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Thawing Ties? Biden & Xi Convene

Presidents Biden and Xi met for just the second time in Biden’s presidency last Wednesday. The consensus around their San Francisco meeting is largely positive. Those hoping for better ties will be buoyed by the superficial signs. One unfortunate ‘Bidenism’ aside in referring to Xi as a “dictator”, the leaders spoke warmly about each other. It was Xi’s first time on US soil since 2017. That itself implied an increased willingness to engage with this frayed relationship. Governor Gavin Newsom greeted him on the runway and even cleaned up the much-maligned San Francisco streets for his visit. Both sides wanted to make a good impression. 

China is keen to arrest its capital flight. Foreign investors are unimpressed with the country’s underwhelming post-Covid recovery and fragile property sector. The US wants to soothe and lower geopolitical temperatures in the Asia-Pacific region. Beyond the PR, what tangible progress was made? Militarily, there is good news as the countries agreed to resume high-level communications. We look at that first. But little has changed on trade. Tariffs remain as does China’s inability to import certain high-tech products. We examine the implications. Finally, we look to 2024 as a crucial year. Elections in Taiwan and the US will determine whether this meeting blossoms into anything more substantial.   

ACCIDENTAL CONFLICT IN THE SOUTH CHINA SEA

Speaking before the meeting, Anja Manuel said “success for President Biden and his team would be getting the military to military exchanges back.” Communication between the US and Chinese militaries shut down after Nancy Pelosi’s Taiwan visit in August 2022. Manuel described this state of affairs as “extremely dangerous”, saying “nobody wants an accident to happen that can then spiral out of control.” The countries’ militaries are operating in very close proximity in the western Pacific. Re-opening lines of communication lessens the chance of any accidental clash there.  

However, James Crabtree dismissed the prospect of these renewed relations changing the fundamental situation in the South China Sea: “”Expect a short-term honeymoon period after the meeting but no fundamental change in either side’s underlying competitive behaviour. China still wants to push the US out of east Asia. The US is determined not to let that happen.” Just last month, Manila summoned Beijing’s ambassador after clashes between Philippine and Chinese vessels. The Philippines is a US treaty ally. As is Japan with whom China is also involved in territorial disputes. An escalation of either of these situations obliges the US to engage China militarily. As long as the US continues to police the area, conflict remains a distinct possibility. 

RESTARTING US-CHINA TRADE

Meanwhile, the trade war goes on unabated. While Chinese state media praised the bilateral summit as “positive, comprehensive and constructive”, they criticised the ongoing sanctions. US trade and investment flows with China have decreased sharply over the last few years. But Biden has little political capital to change this before next year’s election. A strong bi-partisan consensus on China remains. By loosening any of Trump’s tariffs, Biden will also risk being portrayed as soft on China by his familiar rival for the Presidency.  

Noone expected this to change as a result of last week’s meeting. Those of a more optimistic disposition may see the diplomatic groundwork as an important first step in any eventual rapprochement. Furthermore, circumstances make it unlikely the US can enforce these measures indefinitely. Nvidia’s new sanction-friendly China chips are a sign that companies will not forfeit that market. Nor can the US hope to unwind China’s established position as the workshop of the world. Keith Bradsher, the New York Times’ Beijing Bureau Chief, points out that “China has already built enough solar panel factories to supply the entire world’s needs. It has built enough auto factories to make every car sold in China, Europe and the United States. And by the end of 2024, China will have built in just five years as many petrochemical factories as all of those now running in Europe plus Japan and South Korea.”  

CHINA’S FRIEND IN THE WHITE HOUSE: BIDEN OR TRUMP?

Without any significant change in China’s foreign policy, the US is unlikely to negotiate on sanctions before elections next November. Who would China rather see in the White House thereafter? Trump started this trade war and behaves unpredictably. He has railed against China’s “unfair” trade practises time and again. But he also sees himself as a ‘dealmaker’. His re-election would herald the return of a more isolationist foreign policy. Should a new trade regime appear advantageous to the US, he is unlikely to be so concerned about China’s foreign policy ambitions. Any agreement with a fresh Biden House will probably entail more compromise on this front.

TAIWANESE ELECTIONS, JANUARY 2024

There are perhaps more significant elections happening first in January in Taiwan. Crabtree says these are the “fundamental test of whether ties have really improved.” The DPP’s candidate Lai Ching-te has made supportive noises about Taiwanese independence. His election may increase Chinese aggression towards the contested country. Its military has already put on several exercises around the island this year. Some China-watchers speculate about a possible blockade should the DPP emerge victorious again. 

However, the party’s chances are diminished by the recently announced coalition between the more China-friendly Kuomintang and Taiwan People’s Party. The coalition is polling over 50%. A change in government will likely ease this geopolitical flashpoint. It’s much harder to see China taking military action against the self-governed territory when the ruling party is at least committed to the “One China” policy, albeit ambiguously. 

Biden sidestepped the question of whether the US would defend Taiwan from a Chinese invasion. He was reluctant to ruin the diplomatic tone by confronting such a politically charged issue. His administration likely hopes to see the DPP voted out on 13th January 2024. China will regard reunification less urgently if independence rhetoric ceases. 

For now, we can welcome improving diplomacy. But 2024 will soon test the solidity of any re-laid foundations. 

 

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