US President Barrack Obama and Chinese President Hu JinTao Conclude US-China Meeting: China Has The Upper Hand

Full official summit statements by both President Obama and President Hu JinTao:

Our take on this high-profile US-China meeting in Beijing:

• Obama and Hu JinTao only discussed key issues that are not sensitive nor detrimental to China's standings and leadership which clearly show that the global political power is shifting from predominantly US-led to a much more equal US-China combo led leadership as China is gaining significant international political and economic leadership. China is obviously having the upper hand this time as it holds the largest US Treasury Bonds in the world (read: China is the largest creditor to US)
• Chinese Yuan is unlikely to be floated freely anytime soon as US would like it to be. The likely outcome is China will decide when and how it will implement more open currency-exchange for Ren Mi Bi (Chinese Yuan) starting with floating Ren Mi Bi-denominated government bonds in Hong Kong first for few years. Over time, Ren Mi Bi could be floated freely on a global basis, however, we believe that scenario will happen only when Chinese government feels floating the Yuan will benefit China more than other major currencies in the world in the long-term with the ultimate goal to make Ren Mi Bi to be the leader among all global currencies possibly replacing US Dollar over the long-term. As such, at this moment, in the near term (1-3 years timeframe), China likely will ignore any demands by anyone to float Yuan prematurely.
• US economy depends heavily on domestic consumer spending whereas China economy depends heavily of export-driven transactions on a global basis. As such, US is focusing on increasing its export to China and China is focusing on increasing its internal/domestic demand for Chinese-made products and services in order to gradually reduce its dependence on export. We believe this trend will face significant headwind in the short-term (3-5 years) as Chinese people are not yet as prosperous on GDP per capita basis vs. Americans. However, over the long-term (over 5 years), China likely will be able to increase its domestic demand and reduce its reliance on export economy while reducing its US Treasury holding slowly to ensure it maintain the upper-hand/wild card against any US political and economic pressure. At the same token, over the same period, US will likely be able to increase its export and achieve more balanced trade deficits/surplus condition with China. However, the days when US had the upper hand is likely gone forever. The world will likely experience escalating cold war between US and China in the next 30-50 years.
• US acknowledged China's ascendance as a much more visible global economic and political powerhouse and recognized the importance for both countries to mutually respect each other on sovereignty and territorial integrity of China including the one China policy (read: Tibet and Taiwan issues are clearly not in the agenda nor the best interest for US to pressure China this time.) In our view, this means US has reluctantly supported China over both Tibet and Taiwan straits issues. US unfortunately has no choice this time to disagree with China politically especially on domestic issues because China now has significant influence to global economic recovery and US economic recovery. The wind has shifted from US to China's hand on Tibet and Taiwan and hence, in our view, we believe Taiwan will likely be integrated as part of China within the next decade if not sooner, just like what happened to Hong Kong and Macao.