The debt standoff is temporarily over, apocalypse isn’t now and everyone can take a deep breath.
For China, its big dance partner, the U.S., is still too big and important economically to be abandoned or ignored or snubbed. But the terms of the deal are changing.
America’s fundamental economic power may have not been badly hurt—this time—but America’s fundamental soft power has been dealt a harsh blow.
How much does China need America? Now—and for the foreseeable future—a lot. No other market, no other destination for reserves really compares. For China that’s a question with a fairly simple answer.
The questions for the United States, though, are different. How much does America need influence with China? How much influence does it actually have? It may need influence. It may crave influence. Sometimes, still, it may even demand influence. But the credibility gap has widened.
There are key issues where Washington’s voice could be useful and important: trade, economic reform, political reform, human rights, rule of law—the list is long. The spectacle on the Potomac, however, has weakened that voice far more than just an acute case of laryngitis. To regain some projection, the U.S. needs to go after the chronic problems, address some of its own fundamental issues, narrow the credibility gap and try hard to climb up to the moral high ground again.