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Chinese President Xi Jinping met his US counterpart Joe Biden in Indonesia last year. Photo: Reuters

Economy

Global Impact: US-China relations remain on a knife-edge even after latest olive branch

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 edition, we attempt to unpack and break down the latest comings and goings of relations between Beijing and Washington

US-China relations

Robert Delaney

Published: 2:00pm, 2 May 2023

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Developments in the US-China relationship come so quickly these days that the recent glimmers of hope for more constructive bilateral engagement, kindled by the meeting between Chinese President Xi Jinping and his counterpart Joe Biden in Indonesia last year, might seem like something in the mists of time.

“The world is big enough for the two countries to develop themselves and prosper together,” China’s Ministry of Foreign Affairs said about the November meeting.

But whatever progress was being made by working groups on each side afterwards was undone by the emergence of a Chinese balloon with a commercial-jet-sized payload that drifted over US territory.

The Pentagon eventually shot the suspected spy balloon down, leading to a postponement of US Secretary of State Antony Blinken’s planned trip to Beijing to continue work aimed at building a floor under a bilateral relationship in free fall.

14:45

An unwinnable conflict? The US-China trade war, 5 years on

Blinken and other Biden administration officials were then on their back foot, defending against allegations by most Republicans and even some Democrats that their decision to wait until the balloon was over the Atlantic Ocean – after traversing hundreds of miles of US airspace for several days – constituted a national security breach.

Biden’s team countered criticism with assertions that Pentagon and intelligence community officials had learned much about the balloon’s capabilities as it flew, and from its remains retrieved from the ocean floor.

While Beijing downplayed the situation as a weather balloon that drifted off course, the Pentagon called the balloon one of many that make up a global surveillance network.

In another indication of how far apart the two sides are on the issue, Beijing has assailed the move to bring the balloon down as an overreaction as the Biden administration continued to face withering domestic criticism that it waited too long to act.

03:30

China says US balloons flew over Xinjiang, Tibet as diplomatic row deepens

In the wake of the fiasco, US officials have maintained that they have kept communication channels with Beijing open, but that their military counterparts in the country had gone silent.

Meanwhile, the balloon incident has become fodder for US lawmakers as Congress, with its newly Republican-controlled House of Representatives shifting into overdrive with hearings that expound on threats posed by Beijing.

The amped-up, anti-China tone started with the new House Select Committee on the Chinese Communist Party’s inaugural hearing, live-streamed to a prime time audience.

Another high-profile congressional hearing, where TikTok CEO Chew Shou Zi faced intense grilling by Republicans and Biden’s own party, featured assertions that the private data of millions of Americans would wind up in the hands of the Chinese government, and generally fanned fears about Beijing’s surveillance capabilities.

02:32

US lawmakers grill TikTok CEO on app’s alleged ties to Chinese Communist Party

These were just a few of the slew of hearings on issues dealing exclusively with China or defence topics in which Beijing figured prominently.

Nine of the hearings occurred in just one day, when we learned that more of America’s intelligence community may officially conclude that Covid-19 was the result of a Chinese lab leak. Another hearing featured criticism of Secretary of the Navy Carlos Del Toro for the decision to postpone financing a US$1.6 billion amphibious vessel designed to carry marines, helicopters and watercraft, as the Navy turned its focus from the Middle East to China.

As the anti-China fervour in Congress played out, Beijing focused on efforts to mend fences with the European Union. And the fact that French President Emmanuel Macron and European Commission President Ursula von der Leyen were willing to travel to Beijing left open the possibility that Xi could weaken the transatlantic alliance.

After all, the united front that Washington, the EU, the G7 and Nato had managed to show has been almost as problematic for Xi as it has been for Russian President Vladimir Putin.

02:36

French and EU leaders urge China to ‘bring Russia to its senses’ and stop invasion of Ukraine

China’s new ambassador to the EU even suggested that European officials might come back to negotiations aimed at signing an investment accord that was seen as dead and buried owing to Beijing’s sanctioning of European entities.

In a masterstroke of diplomacy, Xi’s courtship of Macron led to comments about Taiwan by the French leader that appeared to damage both transatlantic unity and ties within the EU.

The comments took many pundits by surprise, given how well they played into the Chinese government’s efforts to drive a wedge between Washington and Europe over what Beijing considers to be a red line.

