In the middle of China’s leadership transition, the United States is working at developing a more effective China policy. On many issues currently of significance for the US, such as rebalancing the global economy, nuclear non-proliferation in Iran and North Korea, climate change and cyber security, the US needs a cooperative China.

From his recent State of the Union speech, it is clear that President Obama is frustrated with the economic side of the Sino–US  relationship — on topics like intellectual property rights, market access and China’s economic protectionism. The US wants China to be a responsible stakeholder in the global economic recovery, which is very important for the US economy, and, as he said in welcoming Xi to the White House, ‘play by the rules of the road’.

Xi’s trip is even more important for China than it is for the US. Xi has two audiences: one with the US and one with China’s public. The Chinese audience is more important from his perspective because people in China will want to see whether or not he can represent China well, earn respect from the United States, and act like a statesman or even a global leader. Xi will try to advance his country’s interests as people in China watch. If the trip is successful, Xi will gain political capital and consolidate his power at home. He cannot afford for this trip to be a failure. It would hurt him politically if he were to say something unnecessarily confrontational or act an unstatesmanlike way. It would be even worse if he appears accommodating and not firmly protective of China’s interests.

The US wants to know more about Xi’s personality and policy orientations, especially on issues important to the US. Twenty, ten, or even five years ago, China’s economy was considered less consequential than those of the EU, Japan, Canada, or even South Korea and Mexico. But today, China is rapidly becoming a global economic powerhouse, and the Chinese government’s monetary, trade, taxation, industrial, environmental, and energy policies have a major impact on both the US and global economies.

This visit can also help Xi better understand the US — its values, concerns, and goodwill to China — and correct any of his misperceptions. So the visit is a valuable opportunity for the US to show the best of America to Xi. At the same time, it is an opportunity for Xi to gain a deeper understanding of the challenges confronting the US and how China relates to America.

Xi is meeting not only with President Obama and Vice President Biden but also with the Secretary of State, the Secretary of Defense, the Secretary of the Treasury and other national and local leaders as well as business elites. He will also have a chance to meet many ordinary Americans. This demonstrates that the US wants to develop mutual respect, if not yet mutual trust, with Xi and the Chinese leadership. A personal relationship is of value everywhere, but especially so in Chinese political culture.

Xi holds promise for the US because he previously served as provincial leader in Fujian and Zhejiang and as party chief in Shanghai. These provinces and cities are famous for their dynamic private sectors. Xi is seen as very pro-market. He is also a good friend of former US treasury secretary Hank Paulson. There is thus an expectation that Xi will push for greater financial liberalisation and renminbi convertibility.

At the same time, Xi faces serious economic challenges at home, including a property bubble, inflation, and a rising unemployment rate. China is also experiencing rising labour costs that are adversely affecting the economic advantages which made Chinese growth so powerful up to now. If the property bubble bursts China’s middle class could be hurt and the country’s economy could be in big trouble.

Xi is also facing a dilemma over China’s state-owned enterprises. These monopolies in major industries including telecommunications, oil, shipping, and railways are very strong interest groups that are nested in corruption and disliked by the
Chinese public. If Xi wants popular support he needs to deal with these monopolies diligently. But if he does too much to curtail their rapid expansion he could undermine his power base and see some challenges from these powerful interest groups.

Both the US and China are facing economic difficulties while going through a leadership transition or election. This is unusual in recent history. In addition, each nation has some negative perceptions of the other. In the United States there tends to be blame put on China, particularly on economic issues that are central to the current US presidential campaign. When economic problems are discussed in the US nowadays, you cannot avoid talking about China. China comes up often in the Republican primary debates and was also a focus of President Obama’s State of the Union address, where he criticised China’s protectionism. In China there is a growing nationalist or even anti-American sentiment, not only among the young but also among public intellectuals, and certainly within the military.

In the current political environment, Xi’s visit provides an early opportunity for the leaders of both countries to build mutual respect and perhaps even the mutual trust that will be necessary for navigating what are sure to be some difficult years ahead.

Cheng Li is Senior Fellow at the Brookings Institution. Dr Li examines China’s new leadership in a new volume and in an article in the latest Washington Quarterly ‘The Battle for China’s Top Nine Leadership Posts’ This essay originated in an interview with the National Bureau of Asian Research.