Until today, China wonks have had little sense of how the new Obama administration will handle relations with Beijing. Today's written testimony from Treasury Secretary-designate Timothy Geithner hinted at a new, tougher tone.
"President Obama - backed by the conclusions of a broad range of economists - believes that China is manipulating its currency," Geithner wrote, adding that Obama would "use aggressively all the diplomatic avenues open to him to seek change in China's currency practices."
Exactly what that's going to mean for policy is unclear. Geithner did not say whether the Treasury would formally name China as an exchange rate manipulator in its annual currency report. "The question is how and when to broach the subject in order to do more good than harm," he said.
Former President Bush came into office calling China a "strategic competitor," a jab at the Clinton years when China and the United States sought to forge a "strategic partnership." But after 9/11 the Washington-Beijing relationship improved dramatically. Indeed, it's arguable that one of Bush's few big foreign policy successes was how he handled relations with Beijing. (See this fascinating talk by Bush's National Security Council Asia director Dennis Wilder.) While Bush's treasury secretary, Henry Paulson, never accused China of manipulating its currency, he did pressure China to allow its yuan to appreciate against the U.S. dollar, which it did -- somewhat.
Obama's inauguration was well-covered in the Chinese media. Of course, the censors were busy; they cut his reference to the fight against Communism and being on "the wrong side of history." But in general it was accurate, and even playful.
One cartoon-story showed Obama, dressed up as Superman, asking his "Chinese girlfriend" for "yet more money." (China is the largest foreign holder of U.S. Treasuries after Japan.) She replies: "The Chinese girlfriend may take a more prudent attitude towards lending money to O-Superman." Somebody should tell that to Geithner.