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In this week’s issue of the Global Impact newsletter, we look to the future of the US-China relationship following the meeting between presidents Xi Jinping and Joe Biden in November. Photo: AP

Economy Global Economy

Global Impact: what does a post-Apec US-China relationship, and their global competition, look like?

Global Impact is a weekly curated newsletter featuring a news topic originating in China with a significant macro impact for our newsreaders around the world
In this week’s issue, we look to the future of the US-China relationship following the meeting between presidents Xi Jinping and Joe Biden in November

US-China relations

Robert Delaney

Published: 2:00pm, 14 Feb 2024

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Nearly three months after the long-awaited summit between Xi Jinping and Joe Biden in California, it’s time to check on how the meeting has changed the bilateral relationship.

Although far from rapprochement or a reversion to robust economic engagement, the two sides have at least followed through with high-level meetings, with Air Force General CQ Brown, chairman of the US Joint Chiefs of Staff, speaking with his Chinese counterpart General Liu Zhenli in December.

Those were the first senior military talks between Washington and Beijing since the Chinese government halted all such engagements in response to then-House speaker Nancy Pelosi’s visit to Taiwan in August 2022, and the repeated warnings that the severed communication raised the risk of a military conflict.

Broken ice on this front appeared to move Beijing away from the position that some analysts were expecting: that Chinese government officials felt military-to-military dialogue would embolden the US to maintain its presence in the Taiwan Strait, as well as the east and south China seas.

03:12

Xi Jinping, Joe Biden hold talks on sidelines of Apec summit to ease strained US-China ties

Still, analysts saw restored communication in the wake of the Xi-Biden summit as a “low bar for success” and few expected them to end tensions in the South China Sea, where the strain has been most acute.

Indeed, just two weeks after the Brown-Liu conversation, the People’s Liberation Army’s Southern Theatre Command sent its navy and air force to the South China Sea for patrols to monitor activities it said were “disrupting” the region. This move occurred as the US and the Philippines held their second joint drills in the contested waters in less than two months.

The most senior dialogue between the two countries since the November summit was held in Bangkok between China’s top diplomat, Wang Yi, and US national security adviser Jake Sullivan.

The meeting was characterised by restatements of existing positions, a request by Wang to “treat each other as equals instead of being condescending”, and little to indicate that Beijing would use its leverage over Iran to halt attacks on shipping vessels transiting the Red Sea by Houthis in Yemen.

10:26

Yemen’s Houthi fighters behind Red Sea attacks threaten to disrupt global trade

Following the Wang-Sullivan meeting, an inter-agency US delegation led by deputy homeland security adviser Jen Daskal travelled to Beijing for a two-day talk with their Chinese counterparts where they launched a counternarcotics working group.

They managed to pull that off even though the US Justice Department filed criminal charges against Chinese nationals in June and, for the first time, Chinese chemical companies accused of illegally trafficking ingredients used to make fentanyl.

US government data shows fentanyl, a synthetic opioid, is the leading cause of death for Americans aged 18 to 49, making it a highly political issue and one where China is often accused by US lawmakers of fuelling the problem.

Mixed signals have also come from reinvigorated bilateral negotiations on the economic front.

The third meeting of the US-China Financial Working Group between China and the United States ended with “both sides agreeing to continue to meet regularly”.

US lawmakers criticise lifting of sanctions to gain China’s help on fentanyl

However, analysts questioned how much progress could be made, with political frictions limiting the working group’s ability to resolve more fundamental issues.

More recently, in a meeting of the US-China Economic Working Group – launched in September along with its financial counterpart – the Chinese side voiced concerns over tariffs, investment restrictions and sanctions on its firms, while US delegates raised issues with China’s industrial policy practices and overcapacity, as well as the resulting impact on American workers and firms.

The contrasting messages were amplified by senior American and Chinese officials at an annual gathering of both countries’ business communities, hosted by the China General Chamber of Commerce, where Nicholas Burns, the US ambassador to China, said that even though the bilateral relationship had “notably stabilised” since the meeting between Xi and Biden in November, it remained “competitive”.

