SPENCER MICHELS, NewsHour Correspondent: Hu Jintao's appearance at the White House this morning had almost all the trappings of a state visit, although it didn't have that official designation. The Chinese and American presidents greeted each other amid military pomp.
And while Hu did receive a 21-gun salute, there would be no black-tie state dinner, because the Bush administration saw the trip simply as an official visit. But whatever the official title, the ceremonial trappings reflected China's growing importance on the American political and diplomatic agenda, both as the world's fastest-growing economy and as a nation spreading its diplomatic and economic influence around the world.
Despite the scripting, the South Lawn ceremony attracted anti-China protesters, both outside the White House gates and inside.
A woman who had gotten in with press credentials disrupted the ceremony, shouting out objections to China's restrictions on the Falun Gong, a Chinese spiritual and meditation group. It was over quickly, but the protester's outrage highlighted one major issue keeping China and the U.S. at odds: human rights violations in China.
GEORGE W. BUSH, President of the United States: As the relationship between our two nations grows and matures, we can be candid about our disagreements. I'll continue to discuss with President Hu the importance of respecting human rights and freedoms of the Chinese people.
China has become successful because the Chinese people are experience the freedom to buy and to sell and to produce, and China can grow even more successful by allowing the Chinese people the freedom to assemble, to speak freely, and to worship.
SPENCER MICHELS: President Hu waited to reply until he was asked about human rights by reporters, during an Oval Office question-and-answer session that followed an hour of talks between the two leaders.
PRESIDENT HU JINTAO, China (through translator): In future, we will, in the light of China's own national conditions and the will of the Chinese people, continue to move ahead the political restructuring and to develop the socialist democracy.
And we will further expand the orderly participation of the Chinese citizens in political affairs so that the Chinese citizens will be in a better position to exercise their democratic rights, in terms of democratic supervision, democratic management, and the democratic decision-making.
SPENCER MICHELS: Another hot button topic: China's determination to unify with Taiwan. President Bush today urged both parties to avoid confrontation and reiterated U.S. policy opposing Taiwan officially separating from the mainland.
GEORGE W. BUSH: And I assured the president my position has not changed: I do not support independence for Taiwan.
PRESIDENT HU JINTAO (through translator): We have the utmost of sincerity, and we will do our utmost, with all sincerity, to strive for the prospect of peaceful reunification. This being said, we will by no means allow Taiwan independence.
SPENCER MICHELS: President Hu also pledged to try to ease tensions over the U.S. trade deficit with China, more than $200 billion.
PRESIDENT HU JINTAO (through translator): We'll continue to the expand market access and increase the import of American products.
GEORGE W. BUSH: I'm heartened by the president's answer, because he recognizes that a trade deficit with the United States -- essentially what it is, is unsustainable. I appreciate his statement very much, because the American people -- all we want to do is be treated fairly in the international marketplace.
SPENCER MICHELS: President Bush sought China's cooperation to curtail Iran's nuclear ambitions, though China has resisted imposing U.N. sanctions on Tehran. The U.S. also sees China as an essential partner in reigning in the North Korean nuclear threat. Hu said China is already making constructive efforts.
Later, President Bush hosted a formal luncheon for Hu and his wife, replete with bilingual toasts.
MARGARET WARNER: For more on today's meeting and the U.S.-China relationship, we turn to Kenneth Lieberthal, former senior director for Asian affairs at the National Security Council in the Clinton administration. He's now professor of political science and business administration at the University of Michigan.
John Tkacik, who had a 21-year career at the State Department focusing on China. He's now at the Heritage Foundation.
Robert Hormats, vice chairman of Goldman Sachs International. He served as an economic official in the Nixon, Ford, Carter and Reagan administrations.
And Linda Lim, a professor of corporate strategy and international business at the University of Michigan Business School.
And welcome to you, all.
Bob Hormats, first of all, just help us out as we looked at this encounter between these two men today. Were we seeing two men who regard one another as equals, as competitors, as potential partners?
ROBERT HORMATS, Former White House Economic Official: Well, that's an interesting question. I think they look at themselves and one another as equals, in the sense that they're from two big powers, and it's very important that the Chinese be seen in the eyes of Americans and the eyes of their president as being a major power on the world stage.
The interesting problem the United States has today is -- and it's one that we've seen in the past in history -- is an established power sometimes feels -- almost always feels threatened by a rising power, and there are always a number of frictions between the two.
In this case, the rising power is China; the established power is the United States. The frictions exist in trade, in political relations, security relations, energy issues, a whole panoply of issues. And how these countries manage those differences, how they manage those tensions, is really going to be the very important element in shaping the future of the world, economically, and politically, and militarily, over the next decade or two.
MARGARET WARNER: Just a brief follow-up. Give us a couple of examples of some of the friction points, how they fit into this sort of overarching tension of the established power looking at this rising power and being alarmed.
