Clash of the Superpowers: Xi Jinping Comes to America

0921_Xi Jinping U.S._02
Chinese President Xi Jinping reviews troops at Tiananmen Square at the beginning of the military parade marking the 70th anniversary of the end of World War Two, in Beijing, China, September 3. Xi’s trip to the United States at the end of this month comes at a time of economic turmoil in China and tension abroad. Damir Sagolj/Reuters

Updated | Neither Xi Jinping nor Barack Obama could have foreseen the circumstances surrounding his state visit to Washington this week. In diplomatic tradition, a state visit is meant to be something of an honor for the visiting head of state, and, more often than not, is reserved for close allies of the United States.

China, of course, is no ally, but Obama came to office dreaming of making it a partner to do various good things—combating "climate change" being at the head of the list—while prodding Beijing, as it rose inexorably, to abide by the rules of the road established by the post World War II Pax Americana. The U.S. stance under Obama has been one that privately acknowledges China's eventual rise to, at minimum, co-equal Superpower status; but he has sought to ensure that its continued rise is "peaceful."

And while the president framed the Xi visit in that vein—"My tone toward China has been consistent," he told the Business Roundtable on September 14, "it doesn't jump up and down because of the polls"—the reality of the relationship now between Washington and Beijing is not one of cooperation, but of tension. "No-drama Obama," who was said during his first term to have been disappointed by China's aggressively mercantilist trade practices, is now plainly furious about Beijing's increasingly aggressive cybertheft—so much so that the make-peace-not-war president went so far as to publicly warn Beijing on September 12 that the United States would win a cyberwar with China "if we have to."

Washington has also been taken aback by China's muscle flexing in the real world—in particular by the buildup for military purposes of disputed islands in the South China Sea. China claims the islands for itself, dismissing the protests of the other, smaller claimants—Vietnam, the Philippines, Brunei, Taiwan. At a recent defense forum in London, where he appeared with senior naval officers from the United States and Japan, Chinese Navy Vice Admiral Yuan Yubai could not have been clearer about who Beijing thinks is in charge in the area: "The South China Sea, as the name indicates, is a sea area. It belongs to China."

Washington, to be sure, will make sure that at the end of this week's summit there are various "deliverables," as the diplomats say, that will be trumpeted publicly. Expect, for example, more happy talk about China's commitment toward dealing with climate change, even though the U.S. has consistently mischaracterized what Beijing has committed to. In short, Beijing has committed to nothing, but merely agreed to "goals" of rapid carbon dioxide emission reductions by 2030. But from the administration's standpoint, despite the obligatory clinking of champagne glasses at a state dinner, there will be little cause for celebration. Even the Obama administration—one that has accommodated Iran, Syria and Russia, U.S. antagonists all—understands that the fancy diplomatic trappings aside, this will be a meeting much more about confrontation than cooperation.

That certainly isn't what Xi Jinping wanted. This meeting will be no easier for him than it is for Obama. He arrives in Washington at the closest thing to an "emperor has no clothes" moment that we've had in decades. China's legitimacy at home and its growing power and prestige abroad have been rooted in one thing: its relentless economic ascent. In less than four decades, it has gone from impoverished isolation to the second largest economy on Earth. Xi came to office after China had skated untouched through the global financial crisis; he seemed to embody not just the country's newfound confidence, but in the eyes of critics, its newfound arrogance. His predecessor, Hu Jintao, was a relatively bland engineer who had single-mindedly risen to the top of the party leadership, only to do relatively little during his 10 years in office.

Xi by contrast is an unabashed nationalist, who appears to have little problem projecting China's newfound power abroad. (That's why military officers like Admiral Yuan can go to international conferences and basically tell everyone to shut up about the South China Sea. "It's ours.") During the Hu years, the key catchphrase the government used to describe its trajectory was China's "peaceful rise." You don't hear that phrase much anymore. Xi Jinping is all about what he has described as "the China Dream"—increased prosperity at home, and increasing power abroad.

