A Weaker China to Meet With a More Wary US

US–China relations are at another inflection point and all eyes are on the Biden–Xi meeting in San Francisco next week.

Illustration by The Epoch Times, Getty Images

When communist leader Xi Jinping met with President Joe Biden in November 2022, China considered itself the world’s role model in controlling the COVID-19 pandemic. It watched America struggle over inflation risks. President Biden’s party had just lost the House majority, albeit with a much smaller margin than expected.

A year later, the tables may have turned. Inflation has somewhat cooled in the United States, and China’s economy has faltered after Mr. Xi ended his zero-COVID policy in December 2022. President Biden’s party scored sweeping victories in the off-year state elections. On top of that, Washington tightened its export controls on semiconductors in October and announced restrictions on U.S. investment in China in high tech in August.

The American business community has become increasingly uneasy in the current geopolitical climate. The U.S. semiconductor industry is concerned about the potential revenue impact, as China, the single largest chip market, makes up 36 percent of U.S. semiconductor sales, according to the Semiconductor Industry Association (SIA). The business influence counterbalances the call for Washington to take a tougher position on Beijing.

All forces are converging toward the November Biden–Xi meeting in San Francisco. Their outcome will determine the yard’s scope and the fence’s height in the administration’s current “small yard and high fence” approach—a phrase used by national security adviser Jake Sullivan to describe Washington’s plan to block critical technology from aiding Beijing’s military.

James Lewis, a senior vice president and director of the strategic technologies program at the Center for Strategic and International Studies (CSIS), said the U.S. answer to whether China has peaked will drive the next step in its policy.

U.S. President Joe Biden and Chinese leader Xi Jinping meet on the sidelines of the G20 Summit in Nusa Dua on the Indonesian resort island of Bali on Nov. 14, 2022. SAUL LOEB/AFP via Getty Images

“If you think it’s peaked, then we’ve done enough. If you don’t think it’s peaked, we haven’t done enough,” Mr. Lewis told The Epoch Times. “So there’s a difference about where China will go and what China’s doing.”

The Biden administration has reached an “impasse” on the next steps, he said. During President Biden’s first two years, Washington acted on consensus items such as export controls and restrictions on U.S. investment in China in selected high-tech areas.

“Now, the hard issues are left, and there’s less agreement on what to do,” Mr. Lewis said.

Washington wants to avoid unnecessary conflict and build a stable relationship with Beijing, he said. Therefore, the upcoming meeting probably won’t be confrontational.

“People will agree on things they know they can agree on; they’re not going to pick fights,” Mr. Lewis said.

Derek Scissors, chief economist of research firm China Beige Book and a senior fellow at the Washington-based think tank American Enterprise Institute, doesn’t think the Biden–Xi meeting will make a material difference in U.S.–China relations.

“China wants the U.S. to just let it do whatever it wants: follow CCP [Chinese Communist Party] priorities and policies implemented to achieve its priorities,” he told The Epoch Times. “Xi has been in power for 11 years. We know what he wants.

“The U.S. says things about worrying about tension and the related dangerous relationship, but we’re not doing anything to cause tensions. So if there’s dangerous tension being caused by China, having conversations with them makes no difference,” he said.

Mr. Scissors said the only thing the United States can do is to build on Treasury Secretary Janet Yellen’s message to Beijing.

During her visit to China in July, Ms. Yellen articulated the U.S. position as: no decoupling from China, healthy economic competition, and targeted actions to protect American national security.

On Nov. 2, she reiterated the same points during a speech at the Asia Society in Washington. Some say Ms. Yellen was setting the stage for the Biden–Xi meeting. She’s also meeting with her Chinese counterpart this week in San Francisco to lay the groundwork for the mid-November meet.

The Biden administration has been trying to “thaw” the iced relations ever since Secretary of State Antony Blinken postponed his visit to China after a Chinese spy balloon flew over the continental United States in February. After Mr. Blinken’s June trip to China, the secretaries of Treasury and Commerce visited in the following months.

Sailors recover a high-altitude surveillance balloon off the coast of Myrtle Beach, S.C., on Feb. 5, 2023. Petty Officer 1st Class Tyler Thompson/U.S. Navy via Getty Images

Since President Biden and Mr. Xi’s last meeting one year ago, the tensions between the two countries have been simmering, further complicated by the economic issues both face at home.

How the upcoming meeting goes may set the tone for the China policy in the latter half of the Biden administration. In Mr. Lewis’s read, the United States’ China policy won’t reverse its current track; the difference lies in future momentum.

The Epoch Times contacted the White House for comment, but received no response.

Has China Peaked?

The idea that China has peaked stems from a confluence of bad economic signs, including the slowdown of its decades-long debt-fueled growth and China’s more than 20 percent youth unemployment rate, which the regime stopped reporting since August. Its aging population will greatly constrain the future workforce, diminishing chances for a potential economic comeback.

As a result, foreign investor confidence has tanked. In the third quarter, the net foreign direct investment into China was negative for the first time since China’s State Administration of Foreign Exchange started tracking the measure in 1998.