ROBERT HORMATS: Well, there are several. One, clearly, China is a major trade competitor for the United States, across the board, and a country with a large trade surplus. And those trade frictions are part of the fact that China is a rising competitive power.
Second, energy. There are a lot of concerns on the American side that China is buying up energy properties; it's competing with the United States and the rest of the world for energy. There are ways of managing that constructively, but it does cause concerns among Americans.
And, third, of course, the exchange rate adjustment issue that has gotten so much attention. How we work out our differences on the exchange rate in an orderly way has got to be very important to the exchange rate system and to political relations, because it's a big focus of pressure in the United States.
MARGARET WARNER: Professor Lim, do you agree with that characterization, that what we're seeing is this dynamic between an established power and a rising power?
LINDA LIM, University of Michigan School of Business: Yes, I do. And that's clearly the perspective of third countries, the non-China, non-U.S. countries that are observing this developing relationship between the two.
MARGARET WARNER: But do you think that the fact that they are unequal size, weight, and an economic strength as the moment makes it possible for them to have a productive relationship, or will that inevitably generate the kinds of tensions and frictions that Bob Hormats just cited?
LINDA LIM: I don't think that tensions and frictions are inevitable. I think part of the reason you have them is because China is still a developing economy, it's still a developing polity. It is not a mature democracy. It's not a mature industrial economy. It does not have the established domestic institutions or international rules that the United States has.
So, obviously, there would be some differences because China is at a different stage of development than the United States. As China becomes more developed, in all of these respects, then clearly we would expect, actually, a decline of friction, actually, at least on the Chinese side.
On the perceptual side, however, I don't know how Americans will view an up-and-coming power that might still remain somewhat different from themselves.
MARGARET WARNER: Yes.
Let me ask you, Ken Lieberthal -- I'm going to read you something that a brief -- the National Security Council had a briefing this afternoon closed to cameras.
But the briefer said that, after the meeting, that they were encouraged by President Hu stating that China was committed to trying to reorient its economy more towards internal, domestic consumption, rather than exports. And we heard President Hu mention that today with President Bush.
On the other hand, the U.S. remained very disappointed on the currency issue, the currency reevaluation issue, that China just had not done enough. How do you read that? How do you read that, in terms of what was really achieved?
KENNETH LIEBERTHAL, University of Michigan: Well, the Chinese are saying that they want to move away from the position of being the country with the lowest household level of consumption as a percentage of GDP of probably any country in the world. The U.S. is probably the highest of any country in the world on that.
And the Chinese need to raise domestic consumption if they want to reduce their stress on exports. And, obviously, their stress on exports is one of the sources of trade friction with the United States.
This really signals a much broader agenda domestically in China. People save so much in China because there's almost no social safety net for people in either the cities or the countryside. There's very little help for education. So people have to pay for education, if they want their kids to get ahead in society.
So Hu Jintao was indicating that we're going to have to put more money into the social infrastructure kind of expenditure. We're going to free up consumer dollars in China, which will enable us to sell more domestically and power our growth more by domestic consumption.
And he's saying -- I think quite rightly -- that, as that occurs, the Chinese can loosen up more on their Renminbi without causing major economic destruction in China.
MARGARET WARNER: That's their currency.
KENNETH LIEBERTHAL: The problem is one of time line, of course.
MARGARET WARNER: So, John Tkacik, the briefer also said -- and just following up on that question -- that President Hu told President Bush he understand the domestic pressures -- I guess he means from the Hill and certain business sectors here -- on the administration, vis-a-vis all of these trade issues.
How do you read the limit of readout we got, in terms of whether enough was achieved to at least, for a while, tamp down those pressures?
JOHN TKACIK, Heritage Foundation: Well, I think President Hu Jintao's goal here was not to address the economic issues, the financial issues, the exchange rate issues, the IPR issues.
MARGARET WARNER: That's intellectual property.
JOHN TKACIK: Intellectual property rights, the piracy. You have to understand that he's still in the process of consolidating his political power at home. He's facing a number of competing political factions in the leadership.
His whole purpose in coming to Washington was primarily as a P.R. campaign here in the United States and, secondly, as a propaganda campaign in China to demonstrate that he was a statesman, that he could hold his own with the best, and I think he did. I think, when all the dust has settled and all of the smoke has cleared away, the 21-gun salute, the South Lawn fluttering of the flags, there will be far less that meets the eye.
MARGARET WARNER: So you think, in other words, if there was any stated willingness by President Hu to shift the economy as...
JOHN TKACIK: Well, on shifting the economy...
MARGARET WARNER: ... you think that's pretty cosmetic?
JOHN TKACIK: I think it's cosmetic. The whole idea of shifting the economy to a domestic consumer economy is something that former Premier Zhu Rongji had advocated eight years ago. It's something that they're doing.
