Energy prices fuel US-China tensions

Paulson calls for more cooperation

A woman rides her scooter past power lines under repair in Beijing. US and Chinese officials are meeting to talk about energy and China's $256.2 billion trade deficit with the United States. (MARK RALSTON/AFP/Getty Images)

WASHINGTON - With its exploding appetite for energy, China - not quite an ally, not quite an adversary - is helping drive up world oil prices and putting still more strain on its relationship with the United States.

The importance stretches far beyond the gas pump, although that is where Americans are left wondering what's behind the run-up, why it can't be stopped, and who is to blame. China is just one factor. Also at play are worries about future supplies and production disruptions in Africa or the Mideast.

Still, the "China factor" is big. By some estimates, car ownership in China is growing so fast, with the expansion of its middle class, that by 2030 its traffic will be seven times or more what it is today. China already is the world's second largest energy consumer, after the United States.

That explains why senior-level economic officials from Beijing and Washington are meeting in Annapolis, Md., this week to discuss a range of hot-button issues, including the $256.2 billion US trade deficit with China - a record high - and prospects for increasing cooperation on energy issues.

The United States and China must increase their cooperation on energy issues in the face of increased demand and record high oil prices, Treasury Secretary Henry Paulson, who is leading the US delegation, said yesterday as he opened the meeting.

The session, the fourth in a series, was held on the campus of the US Naval Academy. The Chinese team was being led by a newcomer, Vice Premier Wang Qishan, who took over after the retirement this year of former vice premier Wu Yi.

Looming in the background to these and other discussions about US competition with China is the prospect of armed conflict - if not over China's demand for the return of Taiwan, then over energy resources. China has invested greatly in modernizing its military in recent years, although its budget - even by the Pentagon's high-end estimate - is hardly one-quarter what the US spends on defense.

At present it sounds far-fetched to think of rising oil demand as a trigger for war with China, and some of the United States' more experienced China watchers say that makes little sense.

In a sense, US consumers have a stake in seeing China's energy needs met. Americans can't seem to get enough of China's exports, from toys and clothes to computers and car parts. That's an expanding appetite that is part of the reason China is looking far and wide for additions to its energy supplies.

The soaring trade deficit with China is cited by critics as a major contributing factor in the loss of more than 3 million US manufacturing jobs since 2001. Many in the United States say the undervalued yuan makes Chinese goods cheaper in this country and America's products more expensive in China.

The United States has urged China to promote energy efficiency as a way of reducing strains on global supplies, but that has met with little success.