To John Owen, a professor of politics at the University of Virginia, the current situation of the Chinese economy is a reflection of Mr. Xi’s priorities.

“He wants China to be a great, independent power, and the way to do that has got to include more Party-state control over the economy and reducing the leverage that Western actors have over China’s economy,” he told The Epoch Times.

“Xi Jinping certainly doesn’t think China has peaked. He may think it’s going to peak unless he takes action,” Mr. Owen said.

“Even if China’s economy has peaked, it doesn’t mean that China as a military power has peaked.”

He noted that China has an alternative path to increasing its power by going the military route in the short term.

“I think the Biden people should not be fooled into thinking that now that China’s economy might have peaked, the military problem is just going to solve itself,” Mr. Owen said.

A portrait of China's President Xi Jinping is seen as people visit the China stand during the 6th China International Import Expo (CIIE) in Shanghai on Nov. 5, 2023. (Photo by Hector RETAMAL / AFP) Photo by HECTOR RETAMAL/AFP via Getty Images

According to Mr. Owen, a China with military power and a stalled economy could be more dangerous because it would incentivize Chinese leaders to be more coercive to the neighboring countries.

Tosh Minohara, a professor of international relations and security studies at Japan’s Kobe University, agrees.

“Xi Jinping hasn’t peaked yet,” he told The Epoch Times.

Both professors have observed a changing China that may make Western economics standards a less relevant criteria to gauge the country’s trajectory. Whether China has peaked economically doesn’t dictate the level of threat it poses.

The heightened Party-state control is one of them.

Chinese officials now give out only their Communist Party business cards, Mr. Minohara has observed. That’s in contrast to the past. CCP officials have two business cards, one with their government title and the other with their CCP title, as an official usually has a dual role in a government agency and the Party cell in that agency.

“It was in a way that the government title was the main, and the Communist Party title was the side thing, but no longer,” he said. “It seems to me the Party title is much more important. That’s the path to success.”

Zhao Leji (C), chairman of China's National People's Congress, speaks during a bilateral meeting with U.S. Senate Majority Leader Chuck Schumer (D-N.Y.) at the Great Hall of the People in Beijing on Oct. 9, 2023. ANDY WONG/POOL/AFP via Getty Images

In China, a government official’s performance in the CCP has always been a critical factor for success. But now, the game is even more tilted toward the Party. Mr. Minohara said this was a notable trend because it shows that single personal interests and ambitions trump concerns about national interest.

Mr. Owen noted a connected phenomenon: “Xi Jinping is now trying to commandeer the economy more by coercing billionaire CEOs and entrepreneurs, by requiring boards of directors to have a certain number of Party members, by requiring management of companies to have Party members, and by safeguarding the state-owned enterprises in quite determined ways.”

To Mr. Minohara, Mr. Xi is buying time because “now is not the time for China to strike or be aggressive.” He said Mr. Xi is waiting for the Taiwan election results in January and the global situation with Ukraine and the Middle East to evolve to find the opportune time to move.

In such a context, Mr. Xi will appear to be “much more workable” and less hostile at his meeting with Mr. Biden next week, he predicted.

“China wins by changing the status quo. The United States continues by continuing the status quo. So that’s why I think Xi, at one point, has to take the decisive move,” he said, noting that the decisive move would be Taiwan.

An October Pentagon report states that China is building up its nuclear weapons faster than expected and is “almost certainly” learning lessons from the Ukraine war to inform considerations in a Taiwan invasion scenario.

Taiwanese military personnel drive a CM-25 armored vehicle during a military exercise that simulates China's Army invading the island, in New Taipei City, Taiwan, on July 27, 2022. Annabelle Chih/Getty Images

From the Pacific Ocean to Planet Earth

Peaked or not, Mr. Xi has been consistent with his “China dream.” He has floated the same idea he proposed a decade ago.

Within months of taking over the CCP, Mr. Xi visited the United States in June 2013.

“When I visited the United States last year, I stated that the vast Pacific Ocean has enough space for the two large countries of China and the United States,” he told then-President Barrack Obama at the Sunnylands retreat in California. “I still believe so.”

Ten years later, Mr. Xi’s gone back to this comment but added a new twist—the Pacific Ocean is now planet Earth. “Planet Earth is big enough to accommodate the respective development and common prosperity of China and the United States,” he told Mr. Blinken in Beijing in June.

Mr. Xi reminisced about his decade-old dream: divvying up the world with the United States. While Mr. Obama rejected the idea of Group of Two, or G2, of the United States and China, the Biden administration is even less likely to embrace it today.

An aerial view of the under-construction Shanghai Tower (C) flanked by the Jin Mao Tower (L) and the Shanghai World Financial Center (R), in Shanghai, on Aug. 4, 2013. STR/AFP via Getty Images

As the CCP has tried to establish world leadership diplomatically, it’s also working hard on moving up the global manufacturing value chain by occupying more high-tech components. A big part of that was achieved via commercial espionage and unfair trade practices.

The Party’s ambition for global dominance became apparent when it announced its industrial policy “Made in China 2025” in May 2015.

