The Cable

Harry Reid demands that China fix its economic policies

The U.S.-China relationship is a carefully calibrated dance, especially in this the first year of the Obama administration. That’s why one has to wonder what prompted Senate Majority Leader Harry Reid to write a scathing letter to Chinese President Hu Jintao calling on China to move faster to reform its economic policies. In the letter, ...

The U.S.-China relationship is a carefully calibrated dance, especially in this the first year of the Obama administration. That’s why one has to wonder what prompted Senate Majority Leader Harry Reid to write a scathing letter to Chinese President Hu Jintao calling on China to move faster to reform its economic policies.

In the letter, sent to Chinese and U.S. officials Wednesday, Reid lashes out at China on two issues, its still-inflexible currency and its failure to do more to protect intellectual property rights.

"There is widespread agreement that China’s currency policy is a major source of imbalance in our relationship– indeed, in the global economy. The de facto peg is set at a level that for many years has not reflected economic reality," Reid wrote. "Your currency policy is not in the long-term interest of China: it creates inflationary pressure, promotes over-investment, and feeds asset bubbles within China. In short, it is one of the most serious economic problems in the world today."

On intellectual property, Reid gets downright accusatory.

"High levels of intellectual property piracy in China have led many in the United States to believe that there may be a Chinese policy to undermine American competitiveness in sectors where we are strong, while simultaneously benefiting from open access to the U.S. Market," he scolds. "Rampant intellectual property theft in China will not be resolved merely by a press release or a new policy pronouncement. China needs to take steps and make progress on a continuous basis."

So what’s going on here? Most China watchers-agree that the currency and IPR issues are serious and detrimental to U.S. economic interests. White House officials have raised the currency issue with the Chinese, but mostly in private. After all, it’s tough to openly chastise China’s monetary policies while borrowing billions from Beijing to support your own financial crisis.

Is this the administration playing good cop, bad cop by letting Reid be the attack dog and then claiming plausible deniability? Is the Obama administration trying to send China a signal that a push on currency is coming? Or is this just an effort by Democrats to look active on confronting China without having to put a lot of substance behind the rhetoric?

Reid’s aides did not respond to requests for comment on whether the letter was coordinated with the Obama administration.

 Twitter: @joshrogin

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