Balancing Act: US Financial Diplomacy towards China’s Current Account Surplus, 2009-2013
Abstract/Contents
- Abstract
- The 2008 global financial crisis, the worst since the Great Depression, was viewed by the United States’ government as partially a consequence of China’s undervalued renminbi and export-reliant economic model. Despite intensive American engagement, these Chinese policy choices bred a current account surplus and ballooning global imbalances. While regulatory missteps most directly spawned the crisis, imbalances were seen as inflating the bubble. After the crisis, US policymakers prioritized addressing China’s surplus via financial diplomacy. This thesis analyzes how and why US policymakers engaged with China, and to what degree this diplomacy was effective. It builds a detailed diplomatic history of the 2009-2013 period, coinciding with the first term of the Obama administration and main period of post-crisis diplomacy. This history is derived from speeches, communiques, and other official communications from the bilateral Strategic & Economic Dialogues and multilateral G20 summits, as well as other public Treasury Department statements, Chinese government documents, and media reports. The official history is supplemented with interviews with key US policymakers. Based on this data, I draw three main conclusions. First, US diplomats were sensitive to China’s internal politics. By building on the arguments of Chinese groups aligned with US aims, negotiators leveraged China’s ‘two-level game.’ In essence, American pressure was used by Chinese technocrats as leverage in domestic battles over reform. Additionally, US officials kept many elements of diplomacy private to ensure China’s leaders could save face by claiming reform was based on self-interest, not external pressure. Second, the US used the G20 to legitimize and broaden the rebalancing agenda while building multilateral pressure on China, though it could not construct a sustained coalition due to European unwillingness to pressure China. Third, while substantive reform arguments were most important, US negotiators used bilateral concessions as leverage, while also pursuing China-favorable reforms at the IMF to build trust. These bargaining chips were strengthened by the threat of Congressional protectionism. Overall, my thesis suggests that Chinese interests, not American pressure, drove most key reforms. However, strategic US engagement played an important role in facilitating change within China, providing a model for future financial diplomacy.
Description
| Type of resource | text |
|---|---|
| Date modified | December 5, 2022 |
| Publication date | June 2, 2022; June 2, 2022 |
Creators/Contributors
| Author | Howlett, William |
|---|---|
| Thesis advisor | Goldstein, Judith |
| Degree granting institution | Stanford University |
| Department | Center for International Security and Cooperation |
Subjects
| Subject | International economic relations |
|---|---|
| Subject | Economic policy > International cooperation |
| Subject | China |
| Subject | Foreign exchange |
| Subject | Group of Twenty |
| Subject | United States. Department of the Treasury |
| Genre | Text |
| Genre | Thesis |
Bibliographic information
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- This work is licensed under a Creative Commons Attribution Non Commercial No Derivatives 4.0 International license (CC BY-NC-ND).
Preferred citation
- Preferred citation
- Howlett, W. (2022). Balancing Act: US Financial Diplomacy towards China’s Current Account Surplus, 2009-2013. Stanford Digital Repository. Available at https://purl.stanford.edu/bp960ts2244
Collection
Stanford University, Center for International Security and Cooperation, Interschool Honors Program in International Security Studies, Theses
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