US Treasury Secretary Timothy Geithner flew to Beijing in an Asian tour to obtain cooperation on boosting economic recovery and foster support for sanctions against Iran, but received no specific assurances from Chinese officials on his request that China reduce its oil imports from Iran, although China’s leaders appeared more responsive to US attempts to block Iranian access to international finance through Chinese banks.
China, who is Iran's top oil customer, made it clear that whatever the commercial or political calculations driving ups and downs in its crude orders from Iran, it rejects in principle unilateral US sanctions. Chinese officials have been reluctant to link economic ties with Iran to the nuclear issue, saying publicly that the two matters should be kept separate. Geithner however did receive pledges of continued cooperation on broader global economic issues, without an immediate answer on the request to reduce Iranian oil imports.
Beijing on its part called on Iran to cooperate with the IAEA on Wednesday during Geithner’s visit. However, it also defended China’s oil trade with Iran, saying the Asian giant’s energy needs were “reasonable” and should not be linked to the nuclear issue. On the other hand, US officials appeared to be making more progress in convincing China to curtail its financial institutions from dealing with Iranian banks.
The official Xinhua news agency also quoted Chinese leaders as lauding Geithner’s China visit as “significant for the stability and development of China-US economic relations and the development of bilateral relations in 2012”. Premier Wen Jiabao said during the meeting that he is fully aware of the significance of this visit by Geithner as a special envoy of President Barack Obama. Wen said China and the US should develop a relationship of mutual respect, equality and mutual benefits.
China's Premier Wen also indicated to Geithner that China wants stable ties with Washington, despite friction over Iran and other issues, saying that “dialogue works better than confrontation and cooperation works better than containment”.
China also announced that Premier Wen Jiabao will travel to the Middle East this coming weekend, with some analysts postulating that Chinese leaders may be looking for alternative oil suppliers from the region. China also reduced monthly purchases of Iranian oil in December and January, but analysts say this is mainly due to a price dispute.
When it came to global economic issues, Geithner and the Chinese leaders found more common ground on dealing with the euro zone sovereign debt crisis, reaching broad consensus that European nations need to show a more forceful response in building a firewall around the most troubled countries.
Both the US and China, while largely bystanders to the euro zone crisis, have major stakes in making sure Europe resolves its debt crisis and does not slip further into recession. The nascent economic recovery in the US could be severely affected by a new downturn in Europe, and China has already seen its exports tumble and its growth projections shaved downward, because of the continued weak demand from Europe: New statistics released this week showed that China’s trade surplus continued to narrow for 2011 (down 14.5% from a year earlier) and export growth has also slowed in December (down to 13.4%, from 13.8% in November).
The negative statistics have triggered speculation that Beijing’s leaders may significantly pull back on the gradual appreciation of the yuan this year, which gained about 4.7% against the dollar last year. However, privately Chinese officials signaled to Geithner that the gradual appreciation would continue during 2012. US officials, nonetheless, still believe the Chinese currency is undervalued, which has become a hot button issue in the US presidential campaign.
Geithner’s visit to China was also an opportunity for American officials to begin sizing up and building relationships with the country’s next generation of leaders. Geithner met with Vice President Xi Jinping, expected to take over as Chinese President in 2013, as well as with Vice Premiers Wang Qishan and Li Keqiang, who are expected to become the second- and third-most powerful people in the Communist Party’s collective leadership apparatus.
Geithner will arrive in Japan on Thursday, also with a possible ban on Iranian crude oil and Japan's currency intervention likely to be on the agenda. Japan has also signaled it wants to continue importing oil from Iran despite mounting pressure from the US to cooperate in tightening sanctions. Japan was concerned about the effects on world energy prices and a fuel shortage hindering post-earthquake reconstruction in Japan.
Report: Geithner finds Chinese resistant to Iran oil sanctions (Washington Post, 11 Jan 2012)
Report: China says Geithner's visit “significant” for boosting Sino-U.S. trade, ties (Xinhua, 11 Jan 2012)
Report: US Treasury chief presses China on Iran oil imports (AFP, 11 Jan 2012)
Report: China defends Iran oil trade despite U.S. push (Reuters, 11 Jan 2012)
Report: Japan Wants to Keep Importing Iranian Crude (Wall Street Journal, 10 Jan 2012)