Burns made clear that Washington was unwilling to “compromise” on national security and stressed that keeping “sensitive” technology such as advanced chips out of China and re-routing the flow of critical minerals “much closer to home” made “great sense”.

03:21

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Speaking ahead of Burns at the event, Xu Xueyuan, the deputy chief of mission and minister at the Chinese embassy in the US, who called “win-win cooperation” the only way for the US and China to get along, doubled down on her dismay about how some US policymakers told her not to use the term.

Days before the chamber of commerce event, speaking to an audience at the Carter Centre in a pre-recorded video address, Chinese ambassador Xie Feng also appeared to cite these restrictions as an impediment to better relations.

While Biden administration officials try to balance closer bilateral communication with scepticism and efforts to “de-risk” America’s economic relationship with China, the US Congress does not even bother with engagement.

Just days after the Biden-Xi summit, several pieces of legislation targeting China – including one that could close Hong Kong’s representative offices in America, and another that would all but block US investment in China’s artificial intelligence and other hi-tech sectors – cleared the House Foreign Affairs Committee.

US Congress mulls new methods to restrict investment in Chinese tech sectors

More recently, a House Financial Services subcommittee is considering new ways to restrict US investment in China that involves sensitive technology.

But engagement with China remains a Biden administration priority. More high-level US-China engagements are planned for the near term, with the most significant being an expected phone call between Xi and Biden “this spring … in the coming months”, a senior Biden administration official told reporters after the Wang-Sullivan meeting.

US Treasury Secretary Janet Yellen announced plans to make another trip to China this year to keep pressing Beijing for clarity on its “non-market practices”. At the top of her agenda is facilitating exchanges between US and Chinese financial regulators.

Regardless of how much progress the post-Biden-Xi-summit engagements make, the outcomes may be meaningless if former president Donald Trump steps back into the Oval Office for a second term next year – a concern that has become more prominent since the Republican nominee has outmanoeuvred his competition.

‘Chaotic for the whole world’: fears over Trump’s Taiwan agenda if he wins again

A clip recorded in July, in which the former president refuses to spell out whether the US would help to defend Taiwan, even if it meant going to war with Beijing, was pulled into the news cycle and amplified in recent weeks as Trump’s electoral chances have improved.

Speaking about Taiwan’s lock on manufacturing for the world’s most advanced semiconductor chips, he said “they took our business away” and that “we should have stopped them”.

“The US will always pursue ‘America first’, and Taiwan can change from a chess piece to a discarded chess piece at any time,” Chen Binhua, spokesman for Beijing’s Taiwan Affairs Office, said at a regular press briefing, in response to the wave of attention that those hardline comments about Taiwan produced.

But Chen spoke too soon.

Underscoring the confusion that reigns when it comes to Trump’s China policy, he pledged to slap additional tariffs – possibly in excess of 60 per cent – on imports from the country if he wins this year’s election.

60-Second Catch-up

Donald Trump says he would impose tariffs on China again if re-elected in November

Opinion: Trump’s tariff threat signals no relief from US-China trade pain

Senior Chinese officials voice concerns on US tariffs, investment curbs in ‘candid’ bilateral meeting

Senior Chinese and US finance officials agree to ‘continue to meet regularly’ amid discord

China and US vow closer cooperation in fighting America’s fentanyl crisis as drugs group begins its work

China and US ‘step in the right direction’ with top-level talks in Thailand

Opinion: Although China and US made no real gains in Bangkok, maybe talking about the relationship is the relationship

Deep dives

‘Chaotic for the whole world’: fears over Trump’s Taiwan agenda if he wins again

Now headed for a rematch with US President Joe Biden, Donald Trump suggested during his first administration the self-governing island was not a priority, analysts say
If his indifference continues in a second term, one expert notes, it would be a ‘major geopolitical gift’ to Beijing

Donald Trump, the leading candidate to secure the Republican Party nomination for US president, has sparked a new debate, with months-old comments about Taiwan doing the rounds on social media.

In a clip recorded in July, the former president refuses to spell out whether the US would help to defend Taiwan during a possible second term, even if it meant going to war against Beijing.