Some referenced the damage that Washington inflicted on its relationship with Paris when, in 2021, Biden announced the launch of the Aukus partnership with Britain and Australia to explain Macron’s stance.

02:52

China warns Aukus against going down ‘dangerous road’ over nuclear-powered submarine pact

The fact that Macron apparently failed to convince Beijing to persuade Putin to end his invasion of Ukraine – a conflict that sparked a closing of American and European ranks – further undermined the French leader’s credibility within the European bloc and with Washington.

But, it would seem that a kinship of two and a half centuries makes it difficult to break ties between the US and France, America’s oldest diplomatic ally.

Biden called Macron to discuss the French leader’s China trip, signalling an effort to calm tensions over how to deal with Beijing.

Barely a day had passed when a Chinese diplomat questioned the sovereignty of ex-Soviet republics - a development that quickly undermined European trust in Beijing’s ability to bring peace.

The world is big enough for both of us

Janet Yellen

And the furore that Chinese ambassador Lu Shaye sparked with his comments about former Soviet republics forced Beijing to retreat, with a multipronged walk back of the diplomat’s comments. The Chinese government followed that with a surprise phone call between Xi and Ukrainian leader Volodymyr Zelensky, which the US and EU treated with cautious optimism.

Now Washington is holding out the olive branch, as we saw with US Treasury Secretary Janet Yellen’s speech about the bilateral relationship, in which she struck a conciliatory tone.

“The world is big enough for both of us,” Yellen said, choosing words that echoed Beijing’s. She added that Biden shared her view.

Whether her message will rise above the fury stirred up by numerous congressional hearings remains to be seen.

60-Second Catch-up

Xi Jinping’s talk with Volodymyr Zelensky earns approval from US and EU, as well as a bit of caution

US firms’ confidence in China’s economy is rising, but so are fears over bilateral tensions: survey

US is ‘eroding’ one-China policy to deter Beijing over Taiwan, former top envoy says

US has no decoupling plans despite ‘complex’ ties with China: trade chief Katherine Tai

Risk of US-China decoupling ‘still high’ despite olive branch from Treasury Secretary Janet Yellen

US must ‘publicly and consistently’ press China to release its political prisoners, Congress told

Covid, surveillance, naval forces: US Congress holds multiple hearings about perceived Chinese threats

Opinion: US economic war on China will have consequences for all, especially Americans

Deep dives

Could US-China ties actually improve if Joe Biden is re-elected?

Both sides of politics ‘seem to agree on getting tougher on China’, analysts say•But if Biden wins, he could try to seek a ‘breakthrough’ in the troubled relationship
But they say if Joe Biden is re-elected, there is potential for some improvement in ties between the two powers.

The 80-year-old on Tuesday announced he would run for re-election, setting up a rematch of the 2020 presidential race with former leader Donald Trump, now a Republican front runner.

Electric vehicles: why the West needs China’s battery prowess as it moves to build supply-chain capacity

The process of deglobalisation for Western battery producers is likely to be lengthy and turbulent, with challenges at each stage of the supply chain, says analyst
It will be interesting to see how Chinese players and global carmakers balance need for supply-chain security with geopolitical risks, says Fitch executive

At the Shanghai Auto Show, Fuzhou Lianhong Motor Parts’ sales director Chen Zhiqiang performs the final tests on the eight-way movements of his company’s flagship car seat before clearing it for display.

The luxury seat, wrapped in leather with a built-in pneumatic massager and armrests with touch-screen controls, is found only in highly customised luxury people movers.

What does China hope to gain from its post-Covid diplomatic push?

Beijing seeks to reassert itself as key force in an increasingly multipolar world and boost resilience amid tensions with US, analysts say
It is focusing on building closer ties with developing countries and countering Washington’s containment strategy, according to observers

The dignitaries have also included the leaders of Singapore and Malaysia, as well as Gabonese President Ali Bongo Ondimba, who is visiting China from Tuesday through Friday.

The country is also slated to host major diplomatic meetings, including the China-Central Asia summit in Xian next month and the third Belt and Road Forum, expected to take place in autumn.

