Chi­nese Pres­i­dent Hu Jintao is meeting with Pres­i­dent Barack Obama and other U.S. offi­cials this week. Ravi Rama­murti, Dis­tin­guished Pro­fessor of inter­na­tional busi­ness and director of the Center for Emerging Mar­kets at North­eastern Uni­ver­sity, assesses the impor­tance of the meeting between the global eco­nomic rivals.

Pres­i­dent Hu has said that both China and the United States “stand to gain from a sound rela­tion­ship, and lose from con­fronta­tion.” What are some of the ways in which a strong pos­i­tive rela­tion­ship ben­e­fits both superpowers?

The two sides have gen­uine dif­fer­ences over what con­sti­tutes a “sound rela­tion­ship,” whether you’re talking about indus­trial policy, intel­lec­tual prop­erty pro­tec­tion and exchange rates or Taiwan and human rights. The U.S.-China rela­tion­ship is thus bound to be rocky, as both sides deal with these knotty issues and adjust to fun­da­men­tally new roles in the world economy. At least in the short run, we need cheap Chi­nese goods and Chi­nese cap­ital, while they need access to U.S. mar­kets and tech­nology. Both sides would like to see world growth return to pre-​​crisis levels. A trade war would do nei­ther side much good. Polit­i­cally speaking, con­fronta­tion could spin out of con­trol or under­mine eco­nomic recovery, leading to unde­sir­able outcomes.

China has the largest pop­u­la­tion and fastest-​​growing export market in the world. How can Amer­ican busi­ness owners take advan­tage of this opportunity?

America’s large com­pa­nies are already very active in China. In 2010, Gen­eral Motors sold more cars there than in America. How­ever, most large U.S. firms could be more aggres­sive in going after the mass market in China’s second– and third-​​tier cities and rural areas, because they cannot thrive glob­ally unless they thrive in China. The story is dif­ferent for small Amer­ican firms, which lack the resources to make a big push into China; many of them are strug­gling to hold on to their domestic cus­tomers in the face of cut­throat Chi­nese com­pe­ti­tion. China is good news for these firms only when they have to source cheap parts and com­po­nents made in that country.

China is the United States’ largest lender. How much of a role does China play in rein­vig­o­rating the U.S. economy?

By lending us money, China props up the dollar, holds down U.S. interest rates, keeps infla­tion at bay and stim­u­lates internal demand. Unfor­tu­nately, this arrange­ment is not sus­tain­able, because China cannot for­ever be the net pro­ducer and saver, and the U.S. for­ever the net con­sumer and bor­rower. We need the Chi­nese to show the same enthu­siasm for U.S.-made goods and ser­vices that they show for U.S.-issued bonds and stocks.

The U.S. gov­ern­ment accused the People’s Bank of China of under­valuing the ren­minbi in order to boost its exports. How does manip­u­lating the cur­rency in China affect jobs here?

For U.S. com­pa­nies that com­pete directly with Chi­nese imports — such as steel or tire man­u­fac­turers — China’s under­valued cur­rency leads to arti­fi­cially low prices and patently unfair com­pe­ti­tion. But the bulk of U.S. imports from China con­sist of goods, such as toys, footwear or con­sumer elec­tronics that would be made in Vietnam or Indonesia, not the U.S., if the ren­minbi were prop­erly valued. Thus, an appre­ci­a­tion of the ren­minbi may reduce our trade deficit with China but not our trade deficit with the rest of the world. The biggest vic­tims of China’s under­valued cur­rency are Asian neigh­bors that have not delib­er­ately under­valued their currencies.

Pres­i­dent Obama was expected to take a more assertive approach toward dealing with China than he did during his visit to Bei­jing in 2009. How will Pres­i­dent Hu and the rest of the world receive this strategy?

Pres­i­dent Hu may not wel­come it, but the Chi­nese sure do respect strength — not humility, com­pas­sion or polite­ness. But the strength has to be real and cred­ible. China knows that America is hurting eco­nom­i­cally and is mil­i­tarily overex­tended. So, Pres­i­dent Obama must not over­play his hand, and must be assertive without appearing to be dis­re­spectful. Given the aggres­sive­ness shown by China’s mil­i­tary in recent months, many coun­tries, par­tic­u­larly in Asia, would wel­come an assertive United States.

Some inter­na­tional econ­o­mists say that Chi­nese loan sub­si­dies make it impos­sible for the United States to com­pete with China in green tech­nology. What must the U.S. do to recap­ture the lead in pro­duc­tion of clean energy technologies?

China’s com­pet­i­tive­ness in green tech­nolo­gies is partly based on unfair sub­si­dies, which the Obama admin­is­tra­tion should fight as vig­or­ously as World Trade Orga­ni­za­tion rules allow. But it also stems from the country’s strong com­mit­ment to pro­mote green tech­nolo­gies, which has reduced uncer­tainty for local firms about future demand and prices. This kind of indus­trial policy is anathema to the U.S. and unlikely to work here. There­fore, we may not be able to reverse the lead China is gaining in some branches of green tech­nology. Sure, we can resort to pro­tec­tionism, but that is at best a pal­lia­tive, not a cure.