Tales from the Trail

President Barack Obama quipped that Chinese President Hu Jintao was brave for going to his hometown at this time of year. But what about the visit to Capitol Hill today?

Between the warm reception at the White House and the chilly weather in Chicago, Hu met lawmakers who were quite cool in their welcome. They brought up China’s currency, human rights, the Chinese Nobel Peace Prize winner who wasn’t allowed to attend the ceremony, Tibet, the economy and trade.

“The U.S. and China do not share values and principles as some have claimed in recent days,” House Foreign Affairs Committee Chairwoman Ileana Ros-Lehtinen said.

Senate Foreign Relations Committee Chairman John Kerry summed up the uneasiness that still accompanies the U.S.-China relationship: “It’s critical that leaders in both countries don’t allow mutual suspicions to degenerate into fear-mongering and demagoguery.”

Vice President Joe Biden, caught in the hallway by our senior congressional correspondent Tom Ferraro, told Reuters the Chinese understood they needed to work on the currency dispute. “They indicate that they understand that — that they have to work on it,” he said.

U.S. lawmakers are mad and want Treasury Secretary Timothy Geithner to step in and call China a name – ”currency manipulator” — which may not sound like much on city streets but can be quite an insult in world financial circles.

“At a time when the U.S. economy is trying to pick itself up off the ground, China’s currency manipulation is like a boot to the throat of our recovery. This administration refuses to try and take that boot off our neck.” That’s not a Republican raging against President Barack Obama’s Treasury Secretary, it’s Senator Charles Schumer, a Democrat from New York (where Wall Street happens to be located).

“Mr. Secretary, although there may be some modest disagreement about what to do, I’m increasingly coming to the view that the only person in this room who believes that China is not manipulating its currency is you,” Schumer said.

On Friday, President Barack Obama threw down the gauntlet to Republicans on taxes, effectively daring them to vote against a tax cut for the middle classes, just so that they can give an average of $100,000 in tax cuts to millionaires.

Over the weekend, Republican leader of the House John Boehner seemed to shirk the challenge, but on Monday, Senate minority leader Mitch McConnell picked up the gauntlet and threw it right back. McConnell has promised to introduce legislation “today” to ensure that “no one in this country pays higher income taxes next year than they are right now.” There are no Republicans who support a tax hike, he said, effectively daring Democrats to vote for higher taxes when the economy is in the mire.

Washington Extra is not sure who will blink first. But whichever side you take in this debate, one thing is for sure: this “wrestling match,” as Obama called it, or game of high-stakes political poker if you prefer, does the economy no good at all.

2008 was the last presidential election when voters didn’t know or care about the candidates views on China, argues political risk analyst Ian Bremmer.

Bremmer’s new book “The End of the Free Market” argues that the Chinese economic model — which he calls state capitalism — is so fundamentally different from Western free market capitalism that tensions and economic conflict are inevitable in the years ahead.

The main goal of China’s state-directed capitalism is to harness economic growth to ensure political stability and keep the Communist Party in power, Bremmer says.  And since the financial crisis, China has seen the United States and the West as “less indispensable”.

It’s too early to tell whether President Barack Obama’s new approach to China will be more successful than his predecessor’s. But this week’s high-level dialogue in Washington underlined how the balance of power is shifting.

The U.S. side, determined to be more respectful and less confrontational, tiptoed around the sensitive issue of China’s currency, avoiding any public appeal for an upwards revaluation in the yuan.

There was a passing reference to the rights of China’s ethnic and religious minorities, but no sign the other side would take any more notice of foreign interference in its internal affairs than it has in the past.