But now he has trouble, both at home and abroad. Xi arrives in Washington after a painfully embarrassing summer of economic turmoil at home. His government had encouraged investors to put money into China's stock markets—triggering a sharp run-up in share prices. But this summer the market reversed itself and gave up most of its gains, and Xi's government—which had come to power saying that market forces would be "decisive" in China's economy—panicked. It took a series of ham-handed steps designed to halt the market's slide. They worked initially—there remains among a lot of the Chinese population the belief that the government can pretty much ordain whatever it wants—but the reversal didn't last.

China's President Xi Jinping, left, Brazilian President Dilma Rousseff and U.S. President Barack Obama arrive for a group photo of G20 leaders and representatives of partner groups at the annual G20 summit in Brisbane November 15, 2014. Jason Reed/Reuters

Around the same time, China allowed its currency to move lower against the U.S. dollar—the first time in a decade that that had happened. Though Xi's defenders say that his government had laid the groundwork for the move internationally—allegedly signaling the International Monetary Fund, the U.S. Treasury and the U.S. Federal Reserve that the move was coming—many officials abroad privately disagreed. The move helped jolt equity and currency markets overseas.

It also, at home, intensified what is now a significant problem for Xi, the prospect of increased—and disorderly—capital flight: investors and savers trying to get their money out of China. In July and August, the Chinese have had to dump about $100 billion of the country's massive $4 trillion in foreign exchange reserves to defend the renminbi; that is, to keep it from moving even lower. Market forces are decisive, in other words, until they're not.

The financial jitters came against a backdrop of slowing economic growth overall in China—a slowdown that appears to be even steeper than the gentle descent to 7.5 percent annual gross domestic product growth the government had called for. The concerns about China were very much in the minds of Fed policymakers when they decided on September 17 to not raise U.S. interest rates 25 basis points, after months of speculation that they would. (Among other things, that would have forced Beijing to spend even more money defending its currency.)

The growing economic disquiet within China comes amidst an ongoing crackdown on dissent at home. Human rights lawyers are being rounded up and jailed. Internet censorship has been tightened, as have regulations governing the activities of nongovernmental organizations. A massive military parade on September 3, celebrating the 70th anniversary of China's "victory" in the war over Japan, was a combination of muscle flexing and Orwellian propaganda: The role of the United States in winning the war in the Pacific was barely acknowledged.

While much of this crackdown is out of sight and out of mind for hundreds of millions of ordinary Chinese—and many of the same might have been proud of the military hardware on display in Beijing during the parade—the reaction of many elites in urban China is very different. Increasingly, the people who have been successful over the last 20 or 30 years are becoming resentful of the government. "We can't understand what they are doing," the CEO of a private Chinese company told me recently. "Economic policy seems chaotic, the parade was embarrassing, and everyone is afraid to say anything critical of the government. This is not where I and my friends thought we'd be in 2015," said the CEO, a man in his early 50s.

Obama will no doubt push Xi on these and other issues; he's going to want to hear what Xi believes is the economic reality, and what the government is doing about it. He's going to confront him on cyberwarfare and the South China Sea. He may also make the point that Japan's historic decision on September 12 to allow its military to participate in missions abroad for the first time since World War II has much to do with Tokyo's mistrust of Beijing's intentions in east Asia.

Xi's answers will be telling; will he acknowledge that his people have made some mistakes, and that the reform process going forward is going to be difficult, but that they're sticking to it? Will he acknowledge U.S. security concerns in cyberspace—in particular the recent hack of nearly four million files in the U.S. government's Office of Personnel Management? Will his message about the South China Sea be as blunt as his admiral's was—butt out?

Since assuming office, Xi has projected an image of supreme confidence. Now is the time, says one veteran U.S. China hand who worked in the Clinton administration, to see if he can, in private, show a little humility. Acknowledge the concerns of foreigners on the economy, on trade, on cyberwarfare. Offer practical ways to reassure the outside world, not just the balm of words that turn out to be empty.

If Xi ever really thought that China's glide to No. 1 would be all but painless—with the rest of the world kowtowing to the might of the new China—he's learning differently now. What he says to Obama in private this week, and then what China does after this summit, will reveal not only whether he acknowledges that reality, but whether he's willing to act on it.

Correction | This story initially stated the date of China's recent military parade as September 2. It was September 3.