US-China business cooperation is prevailing, despite tensions elsewhere
- Between China agreeing for its US-listed firms to be audited and the US extending exemptions on trade tariffs, it’s clear both countries can be pragmatic when needed
- With the Xi-Biden meeting in November to be followed by a trip to China by top US official Antony Blinken, there is yet more room for engagement
You’d be hard pressed to find evidence of US and China cooperation these days, considering the intense economic competition and even military rivalry growing between the two. And yet, there are signs that rationality is returning.
Recent events in finance and trade highlight an approach based on mutual interests that endures despite obvious disagreements in other parts of the bilateral relationship. They point towards potentially more cooperation in the future.
Inspections with two auditing firms (one in Hong Kong and one on the mainland), allowed the board to evaluate documents and interview corporate personnel. All US-listed companies are subject to this kind of potential review. State-owned enterprises, which were part of the disagreement between Beijing and Washington, were included in this round of audits.
The PCAOB has the authority to investigate US-listed public companies and broker-dealers registered with the US Securities and Exchange Commission. Their mandate is to protect investors and issue reports of their findings to the public.
This may come as a surprise to the most hawkish of US-China watchers, but access and documentation was granted in a timely manner and the PCAOB concluded its work to the organisation’s satisfaction. Reports are expected to be released in 2023, giving investors greater insight regarding any deficiencies and potential follow-up actions.
The net result of this cooperation is better-informed investors and Chinese companies gaining continued access to US equity markets.
In areas where there is no national security concern, this type of mutually beneficial economic exchange should continue. Chinese companies are now being treated the same as US and other publicly traded firms.
In all of these cases, transparency and rule of law are being applied without fear or favour, as intended. That should come as good news to Beijing, which has asked for more clarity regarding market access on many occasions. China has published rules for various sectors of the economy open to foreign firms for years. The US, while perhaps not being as explicit, appears to be heading in the same direction.
Next up is US Secretary of State Antony Blinken’s expected visit to China early next year. That will provide yet another opportunity to expand engagement. The groundwork for Blinken’s trip is already being laid with a visit to China earlier this month by two high-level officials from the US State Department and the White House National Security Council.
It is too early to tell whether any breakthroughs may occur – the meeting will inevitably cover issues where both countries vehemently disagree, as well as areas of potential benefit. One should not outweigh the other.
If both sides can move beyond the all-or-nothing approach of their most vehement hardliners, then real progress may be made. Successful diplomacy requires comfort in the grey zone. This is the hallmark of a maturing, albeit changing, relationship. Let’s hope that, with a new year approaching, a new rationality arrives as well.
Brian P. Klein is founder of RidgePoint | Global, a strategic advisory firm. He is a former US diplomat