S&ED Promotes Stable and Cooperative Sino-U.S. Ties

THE Sixth U.S.-China Strate- gic and Economic Dialogue（S&ED） convenes in Beijing this July. President Obamas Special Representative and Treasury Secretary Jacob Lew visited China ahead of the event， from May 11 to 13， to meet with Chinese Premier Li Keqiang and Vice Premier Wang Yang. The two sides reached consensus on the basic content of the coming S&ED.

There have been contentions recently between China and the U.S.， but past experience has shown that as long as both countries maintain top-level dialogue and control disputes through proactive communication， so confronting differences and building consensus， there is no obstacle that cannot be overcome.

Significant Dialogue Mechanism

There are 60 or more dialogue and cooperative mechanisms between China and the U.S.， on different levels and in varied fields. The S&ED， attended by the highestranking officials and which addresses the broadest range of strategic issues， stands head and shoulders above the rest.

Back in 2006， then Chinese President Hu Jintao and his U.S. counterpart President George W. Bush jointly founded the Economic Dialogue. The annual event marshals the two countries top economic， finance and foreign affairs officials and policymakers from relevant government departments to meet and discuss economic policies. Upon President Obamas taking office in January 2009， leaders of the two countries， cognizant of growing competitiveness within as well as integration of their primary economic and security interests， decided to extend this dialogue to include security， defense and strategic issues. The S&ED thus came into being. It is convened annually， alternately in the Chinese and U.S. capitals.

The first S&ED convened in May 2009 in Washington. Then Chinese Vice Premier Wang Qishan and State Councilor Dai Bingguo headed the Chinese delegation， and then U.S. Secretary of State Hillary Clinton and Treasury Secretary Timothy Franz Geithner led the American delegation to the four sessions from 2009 to 2012. The meetings significantly promoted communication and cooperation on an array of issues that included economy， finance， trade， environment and climate change， exchange rate， bilateral investment， Internet security and hot regional security issues.

In 2013， the year of Obamas second term， China also elected its new top leadership headed by President Xi Jinping. The administration change led to a reshuffle at the S&ED. Chinese vice premier in charge of economic and financial issues Wang Yang， and State Councilor Yang Jiechi took over the helm of the Chinese delegation. Secretary of State John Kerry and Treasury Secretary Jacob Lew， meanwhile， headed the U.S. team.

The humor and wit of a seasoned statesman that Vice Premier Wang Yangs speech displayed at the opening on July 10， 2013 of the Fifth S&ED impressed other participants. Wang likened the highly interdependent economic relationship between China and the U.S. to that between a husband and wife. To be happy they cannot dream different dreams while sleeping in the same bed， but must pool efforts towards a shared life. He quipped that during this visit to the States， his first in a decade， he was relieved to see that “Americans are still heavier built and with bigger noses than us.” Wang went on to say that since the eruption of the global financial crisis in 2008 there had been widespread worries in the U.S. that the superpower was over the hill. Some Chinese people， meanwhile， have begun to feel swell headed over predictions that their country will soon surpass the U.S. His remarks brought laughter from many in the audience.

Fresh Challenges for the Sixth S&ED

Both parties might feel somewhat uncomfortable in the run-up to the Sixth S&ED. The Obama administration has over-represented itself in the South China Sea and East China Sea issues. Big Brother-like， it has lurked and meddled in marine disputes between China and certain ASEAN members. Vietnams confrontation with China over Drilling Rig 981 is attributable to the former being emboldened by U.S. reassurances to its allies and defense partners of its influence in Asia. In spite of the oil platforms mere 17 nautical miles from Chinas Zhongjian Island， the U.S. nevertheless pronounced it as within Vietnams exclusive economic zone， and accused China of“provocation.” At the Pentagon news conference on May 16， visiting Chinese General Fang Fenghui urged the U.S. to remain objective over the drilling dispute. He made it clear that China would not give way under external pressures but go ahead with the project.

On May 18 the U.S. indicted five Chinese army officers， alleging they had hacked into American businesses to steal trade secrets. This is a far cry from the consensus the two countries reached at the S&ED – of solving disputes， including those over cyber security， through negotiations. The arbitrary charges against the five Chinese officers have cast a shadow over the S&ED and the cooperative spirit it embodies， for the entire Sino-U.S. relationship hinges on cooperation and mutual trust.

