When President-elect Joseph R. Biden Jr. moves into the White House, he will inherit a relationship with China that has hit its lowest point in decades. Topics on his to-do list include tariffs that he wants to keep when he takes over. Dealing with human rights violations in the Xinjiang region of China; and a technical cold war that raises questions about data, sovereignty and power.
Meanwhile, Mr Biden will rebuild a pandemic-ravaged economy. This could make it difficult to focus on foreign affairs, especially a relationship that requires as much repair work as that with China.
As part of the DealBook D.C. Policy Project, the New York Times convened a virtual expert group in early December to discuss the state of US-China relations today and possible changes during the Biden administration.
Damien Ma, Director of MacroPolo at the Paulson Institute
Winston Ma, Associate Professor at New York University School of Law
Dina Powell McCormick, Global Leader for Sustainability and Inclusive Growth at Goldman Sachs
James McGregor, Chairman of Greater China at APCO Worldwide
Andy Purdy, Chief Security Officer at Huawei Technologies USA
Collect sacks, Cybersecurity Policy and China Digital Economy Fellow in New America and Fellow at the Paul Tsai China Center at Yale Law School
Faiza J. Saeed, chairing partner at Cravath, Swaine & Moore
Mark Shafir, Co-Head of Global Mergers and Acquisitions at Citigroup
Moderated by Rebecca Blumenstein, Deputy Editor-in-Chief of the Times
Mr Biden will not give up on China, but will be selective in choosing fights.
Panellists generally agreed that Mr Biden will be tough on China and will continue on the path taken by President Trump. “I think the style will change. In the short term, the substance should stay the same, “said Dina Powell McCormick of Goldman Sachs.” In the medium and long term, I think he’s inherited a relationship that is very different from the one four years ago or during the Obama-Biden administration think this is a once in a lifetime opportunity. “
This opportunity could lead Mr Biden to choose to work more closely with China on climate change and vaccine distribution issues, hoping to have more leverage in areas like technology where the United States is supposed to compete more aggressively with China to get.
Mr. Biden “will continue to take a hard line,” said Samm Sacks of New America and Yale Law School, but will “take a more focused approach” asking “where a real national security risk is and then shows up.” with solutions to solve that. “
The battle for technical supremacy is also being fought far away from Beijing and Washington.
Ms. Sacks warned against focusing too much on the US and China. “The tech competition between China and the USA will increasingly no longer take place in each other’s countries. It will play out in other parts of the world, ”she said.
“Biden comes into a big game of working with allies and partners at a moment when the digital divide between Europe and the US couldn’t be deeper,” she added. “And I think that must be one of his first tasks: to solve the digital divide with Europe.”
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Part of a cross-border collaboration could be to create an international framework to address challenges like protecting data flows, said Andy Purdy, chief security officer of Huawei Technologies USA. “We need to work more closely with our partners to achieve independent compliance and independent testing programs so that we have an objective basis for knowing which products and services are trustworthy,” he said. “We have to work together globally to improve security and security functions as well as transparency functions.”
To talk about US-China relations, one has to talk about industrial policy.
APCO Worldwide’s James McGregor described the state of the game as “American underperformance versus Chinese overreach”. “China has gone too far and has even supplanted business, and we’ve been pretty lame here to invest in ourselves.”
Faiza Saeed of Cravath, Swaine & Moore said American and Chinese companies are not competing on a “level playing field” because China’s preferred companies have more government support than their US counterparts. This is not what many expected when China opened its economy to the world, she said:
“Western democracies thought that opening up to China would change China, and what we’ve seen over the past 20 years is that we’ve been changed. And there are all these forces that undermine the cohesion in our own societies that aren’t It’s China’s fault. China has always focused on its own growth and independence and protected its independence, but we didn’t get what we expected when we opened up and looked the other way. “
For American politicians, however, the answer is not necessarily to “become more like China in order to beat China,” said Damien Ma of the Paulson Institute:
“If you look at what the Chinese are doing, they actually get less involved in industrial policy because they realize it created more bubbles and more costs than it was worth. Yes, they have batteries. Yes, they have Solar panels. But it was a very mixed success. Even in China, they are asking how much they want to push industrial policy. “
Consult the semiconductor industry to assess the balance of power.
Winston Ma of the N.Y.U. The law school that previously headed the North American bureau of China’s sovereign wealth fund, China Investment Corporation, said semiconductors was an industry where China’s industrial policies might have found its equivalent. The government continues to support them, but he has not seen private venture capital injecting at the same pace as, say, artificial intelligence. The unexpected loss of a top Chinese game ‘Go’ player to software developed by Google in 2017 caught a lot of attention, and now, ‘You have a lot of A.I. Startups trying to compete with the US, ”he said.
That he doesn’t see the private sector’s enthusiasm for semiconductors is “a good indication that this is still a government-led push compared to what the market believes has an opportunity.” “
The global semiconductor industry is in a phase of consolidation, including the recent acquisition of Arm by Nvidia for $ 40 billion. The deal would require approval from Chinese regulators as it would have a major impact on the local market, and Beijing’s opposition to the blessing of Qualcomm’s $ 44 billion deal for NXP in the depths of a trade war with the United States two ago Years led to the collapse of the deal.
“People are putting considerable money where their mouth is,” said Mark Shafir, a top deal maker at Citigroup, pointing to the audacity of Nvidia’s offer despite the potential geopolitical pitfalls. Regarding the risk of American companies trying to do business at such a difficult time in US-China relations, Shafir described the sentiment as “It was time to try some things and there was a C.E.O. who said to me, “I don’t know how much worse it can get.”
“I hope we are at rock bottom, but I can’t sit there as a deal practitioner and say for sure it gets a hell of a lot better,” he added, noting the White House blacklisting Chinese tech companies and arresting the chief financial officer of Huawei in Canada at the request of the United States.
He sees no prospect of the tension being eased anytime soon. “Ultimately, I believe there will be some market rationality here, but that won’t happen in 2021,” he said. “We are in a ‘just don’t say world’ and that has to change.”
And in the end you follow the money.
American financial giants like BlackRock and Goldman Sachs recently expanded into China after taking over a majority of the local divisions for the first time. As he let them in, McGregor said, Beijing may have other motives in mind and reveal the multilayered diplomacy that will establish the relationship between the two countries for years to come:
“China is not doing anything that is not in its own interest. It is good to have American companies admitted there now and given them a piece of the market, as it helps with best practices and they need help learning how to handle it handle people’s money and help with their investments. But they also know that the financial services industry is America’s most politically powerful industry, and if they put all these big companies in the market, they’ll be in Washington and tell regulators, Don’t do anything against China because you’re “I’m going to hurt my market share. ‘”