By Jing-dong Yuan

MONTEREY, California – Amid major changes in global and regional security and economic environments, the second United States-China Strategic and Economic Dialogue (SED) achieved some modest results – even as few were expected.

The meeting took place in Beijing this week after a brief period of estrangement this year when the Chinese government reacted vehemently to the Barack Obama administration’s decision to sell arms to Taiwan and the US president’s meeting with the Dalai Lama, the exiled Tibetan spiritual leader.

The Copenhagen summit on climate change, the Google showdown and the issue of currency revaluation have raised questions about the prospects of bilateral cooperation on critical  regional and global issues. The fact that over 200 US officials, including 15 secretaries and administrators, participated in the two days of meetings with their Chinese counterparts is an indication of the scope and expansion of bilateral consultation on multiple issues of mutual interest.

Both sides made great efforts in putting together substantive programs and displaying progress in restoring their relationship. Twenty-six specific outcomes of note were announced. These included cooperation on nuclear safety; joint research and development in shale gas resources; energy and environment cooperation; combating illicit trafficking in nuclear and radioactive materials; and consultation on arms control and non-proliferation prior to the next round of SED. In addition, the sides agreed that continuing efforts were needed with regard to economic adjustments and rebalancing to achieve sustained growth.

These are far from major accomplishments, but in accumulation specific and concrete steps and measures add up and provide regular channels of communication between the various government agencies of the countries.

Modest progress aside, it is clear that important issues remain unresolved. These include China’s currency – the US believes the yuan is undervalued – and US restrictions on high-tech exports to China. Chinese President Hu Jintao emphasized that any currency decision would be made under the principles of “independent decision-making, controllability and gradual progress”, while praising the “mutually beneficial and win-win cooperation” between the two countries.

In terms of its currency, Beijing is understandably reluctant to take any measures, given that the Greek debt crisis has had a negative impact on its exports to the European Union, China’s largest trading partner. Indeed, the financial crisis that started in 2008 has already led to a significant decline in Chinese exports and a re-orientation toward domestic consumption and infrastructure investment.

However, a lack of agreement on North Korea and Iran during the SED is what leads most critics to question the usefulness of the high-powered dialogue. Beijing has acknowledged South Korea’s report on the investigation of the Cheonan incident in which North Korea has been accused of sinking a South Korean naval vessel causing 46 deaths. But it has not made any public statements critical of Pyongyang’s behavior. Instead, Chinese officials continue to call for restraint to ease tensions on the Korean Peninsula.

On the issue of Iran sanctions, Beijing has yet to agree on a list of specific targets, even though in principle it has agreed to a draft United Nations Security Council resolution now being circulated. Here China’s interests are obvious: it seeks to protect its commercial interests in Iran by limiting the scope of any sanctions. But the larger point is that Beijing has never believed that sanctions are an effective tool in getting Tehran to halt its uranium-enrichment program, which some countries fear will lead to a nuclear weapon – something Tehran strongly denies. China worries that further punitive action could be counterproductive without having any impact on the progress of Iran’s nuclear activities.

Clearly, there are major differences between Beijing andWashington in terms of interests, policy goals and specific approaches to various regional and global problems. It is also clear that without effective cooperation between these major powers, solutions will be difficult, if not altogether impossible, to craft.

The fact that such differences exist makes SED, especially its security track, all the more important – the rationale behind its creation is precisely to resolve problems.

This leads to the question of how a rising China will exercise its power and whether and to what extent US and Chinese interests be accommodated – and which side should make the bigger adjustments in the process. China has clearly become more assertive in recent years, not so much in deliberately challenging US interests as in protecting its own interests in ways that balance with its image as a responsible power.

Beijing has every right to protect what it perceives as its national interests, from exchange rates to its cautious handling of the North Korean and Iranian issues. But it also has growing responsibilities as a rising power.

In that respect, while expectations for SED must remain realistic, the wish-list for what China should and can do in the coming years should never be dismissed out of hand.

Dr Jing-dong Yuan is director of the East Asia Non-proliferation Program at the James Martin Center for Non-proliferation Studies, Monterey Institute of International Studies, where he is also an associate professor of international policy studies