One reason for the U.S. lag is its technological trade embargoes on exports to China. The logical pattern of exchange between China and the U.S. is clear. At present the U.S. cannot compete with China in lower and medium technology products, while China cannot compete with the U.S. in the highest technology. In line with comparative advantages, each should supply the other with that in which it is strongest. China does so by supplying lower and medium technology products that have also had the beneficial effect on the U.S. of keeping its inflation low. If the U.S. refuses in return to export high technology products, it can scarcely be surprised at its consequent trade deficit.

China also has large foreign exchange reserves – a high supply of capital that can be invested abroad. This helps power its European investment. But the U.S. has discriminated against Chinese companies by blocking the China National Offshore Oil Corporation from buying the U.S. oil company Unocal and carrying out discriminatory actions against China's telecoms manufacturer Huawei, by opposing its partnering with U.S. firm Bain Capital Partners in a partial buyout of 3Com Corp, and so preventing it from winning significant U.S. contracts. The U.S. evidently wants the widest field for its companies' investments in China while at the same time restricting China's investment in the U.S.

In terms familiar to U.S. corporations, this constitutes "country risk." "China bashing" in the U.S. necessarily leads Chinese companies to conclude that the risk of doing business with the U.S. is greater than of doing business with the EU. Consequently EU companies gain more than U.S. ones from trade with China.

Vice President Xi's visit might have helped convince the U.S. administration that treating China and other countries as equals is not only morally correct but the only route to doing the most successful business.

John Ross is visiting professor at Antai College of Shanghai Jiao Tong University. From 2000 to 2008 he was director of economic and business policy in the administration of the Mayor of London Ken Livingstone. He previously served as adviser to several major international mining, finance and equipment manufacturing companies.