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China Economic Clout Gives Obama `Foil' to Push Domestic Plans

President Barack Obama wants Americans to hear China’s footsteps.

Whether the subject is funding for education, spending on infrastructure or advancing technology, the president points to China’s investments in those areas as incentive for the U.S. to do the same.

While China draws complaints from U.S. politicians and some business leaders in areas such as currency valuation, trade and intellectual property rights, Obama often cites the world’s fastest-growing major economy as much as an example as a threat.

“The administration recognizes the value of a near-peer competitor both for domestic purposes and to focus foreign policy,” said Charles Freeman, a specialist in China studies at the Washington-based Center for Strategic and International Studies.

The competition between the U.S. and China is playing out at a summit of the world’s 20 biggest economies, which ends in Seoul today. Obama and the other leaders at the meeting are aiming to bridge global disagreements over how to spark economic growth and balance trade between exporting nations such as China and net importers such as the U.S.

Obama’s meeting yesterday with Chinese President Hu Jintao at the Group of 20 meeting, the seventh face-to-face session between the two leaders, was dominated by exchange rates and trade. The U.S.-China relationship also will be at center stage at the Asia-Pacific Economic Cooperation forum that begins tomorrow in Yokohama, Japan.

Sources of Friction

China has run up a $201 billion trade surplus with the U.S. for the first nine months of this year, more than the U.S. deficit with the next seven-largest trading partners combined, according to Commerce Department data.

That gap, together with the drop in American manufacturing employment and the U.S. contention that the yuan -- which has gained 3 percent since a two-year peg to the dollar ended in June -- is undervalued, has made China a target for Congress and voter anger.

At the same time, Obama is confronting new hurdles to getting his agenda enacted, including spending on education, new technology research and infrastructure projects, following midterm elections that gave Republicans control of the House of Representatives next year and narrowed the Democratic majority in the Senate.

With the federal budget deficit that hit $1.3 trillion in the fiscal year that ended Sept. 30, Republicans campaigned on an agenda shrinking the government and cutting expenditures.

Bricks and Mortar

China is the perfect “foil” for Obama in pushing his plans for roads, bridges and airports, said Wendy Schiller, a political science professor at Brown University.

“It’s going to be bricks and mortar and it’s going to employ all the people that voted Republican,” Schiller said. “It’s going to be hard for Republicans to say no when you mention competition with China.”

Before and after the Nov. 2 voting, Obama cited China in urging support for his proposals.

“We should be able to agree now that it makes no sense for China to have better rail systems than us,” Obama said at a news conference the day after the election. “And we just learned that China now has the fastest supercomputer on Earth. That used to be us.”

In an Oct. 26 address to Democratic Party donors in Rhode Island, Obama criticized Republican budget plans that he said would cut federal education funding by 20 percent.

Playing for First

“Do you think China is cutting it by 20 percent?” Obama asked, also citing Germany and South Korea, two other nations with trade surpluses with the U.S. “They’re playing for first place, and we need to play for first place.”

White House press secretary Robert Gibbs said at a briefing the next day that the president’s remarks are meant to be a challenge to the U.S. and he’s “not casting aspersions on those governments.”

“It’s a very interesting twist in the history of the relationship between the two countries,” said Pieter P. Bottelier, a professor of China Studies at Johns Hopkins University. “Generally China is characterized as a threat to the U.S., not as a positive example.”

Yet employing the image of the closest U.S. global rival for political purposes is also an extension of tactics employed by Obama’s predecessors, said H.W. Brands, a professor at the University of Texas at Austin.

Changing Characters

“During the Cold War, presidents talked about the Soviet Union. During the 1980s, when the Japanese economy was surging, they talked about Japan,” said Brands, who was one of a group of historians who met with the president at the White House last year. “President Obama talks about China for much the same reasons.”

Elizabeth Economy, director of Asia studies at the Council on Foreign Relations in New York, said bringing China into domestic political debates is “a lower common denominator political argumentation than we ought to be having out of the White House.”

Still, she said, such rhetoric, particularly as it comes amid the U.S. political cycle, isn’t likely to have an impact on the broader U.S. relationship with China.

The Chinese are “sophisticated enough to know that this is election time and that whatever is being said by and large will have little bearing post-election,” she said.

To contact the reporter on this story: Kate Andersen Brower in Washington at Kandersen7@bloomberg.net

To contact the editor responsible for this story: Mark Silva in Washington at msilva34@bloomberg.net

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