I have a feeling that, by generating and expanding the domestic economy, what you're going to see is far more government support for domestic industries to supply the domestic demand, and I have a feeling there's going to be more pressure on the Chinese government to keep out foreign competition. This is true in automobiles, primarily, but you're seeing it in just about everything else, as well.
MARGARET WARNER: So, Bob Hormats, how do you see the outcome on the economic issues? Do you think that the president got anything, President Bush?
ROBERT HORMATS: I don't think there were any major breakthroughs at this point, no, and I don't think we should have anticipated breakthroughs. The Chinese tend to move very gradually.
Deng Xiaoping said that you cross a river one stepping stone at a time, and they move these things along, but they're not dramatic changes. In the exchange rate, for instance, the probability is very high, in my judgment, that they'll continue to allow the currency to appreciate, but do it very gradually.
They're not going to have a big appreciation of the currency. They're not going to let it float and move with the market, because they want to keep a certain amount of control.
They want to open up their economy to foreign competition a bit, to take pressure off of the relationship, but they're not going to do it in a dramatic way. They're going to improve their financial system. They've done a number of things; they'll do a number of additional things, because it's a sclerotic system, a lot of regulation.
They'll make it more efficient, but it will be done at a very gradual way. And one summit is not going to change things a lot.
But for internal reasons and also to deal with some of these external pressures, I think they'll move in the right direction. The U.S. wants them to move very rapidly. Pressures in China are going to mitigate against that, and they're going to move, I think, in a much more gradual and deliberate way than perhaps the United States would want.
MARGARET WARNER: Professor Lieberthal, another thing, of course, the United States wanted and President Bush referred to today was more cooperation on Iran, on North Korea, and on the Sudan and Darfur.
Why, if China does want at least a better or an un-acrimonious relationship with the U.S., has so far China been unwilling to do more to press Iran to take tougher measures, to let the U.N. take tougher measures, and the same vis-a-vis Sudan?
KENNETH LIEBERTHAL: Well, the Chinese are generally committed to the notion that you get more by taking more time, taking things more gradually, and using more carrots and fewer sticks, because ultimately you need national leaders in the countries you're trying to change, you need national leaders to be able to make the changes you want them to make without losing face. In other words, it's got to be politically feasible for them domestically to go there.
We tend to feel that the Chinese are somewhat naive, that these are bad actors, you have to put more pressure on, more sticks, fewer carrots, and so forth.
I think we, especially in Iran, agree on the goal: an Iran that does not have the know-how or capacity to produce nuclear weapons. I think, clearly at this point, we still disagree on the tactics, and we're going to have to see a lot of diplomacy in the coming months, especially focused on the U.N. Security Council, to see whether we can bridge those differences.
I think, though, that, you know, fundamentally what we're seeing here is as much a difference and a notion of how you get things done as it is a difference in where you want to end up.
MARGARET WARNER: John Tkacik, some members of the administration have suggested a darker motive, which is that China has oil deals with Iran and also oil interests in Sudan, and that kind of -- they call it a new mercantilism -- that kind of thing is driving Chinese policy.
JOHN TKACIK: Well, I think that's certainly part of it, but I wouldn't put it past the Chinese to be working it the other way around, to using their tremendous leverage, their tremendous buying power to leverage a lot of these countries.
They could, if they wanted to, put pressure on Iran. It was interesting to me today to hear the president thank Hu Jintao for his frankness. That is a code word for, "We didn't get anything done. We argued."
Now, on Taiwan, on Iran, the president mentioned specifically Chapter 7, which is threat to the peace, Chapter 7 action on the...
MARGARET WARNER: He said to President Hu that was important to pursue.
JOHN TKACIK: And President Hu stopped that. He stopped him cold. And I think what we're looking at here is a China that simply doesn't want to act.
When the Chinese want you to behave, they will whack you. The Mongolians knew this in 2002 when they invited the Dalai Lama to come and the Chinese cut rail links to Mongolia.
MARGARET WARNER: Let me get Professor Lim in here. Is that how you read this, on these geo-strategic issues, whatever you want to call them, diplomatic issues, that China really doesn't want to act, if it did, it could?
LINDA LIM: No, I don't agree. I think part of the issue is that China has not been involved in crafting these global policies. If it is to be treated as an equal, if it is to be treated as a leader, if it is going to be expected to deliver some results, then it should be involved in the crafting of policy, in addition to just its execution.
I think that's one issue. I think another issue is China does have its own interests, including its own economic interests, including its own diplomatic interests. And it's naive to expect it to just follow U.S. policy just because it's a friend. I think we need to see things very much more from the Chinese point of view, an evolving point of view.
MARGARET WARNER: All right, Professor Lim, and gentlemen all, thank you.