Will US-China Relations Shift Under Biden?

Written by: Mo Ji

Global investors have been watching US President-Elect Joe Biden closely for clues as to how his administration intends to conduct relations with China.

Broad opinion among Western commentators appears to be that there will be a change of tone and style from that of Biden’s predecessor, but that the US’s China policy will be less accommodating than it was in the early years of the previous Democratic administration, when Obama was president and Biden was vice president.

But what does Beijing think?

China’s official response to the outcome of the election has been muted, perhaps out of respect for the electoral process, which has yet to be fully completed. Behind the scenes, however, a consensus appears to be emerging among Chinese policymakers around what they can expect from the new team in the White House.

This consensus is based not only on comments that Biden has made publicly but also on direct personal knowledge of Biden gained by Chinese diplomats and other officials—including President Xi Jinping—over many years and through Biden’s numerous official visits, both as senator and as vice president.

Expectations for More Stability and Predictability

The consensus covers seven areas. In most of them, Beijing expects change—not just in tone and style compared to that of the outgoing administration, but in substance, too. And in one important and contentious area, it expects the status quo to remain intact for the foreseeable future.

1) A more nuanced rivalry: competitors, not enemies. Biden’s early engagements with China were characterized by optimism about the country’s potential to become more fully integrated into the global trading and financial systems. Indeed, Biden has often said that he sees China’s growth as a plus for the world economy. Over the years, that optimism became tempered by concern about China’s assertions of sovereignty and other issues. During the Obama administration, this led to dialogue between Biden and Xi about how the countries might compete without the threat of hostilities.

More recently, Biden has spoken publicly about “competition for the future” with China. Based on their knowledge of Biden, and those talks with Xi, China’s policymakers expect the idea of competition to be a guiding principle for the US in its dealings with China. That is, the US will collaborate with China where possible (on issues such as climate change and global public health, for example) and compete where necessary (in technology, for example).

2) The US’s “global reset” will take some pressure off the relationship. Biden’s election pledge to refocus on the US’s global leadership role is being seen in Beijing as a broadening of the US’s foreign-policy agenda. To some extent, this will ease the intensity of its focus on China. In other words, the US will be less concerned about how to change China, while it attempts to reprise its role as leader on the world stage.

For this reason, Chinese policymakers believe that the potential for a decoupling between the US and China will be lower under a Biden administration, and the risks of a cold war between the countries will be slighter, too.

3) US multilateralism will create constraints for China. At the same time, Chinese policymakers note that Biden’s aim to refocus on US leadership involves reviving relationships with historic allies and seeking multilateral solutions to global challenges. They see this as likely to create pinch points in China’s efforts to extend its global influence, particularly in areas covered by cooperation between the US and Western Europe and in the Asian region, especially the South China Sea, Taiwan and India.

4) A more even-keeled US approach will be good for stability. China’s policymakers are taking a keen interest in the choices Biden will make when appointing officials who will deal with Beijing. They see the human dynamics of such interactions as important and regard their relationship with the Trump administration as fractious.

For that reason alone, China’s policymakers see a change of US administration as likely to deliver short-term improvements in terms of the stability, transparency and predictability of the countries’ engagement with each other. They also take some reassurance from the possibility that many officials on both sides will already know each other from previous interactions during the Obama administration.

5) A less hawkish US approach will make life easier for China’s tech companies. The Trump administration’s aggressive actions against Chinese tech companies, which involved making it extremely difficult for some to do business with US firms, is seen by China’s policymakers as unstrategic. They do not expect such hawkishness from a Biden administration and see the risk of further US threats to, or sanctions against, Chinese tech companies as likely to ease.

6) China will not be an immediate priority for a Biden administration. China’s policymakers expect an incoming Biden administration to focus first on dealing with the COVID-19 pandemic while also attempting to restore a sense of unity to the country. These priorities are likely to occupy his first 100 days in office, making it unlikely that the White House will turn its attention to China before May 2021.

7) Escalation of trade tensions looks unlikely. The status quo in the fractious trading relationship between the US and China is likely to be maintained, in Chinese policymakers’ view, as the country proceeds to make purchases on schedule under the phase-one trade agreement reached with the Trump administration in early 2020. This creates the grounds for some optimism that US tariffs on Chinese goods could be reviewed toward the end of 2021 and, potentially, reduced.

Potentially Softer on Economic Issues, but Not on Security

The consensus Chinese policymakers appear to have reached suggests that they are looking ahead to an easier relationship with the US in trade and economic matters. But given Biden’s ambitions to refocus on the US’s global leadership role, they also see the potential for a more challenging dialogue on security issues.

In our view, investors will need to keep in mind Beijing’s hopes and expectations for the US-China relationship—in addition to Washington’s—to successfully negotiate the shift to the next US administration.

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