Why China hopes US won’t touch century-old trade rule for imports under US$800

E-commerce giants Shein and Temu flourish as parcels surpass quarter of a trillion dollars in value annually amid push to tighten de minimis provision
US lawmakers argue Chinese goods produced from forced labour are being allowed into the states, but election year factors cast doubt on reform

Like many entrepreneurs handling exports in the business powerhouse that is China’s Guangdong province, Victor Wang’s freight company has leapt into cross-border e-commerce.

Transitioning away from placing large containers of bulk cargo on overseas-bound ships, Wang over the past year has embraced a sea change in volume and scale that has proved lucrative.

China’s investment in Mexico is up – but is dodging US tariffs the whole story?

Investment in Mexico by Chinese companies has increased in recent years, and the timing suggests heightened US trade restrictions are a factor
The country has appeal outside its role as a bypass, however, with a relatively inexpensive labour force, high urbanisation and growing middle class

Though sidestepping Washington’s tariffs has been a prime incentive for Chinese manufacturers to boost their investments in Mexico, the United States’ southern neighbour offers far more than an alternate route into the world’s richest country – as well as its fair share of risk, analysts warned.

The escalation has been unmistakable. Export value for automotive components sent to Mexico, for instance, surged 35 per cent in 2018 – the same year strict trade restrictions were imposed by Washington – followed by a 48 per cent jump in 2021.

Time to compromise? Has US economic growth strengthened its hand with China?

US economy expanded at annualised rate of 3.3 per cent in fourth quarter, while China is faced with challenges at home and abroad
Trade and economic talks have increased since Xi Jinping met Joe Biden, with US Secretary of the Treasury Janet Yellen set to return to China this year

Stronger-than-expected economic growth in the United States and China’s contrasting slow recovery could push Beijing to “be more willing to compromise” in its trade and economic negotiations with Washington, though talks are ultimately “driven by politics”, according to analysts.

The US economy expanded at an annualised rate of 3.3 per cent in the fourth quarter, the Department of Commerce said on Thursday, just over a week after China confirmed its economy grew by 5.2 per cent, year on year, in 2023.

US and China have ‘strong reasons to favour status quo’ in 2024 economic talks

President Joe Biden seen trying to avoid ‘undue escalation’ with China, while Donald Trump hails friendship with President Xi Jinping amid threats of higher tariffs on Chinese goods
US-China Economic Working Group’s latest meeting comes as both sides struggle to see eye to eye on economic affairs in their ‘strategic rivalry’

Washington and Beijing appear keen on staying the course in their interactions, with warm handshakes and sincerity in dialogues, but they lack the incentive to resolve deep-seated differences, according to analysts who point to a just-concluded meeting of the US-China Economic Working Group.

Employing such a tactic in a formal economic-dialogue structure, they say, serves the respective agendas in both countries and comes as the administration of US President Joe Biden is facing a resurgent challenge by predecessor Donald Trump in an election year, while President Xi Jinping has his hands full trying to revive China’s economy.

Great power lite? Why China is reluctant to wade into the Red Sea crisis

Beijing has called for an end to the attacks on the ships and expressed concern over the escalating situation
But it is unlikely to play a bigger role in resolving the conflict, affecting its global standing, analysts say

For about two months, Iran-backed, Yemen-based Houthis have been attacking merchant ships in the lower Red Sea with drones and missiles.

The rebel group says the action is in response to the Israel-Gaza war and it is only targeting Israeli-linked vessels or those heading to Israel.

US Congress mulls new methods to restrict investment in Chinese tech sectors

Hearing is held to build on President Joe Biden’s executive order banning US investments in four Chinese tech sectors
Witnesses urge lawmakers to use existing authorities, including current export control lists, rather than create new mechanisms

Amid the growing tech war between the world’s two largest economies, the US Congress considered new ways on Tuesday to restrict US investment in China that involves sensitive technology.

The hearing by the House Financial Services subcommittee on national security, illicit finance and international financial institutions followed US President Joe Biden’s executive order in August prohibiting US private equity and venture capital investments from flowing into four Chinese tech sectors: artificial intelligence, quantum computing, semiconductors and microelectronics.

Global Impact is a weekly curated newsletter featuring a news topic originating in China with a significant macro impact for our newsreaders around the world.

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