Foundinchina.com

"your turn to play the good cop, comrade"

This excellent analysis of the latest round of US-China posturing on Iran and currency issues demonstrates how masterfully the Chinese played their hand in linking these two strange bedfellows to their advantage:

This April Fool’s week announcement that the US was dropping currency as a negotiating variable for a definite maybe on nuclear Iran isn’t a cause for optimism. The Chinese have pushed the Americans around a lot in the first period, and they don’t see much reason to stop now.

China won this one with a head fake and a promise that will never be made public. By moving the debate about renminbi-dollar exchange rates to the back rooms and allowing the Chinese to hijack the US decision-making process, the PRC has not only won this battle — they seem to have solidified their ability to influence US policy at will.

The Timing: For the Chinese to wait until just days before the deadline to apply pressure to change the time, date, transparency, substance and scope of the deal was typical — and in this case, beautifully executed. Instead of a single authorative report accusing the Chinese of manipulation, we are now looking at a never-ending series of international consensus and jaw-boning. Note to internatational deal-makers: when Chinese counter-parties don’t like the substance of a negotiation, they will attempt to delay it, make the discussion less binding, and move the discussion to a more favorable venue.

Forex is a sore subject for the Chinese — even their allies think that the currency is being manipulated. Iran’s attempt to get nuclear capabilities, while seemingly unrelated, gave China the leverage it needed to neutralize America’s most powerful weapon. China’s response was to find a way to link the forex issue to something tht the US cared about but was no-lose for the Chinese side — and that’s how the Iran issue found its way into the forex debate. Note to negotiators: many westerners in China will agree to linkages of seemingly unrelated issues early in the discussion to ‘maintain face and harmony’, only to have it bite them in the back later.

The Chinese will continue wringing concessions out of this administration at will, simply because it can.

Got to say, though. Hu JinTao as the Good Cop while Grandpa Wen was the Tough Guy? Well played, my friends. Well played.

It is naive in the extreme for the US to believe that an offer of watered-down currency manipulation charges is going to buy them any real progress from the Chinese on the Iranian nuclear issue; Hu will now quite happily stall and obfuscate in typical CCP fashion.

Watch this space.