Andrew S. Erickson

China’s slowing economic growth, the U.S. shale gas and oil boom, and emerging resurrection of U.S. manufacturing and industrial activity point to a new and uncertain world. China’s leaders rode a wave of economically driven hubris following the severe U.S. recession in 2008 and uneven recovery, but the tailwinds are fading and China’s central and local leaders alike will face tough decisions as they seek to keep the country stable and the Communist Party relevant. Beijing’s repeated rollouts of modern new military hardware in recent years signal significant increases in China’s hard power. At the same time, ballooning local debt, pollution, chronic diseases and other challenges threaten to curtail growth significantly decades before China can build comprehensive national power commensurate with its aspirations and rhetoric.

The U.S. also faces huge national challenges that will require long-term vision and skillful leadership. Foremost among them: An increasingly bitter political climate driven by divergent philosophies of governance has stalled Washington’s ability to set government spending on a sustainable path. This economic and political turbulence generates daily problems, like the myriad pains resulting from the ongoing federal budget sequester and its cuts to government spending—ranging from Head Start programs to public defenders to support for front-line military forces.

The potential long-terms effects are more sobering, as the now-five-year bout of post-recession instability is helping to establish a more risk-averse mentality within a broad cross-section of American society. If workers, leaders and executives continue battening down the hatches, they risk sapping a major engine of U.S. growth and dynamism. In short, the U.S. has the tools at its disposal to revive economic growth and resume dynamic change. That said, applying the tools will be difficult and the challenges of balancing the actions needed for domestic revival with the imperative of safeguarding overseas interests in a complex world are substantial. The U.S.-China relationship will play a key — if underappreciated — role in this unfolding saga, as both nations rely on each other economically and are increasingly interdependent in other ways.

China and the U.S. face substantial challenges and opportunities in their relationship. One meeting cannot magically surmount these issues. Therefore, Presidents Obama and Xi cannot afford to engage in California dreaming and ignore the fundamental differences in political systems and national interests that complicate their bilateral relationship. No amount of personal rapport, or even friendship, could hope to solve that.

Instead—even if only tacitly—they should recognize that even if the discussions are not all sunny at Sunnylands, frank, substantive dialogue would still represent a positive outcome. Both Washington and Beijing need to appraise honestly where engagement is presently feasible, where progress is achievable politically, and where cooperation remains difficult if not impossible for the foreseeable future. These broader dynamics, even if implicit, must inform their specific efforts. Both Obama and Xi face significant real world political constraints and must tap reservoirs of political courage to begin realizing the potential of their relationship.

At present, many vital U.S.-China diplomatic discussions—the Strategic and Economic Dialogue, for instance—focus on technocratic agendas that are inadequately informed by a larger vision. These issues are vitally important, but they cannot by themselves replace direct communications between top leaders aimed at setting a realistic agenda for a comprehensive relationship. Such a leadership-informed agenda can’t transcend fundamental problems, but it can certainly help prevent inconsistency and inattention from making existing problems even worse. And in the present context of Sino-American relations, that in itself would represent a victory of sorts.

Working events such as Sunnylands thus offer the chance for the top leaders to build interpersonal relationships that function as the connective tissue linking the efforts of the special working groups into a more powerful whole. If Presidents Obama and Xi use the Sunnylands summit to begin a real dialogue that creates space over time for circumventing and managing core friction points, it will be a true success.

In this spirit, there are three core points for the two to grapple with at Sunnylands. Each helps define the context of a bilateral relationship whose impact reverberates globally.

• “Selective power status” won’t work anymore. China has become sufficiently powerful that the U.S. is unwilling to facilitate Chinese efforts to “have it both ways” by posing as a poor developing country or an established superpower when convenient. U.S. willingness to accord China international status lies not in its internal development (a task for all nations, including the U.S.) or bilateral negotiations (many of which the U.S. is not a party to) but to the public goods it provides. China’s Gulf of Aden antipiracy missions represent a positive step forward, and have rightly received approbation from the U.S. and many other nations. Any concrete plans for further steps in this direction that Xi might communicate to Obama could have a similarly positive effect.

• Real reciprocity is essential. The quality of Sino-American relations will be determined by the opportunity for reciprocity in key areas. The key is that each side not be actively prevented by the other from pursuing activities when the other side is legally free to do the same; how and whether to act is their choice. For example, China continues to restrict American firms’ market access with high protective barriers. Opposition to Cnooc Ltd.’s bid to purchase Unocal should be viewed in the larger context: no American firms would even be considered for equivalent opportunities in China. Market access should be emphasized over “currency manipulation,” which is a far more complex issue. As Abenomics suggests, a key U.S. ally like Japan can engage in even more dramatic exchange-rate adjustments. And U.S. quantitative easing policies themselves have been widely criticized abroad for deflating the value of the U.S. dollar. Rather than issuing similar nonspecific complaints annually about the Pentagon’s PLA report, Beijing is free to issue its own report on the U.S. military, as it already does concerning U.S. human rights. More positively, Chinese acknowledgement at the 2013 Shangri-La Dialogue of its conducting military surveillance in America’s undisputed exclusive economic zone may presage reduced opposition to similar activities in China’s own EEZ as China rises as a maritime power with access interests of its own.

• Strategic adjustment is a two-way street. Over time, Washington and Beijing may need to make strategic arrangements and adjustments vis-à-vis each other. But China cannot simply emphasize what the U.S. should offer while declining to specify what China might offer in return. The U.S. would be ill-advised to repeat its 2009 Joint Statement mistake of accepting vague rhetoric to help with problems of international concern, e.g., vis-à-vis North Korea and Iran, in return for U.S. “acknowledgement” of “core” Chinese national interests. To paraphrase Mark Twain, reports of American decline are greatly exaggerated. Given the likelihood of China’s economic and overall growth slowing in coming years and of enduring U.S. power, Washington should not be pressured into hasty “concessions.”

With these points in mind, far from the klieg lights of either capital’s domestic politics, President Xi will need to explain concretely to President Obama his vision for a “new type of great power relations.” If the concept truly entails meaningful reciprocity with tangible applications, then there should be plenty of room for U.S. attention. If, however, this concept proves to be nebulous rhetoric with undertones of expectation that Washington yield to an ascendant Beijing and its principled positions, it will be a bridge to nowhere. Any idea that is truly worthwhile should be readily forthcoming and understandable.

The grave internal challenges China and the U.S. face and the tough webs of issues Beijing and Washington must confront when dealing with each other mean that the time for California dreaming is over. Presidents Obama and Xi have the opportunity to set a new tone and attack the “real” issues when they meet later this week. Let us all hope they choose the bold path of facing reality over politics of mutual delusion.