Taiwan the ‘most dangerous flashpoint’ in US-China rivalry, Singapore PM says

In an address to parliament, Lee reiterated Singapore’s one-China policy and its continuous support for ‘the peaceful development of cross-strait relations’
He said the outlook for US-China ties was ‘worrying’ but believed both sides were keen to avoid a direct conflict

In a speech heavily focused on foreign policy and the troubled state of geopolitics, Lee highlighted divergent views in Beijing and Washington about ties between the superpowers as among the ascendant risks for Singapore and the region.

While in Beijing there was a belief that the US was seeking to hold back China’s growth, in the US there was now bipartisan consensus that “China’s growing strength and assertiveness is becoming a grave threat to US interests and values”, Lee told lawmakers.

02:03

China to send envoy to Ukraine after Xi and Zelensky hold first call since Russian invasion

As US Congress debates budget, Pacific island nations are watching with concern

US President Joe Biden has pledged generous funding for tuna treaty and other regional initiatives in a bid to offset China’s growing influence
But Republicans are looking to make cuts in foreign aid and the Pacific Partnership might be a victim, experts say

Announced in September, the Pacific Partnership Strategy – intended to help the US catch up with China’s growing influence in the region – committed to spending more than US$800 million on priorities like climate change, fishing disputes and maritime security.

A majority of the funding was US$600 million in ramped-up aid for renewing the South Pacific Tuna Treaty, nearly tripling the US contribution to US$60 million annually for the next 10 years.

Taiwan in talks with Washington about potential weapons stockpiles on or near island, premier confirms

Chen Chien-jen says Taiwan and the US have been in talks over potential plan since US National Defence Authorisation Act was approved by US Congress in December
Regional contingency stockpile necessary to help island hold out during enemy attack but ‘would be risky to build it in Taiwan’, according to analyst

“The proposal of regional contingency stockpiles is still in the negotiation process,” Taiwanese Premier Chen Chien-jen said on Monday.

Chen confirmed that Taiwan and the US had been in discussions over the potential plan since the US National Defence Authorisation Act (NDAA) 2023 was approved by US Congress late last year.

China’s CPTPP trade aspirations still hinge on bloc’s support as external pressures mount

Deputy trade minister and international negotiator Wang Shouwen says China has ‘the capability to fulfil relevant obligations’ required to join high-quality trade group
Chinese analysts see accession to the CPTPP as a means to undergo further economic restructuring that would help clear growth hurdles

“China is willing to join the CPTPP … and has the capability to fulfil relevant obligations,” vowed Wang Shouwen, a vice-commerce minister and China’s international trade negotiator, at a media briefing on Sunday. “We hope that all 11 member countries can support our joining.”

The comments by Wang, who participated in the years-long trade talks with the United States, come as its application to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) appears to have fallen behind the curve.

Hong Kong has ‘strategic ambiguities’ to navigate US-China rivalry: Singapore’s Kishore Mahbubani

At a Hong Kong forum, the retired Singaporean diplomat addressed issues such as the prospect of ‘de-dollarisation’ of global trade to tensions in the Taiwan Strait
Hong Kong ‘enjoys the status’ of ‘one country, two systems’, but has to ‘work very hard’ to convince the US that it remains autonomous, Mahbubani says

Speaking at a forum in Hong Kong, the retired Singaporean top diplomat addressed a wide range of issues, from the prospect of “de-dollarisation” of global trade to the tensions in the Taiwan Strait.

Asked on how Hong Kong could best navigate the escalating rivalry between Beijing and Washington, Kishore noted during the question-and-answer session that the city – as part of China – was obliged to abide by national security “red lines”.

US-China ties set for further ‘turbulence’, former Chinese envoy warns

US failure to show mutual respect and keep its promises on issues like Taiwan is worsening ties with Beijing, veteran diplomat says
US government and media playing up ‘China threat’ to fend off perceived threat to hegemony, adds the ambassador to Washington from 2013 to 2021

Cui Tiankai, who served as envoy to the US from 2013 to 2021, said he had observed a significant deterioration in opinions about China among the American public during his term. The negative changes in Washington’s China policy would continue for several more years, he forecast.

“We would see no essential change in the US administration’s China policy regardless of the result of the 2024 presidential election,” Cui said as he attended a government-backed conference on diplomacy in Shanghai.

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