middle class and innovation to drive growth.


In short, China has lost some economic swagger. It gives the U.S. the upper hand -- at least slightly -- in negotiations this week.

"The world is now saying -- what's going on over there [in China]?" says Derek Scissors, a scholar at the American Enterprise Institute who focuses on Asia.

Related: Xi goes to Washington: 4 problems for the U.S. and China

U.S. bargaining position just got stronger

The U.S.-China relationship will always be one of co-dependence, at least economically.

But China probably needs America more right now. Its economy is heavily dependent on making goods and selling them to other people around the world, especially the U.S.

When President Xi Jinping meets Obama on Thursday and Friday, expect the White House to use any advantage to push hard on China to crack down on cybercrime and stop stealing U.S. corporate secrets.

"We've been pounding them on the cyber issue," says former ambassador Stapleton Roy, who is now at the Kissinger Institute on China and the United States. "I expect something to come out of the summit on cyber."

China's middle income trap

The bigger issue for China is that the country is undergoing a massive transformation from a cheap exports nation to one that is self-reliant on its

It's known as the "middle income trap."

It's tricky. Many developing nations fail when they hit this stage. That's why there's such a fierce fight over China stealing U.S. intellectual property. That game plan works for awhile, but it wo

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