Two months later, the American public learned that China repeatedly hacked the Office of Personnel Management (OPM) in 2014 and 2015. More than 21 million U.S. federal government employees and their family members’ data were breached.

The OPM incident followed a series of commercial espionage hacks that surfaced in previous years.

In August 2014, a Los Angeles grand jury indicted a Chinese national who helped Chinese military hackers steal over 630,000 files from Boeing related to a strategic transport aircraft and fighter jets produced for the U.S. military between 2008 and 2014. In 2016, he pleaded guilty and was sentenced to 46 months in prison.

The impact was severe enough for Mr. Obama to consider imposing sanctions on China in the summer of 2015 before he agreed with Mr. Xi to slow down commercial espionage a few months later. The agreement was short-lived. In April 2016, U.S. Steel accused Chinese government hackers of stealing trade secrets for Chinese steel producers. By 2018, CCP’s cyber attacks were fully back.

Deputy Attorney General Jeffery Rosen talks about charges and arrests related to a computer intrusion campaign tied to the Chinese regime, at the Department of Justice in Washington on Sept. 16, 2020. TASOS KATOPODIS/POOL/AFP via Getty Images

2015 was the critical year that marked a mood shift in the way Washington dealt with the regime. Before then, many people thought China was on the path to market democracy or adopting more international norms.

“The OPM incident really angered the president [Obama]. And he negotiated an arrangement with Xi Jinping, where China promised to slow down the rate of commercial espionage. And the agreement only lasted about six months before the Chinese reneged on it,” said Mr. Lewis. “And I think people said, look at what these guys are doing. We can’t put up with this anymore. That was 2015 for the U.S.”

Jon Bateman, a senior fellow at the Carnegie Endowment for International Peace also pointed to the September 2015 meeting between Mr. Obama and Mr. Xi in Washington.

“That was kind of a moment where there was still a fork in the road on tech issues of China, where Obama could, in effect, communicate to China that you’ve got two paths in front of you: You’ve got one path where there will be increased sanctions and pressure because we can’t take this anymore,” Mr. Bateman said at a seminar at the Massachusetts Institute of Technology in May. “But you’ve also got another path in which there won’t be. And if we could come to some kind of workable arrangement between the two of us, a negotiated solution could allow the continued sustainment and growth of U.S.–China ties.”

U.S. President Barack Obama (L) sits with Chinese President Xi Jinxing during a bilateral meeting ahead of the opening of the UN conference on climate change near Paris on Nov. 30, 2015. JIM WATSON/AFP via Getty Images

He said a similar arrangement wouldn’t have any basis now.

During the Trump administration years, Washington showed visible major shifts in their read of China. Senior national security officials and the top diplomat defined the undertone of  U.S.–China relations around the threat the CCP poses with its “Marxist-Leninist and mercantilist vision for the world.”

In addition, for the first time, the U.S. government openly challenged a CCP propaganda point that the regime had relied on when being called out for its many abuses: that criticizing the Party is the same as attacking the Chinese people.

Over the years, Europeans have also joined the zeitgeist. A 2019 policy signified a consensus to view China as “an economic competitor and a systemic rival,” a significant shift. Before that, the European Union organized around economic engagement with China and saw China as a strategic partner for more than a decade.

China’s aggressive trade policy, espionage, and wolf warrior diplomacy, which began around 2017, led to the new European consensus, according to Mr. Lewis.

“China’s behavior has moved the Europeans in our direction,” he said.

A cargo ship loaded with containers makes its way at a port in Qingdao in China's eastern Shandong province on January 14, 2020. China's trade surplus with the United States narrowed last year as the world's two biggest economies exchanged punitive tariffs in a bruising trade war, official data showed on January 14, on the eve of a deal to ease tensions. (Photo by AFP) Photo by STR/AFP via Getty Images

Going Forward

In his latest essay published in Foreign Affairs magazine, national security adviser Mr. Sullivan defined the U.S. foreign policy challenge as “competition in an age of interdependence.” He said the United States is at the beginning of a “third era,” post the WWII and Cold War periods.

“We are often asked about the end state of U.S. competition with China. We expect China to remain a major player on the world stage for the foreseeable future,” he wrote. “We seek a free, open, prosperous, and secure international order, one that protects the interests of the United States and its friends and delivers global public goods. But we do not expect a transformative end state like the one that resulted from the collapse of the Soviet Union.

“Washington must balance a sense of urgency with patience, understanding that what matters is the sum of its actions, not winning a single news cycle.”

Mr. Sullivan defended the “small yard and high fence” approach against criticisms that it’s protectionist: “These are steps taken in partnership with others and focused on a narrow set of technologies, steps that the United States needs to take in a more contested world to protect its national security while supporting an interconnected global economy.”

The rationale behind “intensifying U.S. diplomacy with China” is to “manage competition to reduce tensions,” he wrote, recognizing that whether the existing and new communication channels would endure during conflicts was an open question.

Whether the uptick in diplomacy will lead to the United States easing the pressure on China also remains to be seen.

But if America chooses to relax its sanctions, China is ready to embrace it. In late October, it removed all restrictions on inbound foreign direct investment in manufacturing.