The first round of the US-China Strategic and Economic Dialogue was held in Washington from 27 to 28 July, 2009. It was a star-studded event that saw a candid and in-depth exchange of views on the “strategic, long-term and overarching issues concerning the development of bilateral relations.” The issue of China’s SWFs came up. In 2007/2008, Washington policymakers were particularly concerned with the behaviour of the CIC, so this wasn’t all that surprising.
However, what I found interesting from reading the Treasury press release was the way in which both sides bypassed what was once a very controversial topic. China simply reinforced its commitment to implement the Santiago Principles. The US, for its part, reaffirmed its commitment to the principles for recipients of sovereign wealth fund investment set out by the OECD. It also assured China that the CIC would be treated fairly under CFIUS.
Clearly, the press release isn’t going to tell us all that was said at the table. But I was surprised to see the tone change so much from 2007 to 2009. For example, the U.S.-China Economic and Security Review Commission‘s 2008 annual report dedicated an entire section to China’s “capital investment vehicles” (i.e. SWFs) and their implications for the U.S. economy and national security. It was pretty clear about its concerns. (See also my paper for more details on the American perception of the CIC at the time).
Perhaps the recent dialogue reflects the changing views in Washington about the CIC and SWFs more generally. In my view, this is a positive development.