Cooperation and Mutual Trust Vital to China-U.S. Ties

Since the founding of the S&ED mechanism， the two sides have made headway in such fields as economy， trade， finance， climate change， and emission reduction， guided by the principles of frank exchanges， pragmatic cooperation and mutual benefit. At the fifth S&ED， all present decided to formally initiate negotiations on a bilateral investment treaty （BIT）. This constituted the most impressive outcome of this particular round of S&ED. The negotiation is Chinas first on a BIT. If agreed upon， bilateral relations in the sphere of economy and finance will undoubtedly enter a new stage. The sixth S&ED will see formulation of an agenda on climate change and emission reduction. The two countries reached a consensus in 2012 on establishing a climate change working group within the S&ED framework. The China-U.S. Joint Statement on Climate Change was published on April 13， 2013. In July of the same year， the climate change working group submitted a report to special representatives of the two countries state heads. It raised five suggestions on controlling sources of primary greenhouse gas emission and of air pollution. On February 15， 2014， the two countries released another joint statement on climate change. It displayed the positive results of China-U.S. cooperation on climate change and emission reduction. The document also demonstrated both countries firm cooperative stance on climate change ahead of the new universal agreement on climate change to be reached in 2015.

According to the recent China-U.S. joint statement on climate change， “Both sides reaffirm their commitment to contribute significantly to successful 2015 global efforts to meet this challenge.” The two countries will also place emphasis on sharing information and talks； this is critically important to guiding the standard protocol on global climate change that the UN will announce in 2015. The Obama administration has committed the U.S. to a 17 percent emission cut by 2020 from a 2005 baseline. In 2009， the Chinese government also announced its emission reduction goal， whereby Chinas 2020 carbon dioxide discharge per GDP unit will decline to an estimated 40-45 percent of the 2005 level. China-U.S. cooperation on climate change and emission reduction has displayed to the world a grand prospect for bilateral cooperation， and also propelled global emission reduction progress.

The achievements of the two countries in cooperatively dealing with global climate change demonstrate that the S&ED is an indispensable mechanism that enables the two sides to resolve disputes and deepen cooperation. To reduce greenhouse gas emissions and other air pollutants， China and the U.S. set up within the S&ED mechanism a working group on climate change and emission reduction. Shortly after they initiated an action plan for cooperation in five fields， including heavy-duty and other motor vehicles； smart grids； carbon capture， utilization， and storage； collecting and managing greenhouse gas data； and energy efficiency in buildings and industry.

As the worlds two largest greenhouse gas emitters， cooperation between China and the U.S. on emission reduction and combating climate change will enhance universal confidence in this regard. It will also constitute a major force in UN-led global cooperation on tackling climate change. On February 15， 2014， U.S. Secretary of State John Kerry， accompanied by U.S. Special Envoy for Climate Change Todd Stern， met with Chinas chief negotiator on international climate change talks and vice chairman of the National Development and Reform Commission Xie Zhenhua. S&ED has without doubt become the most important vehicle for the two countriescooperation on combating climate change and emission reduction.

The growing importance in recent years of crossborder accounting/auditing and its role in bilateral business and financial cooperation is expected to be a main topic at the sixth S&ED. James R. Doty， chairman of the Public Company Accounting Oversight Board （PCAOB）， expressed expectations that a bilateral agreement on cross-border accounting and auditing cooperation between supervisory agencies of both sides would be reached at the 2014 S&ED. The cross-border audit has been a priority at past S&ED rounds. Prior to the fifth S&ED， PCAOB signed in July， 2013 a memorandum of understanding with China on cross-border investigation. This was in a bid to carry out， together with Chinas auditing authorities， cross-border auditing of accounting firms registered with the PCAOB and in China. Cross-border auditing is an important move towards guaranteeing a sound auditing and accounting environment for bilateral investment. It also ensures an objective， accurate and impartial consultancy on Chinas companies listed in the U.S. In January， 2014， the U.S. Securities and Exchange Commission （SEC） declared its sanction of China branches of the four world famous accounting firms – KPMG， Deloitte Touche Tohmatsu， Ernst & Young Consulting and PWC – suspending for six months their accounting businesses in the U.S. With closer bilateral exchanges in the fields of economy and finance， the two countries need to intensify cooperation in law and supervision and in fighting cross-border business fraud and crime. The cross-border accounting/ auditing cooperation， therefore， will play a central role in the development of bilateral relations.