Australia | Dec 12 2006
By Chris Shaw
According to Macquarie Bank one implication of the Democrats regaining control of both parliamentary houses in the US is a shift in the rhetoric with respect to China, as the Democrats are likely to up the ante in terms of anti-China sentiments.
While this sets the stage for a potentially rough couple of years the broker suggests the increased noise is unlikely to translate into much action, simply because the US appears intent on strengthening its ties with China rather than weakening them given common interests such as the nuclear weapon situation in North Korea.
Even allowing for a tougher approach from Congress the broker sees little chance of a breakdown in relations between the two powers, as their common interests in both trade and global security concerns will continue to demand close ties.
The broker sees the upcoming visit by a delegation led by Treasury Secretary Hank Paulsen as providing some insights into how the relationship may play out in coming months, as it expects the meetings to include items such as the exchange rate, trade deficit and intellectual property rights on the agenda.
Given the potential for increasingly tough rhetoric from Congress the broker expects China to make some concessions at the meetings, as such a move would likely quieten Congress in the short-term at least.