invited to the party just as the check is coming due. Older China-watchers will remember the debates surrounding China’s acceptance into the WTO – with all the human rights conditions and yearly renewal of “Most Favored Nation” status that accompanied it. Americans are happy enough to forget all about it – but it was only 9 years ago. That’s a blink of the eye in Beijing time.

    Managing internal debate.
    Premier Wen may simply be managing internal debate at home. There is certainly a possibility that Beijing plans on playing a major role in the global economic recovery. However gratifying US and European officials will find that news, domestic critics in Beijing will certainly object to helping foreigners while Chinese citizens are unemployed – and unhappy. Wen’s trial balloon may very well have been meant for domestic use.

What is he doing wrong?

Chinese and Western relations have certainly come a long way in a short time. We can all be justifiably proud at the advances both sides have made in Win-Win negotiating and our successes at enlarging the pie of economic opportunity. BUT…our hard won victories have been slowed by constant cultural misunderstandings, tactical blunders and subtle disconnects that have scuttled more than a few deals. We at ChineseNegotiation.com see our main mission as helping western negotiators avoid gaffes and tactical missteps – but the Chinese definitely make their share of blunders as well. Premier Wen may have made a few in his “worried about US assets” speech.

    Cultural disconnect — “What, you worry?!?
    This is a Chinese message that has merely been translated into English. Its classic lose-lose negotiating that gives up ground without gaining much in return in the name of ‘preserving harmony’. The Premier has made a mistake common to Asian negotiators – arguing from strength by using the language of weakness. China is no longer the scrappy young revolutionary with empty pockets but a heart burning with ambition for equality. China has been recognized as a world leader and an economic giant. If Wen is making a policy statement, then he has to speak to a global audience. Global leaders don’t use passive-aggressive double-talk to wriggle out of things.

    Squandering an opportunity and getting nothing in return.
    China shouldn’t take a globalist approach off the table so quickly – because it will be difficult to put it back on the table later. Right now China is scoring points for stability and speedy action at home. Beijing can capitalize on this by appearing strong, dependable and forward-looking – at least while it can do so for little or no cost. If Beijing does end up deciding to allow the world to fend for itself while China takes care of China, Wen’s statements will be remembered for two things – China acted out of fear (even if it was an understandable fear that the US couldn’t keep its fiscal house in order) and that China didn’t step up when it could. 150 years of righteous indignation about colonialism and hegemony suddenly get eclipsed by a modern image of “the China that can’t be counted on when the chips are down”. Fear talk doesn’t play well in the West, and Premier Wen should couch his reservations in language that average Americans find less distasteful and insulting.

    Conflicting goal systems
    China wants to be respected globally – but doesn’t want to get sucked in to the worldwide sinkhole of toxic assets. Understandable. But Beijing runs the risk of looking weak and undermining China’s position of regional/world leadership. Wen’s speech sets China up for a new worst-case scenario. The last thing China needs right now is for America to look like the strong savior in Asia and around the world if Obama pulls this recovery off while China takes care of China behind a wall of trade-surplus cash. Bush lowered the bar for world leaders with a tendency towards ‘shoot from the lip buffoonery’ – and gave Beijing leaders the opportunity to catapult to world prominence and respect on an empty stage. If Obama ends up looking cool, smart AND successful while China takes care of China, then Beijing leaders run the risk of looking like 2nd raters. This will be especially severe if China is still floundering as the US recovers. There are economic scenarios where China is the last man standing – but plenty of possible, plausible futures where the US is the first to get back into the game.

    Counting out a potential competitor before he’s dead
    Maybe I’m being a little too Brooklyn here, but you never kick a guy when he’s down unless you’re sure he isn’t ever going to get up again. Wen’s “worry” statement may be just a blip on the screen that will be quickly forgotten, but if it does signal a significant Chinese policy about concerted global action then he may regret his choice of words. If and when the US powers back and leads the world recovery, China can be portrayed as ‘not ready for prime time’ just as it needs the status and power. The US, even after 8 disastrous Bush-Cheney years, is stepping up and filling the role of global leader. Europe is fractious, Japan is looking like a nobody, and Russia is acting like a punk. This could be China’s moment to assert leadership along with the US. China isn’t the poor man of Asia struggling against heartless capitalist giants anymore. Stability and strength mean having courage and resolve. If China does end up throwing the US under the bus, it had best be prepared for a resurgent America to exert more influence in Asia and around the world.

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