US-China relations: how business can help write the new rules of engagement

The deteriorating bilateral relationship can benefit from expert input from the business community as Beijing and Washington redraw the lines in strategic industries
Business ties can also play a stabilising and humanising role as dialogue channels shrink elsewhere

Colleen K. Howe

Published: 3:30am, 21 Jul, 2021

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If there were any questions about whether the US and China would remain strategic rivals under a Biden presidency, no one is wondering now.

The US fears China wants to change the global order and reshape the world in its own illiberal image. China believes the US intends to hold back its hard-won economic rise. There is probably truth to both views.

These opposing world views are on a collision course. The goal now is to carve out a space for peaceful coexistence. That means drawing lines and setting down the rules of engagement.

This has drawn comparisons to the Cold War. Yet, viewing US-China relations today through the lens of the Cold War risks downplaying the importance of non-state actors in the international system.

British diplomat Robert Cooper may have spoken too soon when he said in the 2000s that borders were increasingly irrelevant. Nation-states are still paramount. However, international relations theorists have also pointed out that the largest corporations are now bigger than most states in terms of revenue.

In fact, political scientists say international relations will increasingly be shaped by the interplay between states and corporations.

As positions on both sides harden, traditional bilateral and information channels are closing or narrowing. The two sides have no plans to restart the high-level economic talks that used to be a cornerstone of the economic relationship, and it is not clear yet whether a meeting between presidents Joe Biden and Xi Jinping is on the cards.

It is becoming harder to understand what is happening in China as foreign correspondents have been denied visas, while some Chinese journalists in the US have also been squeezed by limits on correspondents from state-run media. Even traditional people-to-people ties like student exchanges have slowed due to the pandemic and rising tensions.

All of this has resulted in a shrinking space for dialogue and basic understanding.

A face-to-face meeting between Chinese President Xi Jinping and US President Joe Biden is up in the air amid tense bilateral relations. Photos: AFP

But business ties, which have traditionally produced some of the staunchest opposition to drastic policy measures, may in fact have deepened. Earlier this month, Chinese Premier Li Keqiang met British business leaders, including senior executives from AstraZeneca, BP and HSBC.

The meeting was not the only time this year that Li has met a foreign business community; it followed a February meeting with European business leaders from Volvo, Airbus and others, and an April forum with senior executives from American companies including Boeing and Pfizer.

Li stressed in the British meeting that businesses from the country would be treated fairly in China, reassuring leaders spooked by the possible business repercussions of growing tensions.

With the opportunities for bilateral exchange slowing, business ties will be an increasingly important way for leaders to sound out the other side and gauge intentions.

Bilateral business relations can help maintain stability in the relationship. Under the current trajectory, the best outcome for the global economy will be for decoupling to be restricted to specific strategic industries rather than cordoning off entire sectors of the economy.

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For example, as governments across the world look to promote domestic semiconductor production, industry experts have warned of the risks of rising protectionism in chipmaking, and called on policymakers to continue to allow civilian-use chips to be traded freely.

Policymakers should continue to involve industry experts in discussions over where to draw these lines.

Another area in which industry can help to define the limits of national security is in data privacy. Last year’s debate over TikTok raised questions about whether any use of personal data could be considered a national security threat.

The Biden administration is moving to end the Trump administration ban on new downloads of TikTok, signalling that it is open to a more measured approach to national security considerations.

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Meanwhile, Beijing is wringing its hands over Didi’s collection of personal data and whether expansion abroad could risk the misuse of that data by a political adversary.

US companies’ stances have grown more complex since the days of China’s accession to the World Trade Organization, in which corporations like Boeing played a big part in smoothing over the deal in the US Congress.

But they may still have a role to play when there are internal disputes, such as during the wild policy swings seen in the Trump administration between China hawks and advisers who wanted to take a more conciliatory view.

Business ties can also be unexpectedly humanising. The 2019 documentary American Factory chronicled Chinese glass producer Fuyao’s efforts to open a factory in a declining Ohio industrial town.

Though some viewed the documentary as a commentary on the incompatibility of Chinese and American working cultures, others saw the interactions between American and Chinese employees depicted in the film as a tale of solidarity among blue-collar workers around the world.

To be sure, the ability of businesses to push back on government actions is limited in this time of heightened tensions and polarised citizenry.

US businesses in Hong Kong complained about the government’s clunky messaging in warning them recently about the risks of operating in the city – as though they were not keenly aware of the risks – while Chinese companies probably had little say in the decision to clamp down on offshore listings by Didi and other Chinese companies.

Certainly, there are lines that cannot be crossed. The US is unlikely to back down when it comes to human rights and China’s treatment of Uygurs. China, for its part, will refuse any action that it views as threatening its territorial integrity. And corporations need to be wary of states using them for geopolitical ends.

But more dialogue and expert input can make it clearer where those lines are, bringing stability and predictability to bilateral relations.

Colleen K. Howe is a programme associate at the Asia Business Council