US and China Seek Calm as Rivalry Persists: What Lies Ahead for the Global Economy
In recent weeks, there has been a slight thawing in the relationship between the United States and China, bringing some temporary relief to both countries and the global economy. However, it’s important to note that this doesn’t signify a fundamental change in the increasingly strained rivalry between the two superpowers. The coming year will present new challenges that require close attention.
The positive signs of improved communication between US and Chinese officials are real. Plans are underway for the first face-to-face meeting between Presidents Joe Biden and Xi Jinping in over a year, scheduled to take place on the sidelines of the APEC summit next month in San Francisco. There has also been a surge in high-level meetings between diplomats, finance officials, and trade representatives, reminiscent of the past strategic and economic dialogue meetings. Even sensitive topics like artificial intelligence have been broached.
While there haven’t been any diplomatic breakthroughs on the horizon, regular communication can help ease the heightened tensions that have arisen since the breakdown in communication worsened during the pandemic.
Both governments are currently grappling with urgent domestic challenges. Neither can afford a costly confrontation that would exacerbate these challenges. China’s economy, for instance, has experienced a significant stumble since the lifting of Covid-related lockdowns, leading to alarmingly high levels of youth unemployment. Chinese officials have even stopped reporting the latest unemployment figures. Additionally, China’s more aggressive foreign policy in recent years has inspired resistance from its rivals. Japan and South Korea are putting aside longstanding differences to cooperate more closely on security and trade policy. India has moved closer to the United States and joined forces with the US, Japan, and Australia to counter China’s expanding influence. The ongoing war in Ukraine has brought the US and Europe closer together, which further complicates Beijing’s efforts to prevent Western powers from fully coordinating their policies toward China.
Meanwhile, the US is entering an election season that could potentially be exceptionally unsettling and dangerous. The recent upheaval in the House of Representatives, resulting in the first-ever ouster of a House Speaker, Kevin McCarthy, has raised doubts about the Biden administration’s ability to finance its costly agenda, including support for Ukraine. Concerns about a slowing economy in 2024 are also growing.
Given these pressing domestic issues, both Presidents Xi and Biden would benefit from a period of calm and predictability in their crucial international relationships, allowing them to focus on the challenges within their own countries.
However, there are underlying structural reasons why it is unlikely that Washington and Beijing will be able to fundamentally improve their relationship. Despite their differences, both Democrats and Republicans in the US share the view that China poses a threat to American interests that needs to be addressed. This sentiment is particularly evident in technology policy. The US has expanded export controls on products with dual-use capabilities, including advanced semiconductors crucial for the development of next-generation artificial intelligence. By denying China access to these advanced chips, the US is essentially engaging in economic warfare against China. There is currently little political incentive in Washington to deviate from this strategy, which underscores the unlikelihood of a complete overhaul in their relationship.
On the other side, Xi remains steadfast in his long-term priorities, even if he is occasionally patient in pursuing them. He is determined to resist perceived efforts by the US and its allies to impede China’s natural growth and contain its rise on the global stage. This was exemplified by the publication of a new Chinese map of the South China Sea in August, reaffirming China’s territorial claims despite objections from neighboring countries and the United States.
Of particular concern is Xi’s insistence that the Taiwan issue cannot continue to be passed down from one generation of Chinese leaders to the next. Taiwan is set to hold national elections in January, and the likely next president, William Lai, a nominee of the Democratic Progressive Party, is someone Beijing has actively tried to undermine in recent months. In the lead-up to the vote, China has used both trade incentives and displays of military force to boost the opposition leader from the Kuomintang. If Lai is elected, Taiwan can expect fewer offers and more threats from Beijing. There could even be a significant escalation in pressure from China’s military, including naval provocations that challenge Taiwan’s rules of engagement and enforced inspections of Taiwan-bound shipping. The risk of a confrontation in the Taiwan Strait, escalating beyond what China, Taiwan, and the US desire, is growing, although the likelihood of war remains low for now.
While the improved US-China relations in the short term hold some significance, the fundamental basis of the world’s most important bilateral relationship is on shaky ground and is unlikely to change in the foreseeable future.
This article was written by Ian Bremmer, President and Founder of Eurasia Group and GZERO Media, and author of The Power of Crisis.
