HONG KONG (Reuters Breakingviews) – President-elect Joe Biden and Chinese President Xi Jinping won’t warm frozen ties immediately in 2021. China-bashing has become a bipartisan sport in America. Xi has let nationalist trolls take over his diplomatic corps. But with delusions about the status quo stripped away, both sides can renegotiate their $600 billion trade relationship with some semblance of economic realism.
President Donald Trump’s tenure was so irascible, Biden can calm troubled waters by simply declining to escalate. But only so far. Xi’s willingness to deploy economic coercion to advance the interests of China Inc, combined with ham-fisted crackdowns in Hong Kong and Xinjiang, has dashed hopes that patience alone might curb the Communist Party’s worst instincts. Under Xi the party has been reconfigured into a conservative political force at home, and a disruptive influence abroad.
To many Chinese, however, Washington’s reaction looks like a desperate attempt by rich, jaded colonialists to preserve their privilege by containing an emerging power. The turn to protectionism through tariffs has not only made American politicians look hypocritical, it has retroactively justified China’s employment of trade-distorting measures.
However, out of conflict comes clarity. Supply chain dependencies between China and the United States are deeper than many realised. Similarly, financial dependencies between Chinese banks and foreign financial systems make U.S. dollar sanctions double-edged. In the standoff over Hong Kong, Washington appeared to blink. Trade wars are hard to win.
Even so, from Beijing’s perspective a hostile Uncle Sam caused trouble via other channels. The White House has starved telecoms champions like Huawei and Semiconductor Manufacturing International of components, forced asset sales, named and shamed officials, and rallied international opinion against China. And for all the improvements to domestic equities markets, locking Chinese listings out of New York would sting too.
Concessions seem unlikely, but both governments can stop being gratuitously horrid. It’s not in U.S. interests to indulge bigotry, for example, much less discourage the People’s Republic from exporting its best and brightest to U.S. research institutions. Beijing would do well to mute “wolf warrior” diplomats like Foreign Ministry spokesman Zhao Lijian, whose Twitter account is dedicated to torching Western goodwill. The two sides may have nothing nice to say. The best start is saying nothing at all.
– This is a Breakingviews prediction for 2021. To see more of our predictions, click here
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