U.S.-China Relations In 2024

The summit meeting between Presidents Joe Biden and Xi Jinping held in November near San Francisco, just in advance of the APEC Economic Leaders’ Week, was the culmination of a year-long process that calmed the waters. The two sides announced a range of deliverables on economic and security issues and tried to convey a sense that they could effectively manage their differences. Although the United States and China are still engaged in a comprehensive contest for power and over setting the global rules of the game, guardrails are gradually being created, and as a result, the likelihood of the most disastrous outcomes has receded. Moreover, even though the chances of a genuine thaw that resolves fundamental differences and leads to greater cooperation are low, there also are underappreciated sources of structural stability that could keep relations from further deteriorating in the coming years. Nevertheless, it will take active diplomacy and some good luck to keep ties from fraying in 2024.

Surpassing Low Expectations

During their four-hour meeting on the Filoli Estate in Woodside, California, both Biden and Xi appeared to stick to their original positions on technology and economic security, Taiwan, Ukraine, human rights, and several other issues. At the same time, they were able to produce a series of deliverables exceeding the expectations of most analysts.

Based on the readouts from the White House and People’s Republic of China (PRC) media (Xinhua, Caixin), it appears that, at a minimum, the two sides agreed to several actions:

1. Resume military-to-military dialogue through a variety of channels and on a number of specific topics.

2. Commit to accelerate efforts to expand renewable energy and reduce carbon emissions, including from methane and other greenhouse gases, in accordance with the joint statement issued at Sunnylands just before the bilateral meeting.

3. Restore and expand cooperation on countering the production and trafficking of fentanyl and other narcotics.

4. Step up discussions to minimize risks related to artificial intelligence.

5. Push for more direct flights between the two countries and expand people-to-people exchanges.

6. Begin consultations aimed at renewing the U.S.-China Science and Technology Cooperation Agreement, which is set to expire in late February 2024.

Beyond specific actions, the two sides adjusted the tone of how they frame the relationship. The Biden administration’s readout said the two sides “are in competition,” dropping the previously ubiquitous adjective “strategic” from the characterization of ties. U.S. officials have continued to avoid using the “s” word in public statements. In place of the highly critical language about the United States and the Biden administration that have been dominant in the past few years, Chinese state media coverage has consistently highlighted the friendly and respectful nature of the meeting and has presented a hopeful vision for future ties. Chinese ambassador Xie Feng’s speech to the U.S.-China Business Council’s annual gala in mid-December is perhaps the best example of this major shift in tone.

Different Roads to San Francisco

The United States and China both wanted the meeting to be successful, but their leaders arrived in San Francisco on very different trajectories.

President Biden came in with the wind at his back. The U.S. economy has recovered; growth has regained momentum, while inflation has slowed. Although Congress seems locked in eternal battles internally and with the executive branch, it did adopt, in consultation with the administration, major pieces of legislation — the bipartisan Infrastructure Investment and Jobs Act and the CHIPS and Science Act — that will provide a stronger foundation for the U.S. economy in the coming years.

Moreover, the United States’ relations with allies in Asia and Europe have improved dramatically in general and with respect to their approach toward China in particular. Analysis of the challenge China poses on economic and national security issues sounds increasingly similar whether one is in Tokyo, Berlin, Brussels, Washington, or other advanced market democracies. Closer alignment has been generated by China’s increasingly ambitious and distortionary industrial policies, the human rights situation in Xinjiang and Hong Kong, China’s close ties with Russia and its approach to Ukraine, instances of economic coercion by Beijing, and the worsening security situation in the South China Sea, the Taiwan Strait, and along the China-India border.

The narrowing of differences reflects a greater willingness by the Biden administration, relative to its predecessor, to develop a foreign policy framework rooted in longtime alignments with allies, as well as a willingness to shift its own language and approach in a way that is more comfortable to friends in Europe and Asia. This certainly applies to the administration’s emphasis since the spring of 2023 that it is pursuing “de-risking,” not decoupling. At the same time, likeminded countries have become more willing to be openly critical of China and develop a range of policy responses, individually and together with others. This is most visible in the area of economic security, for example, with Japan’s Economic Security Promotion Act and the European Commission’s investigation into subsidies for China’s electric vehicle (EV) sector. Although there are still significant frictions — U.S. tariffs on European steel and aluminum, different approaches to data security and privacy, and disagreement over how to reform the World Trade Organization (WTO) — the dramatic reduction in differences between Washington and its allies is the more important trend.

President Xi, by contrast, came in facing substantial domestic and international headwinds as a result of his changing policies at home and abroad. China’s zero-Covid policies, which initially were successful in 2020 and 2021, proved to be a failure in 2022 in the face of the Omicron variant. Lockdowns in Shanghai and elsewhere generated widespread anger, and the sudden removal of restrictions in late 2022 in the face of protests left many Chinese people feeling abandoned.

The economic front has brought a long string of bad news: the extended crackdown on the private tech sector, the imposition of a range of national security–oriented laws, the shrinking of the workforce and graying of the population, the property market’s woes, and growing restrictions on access to Western markets and technology. China’s economy may meet its official economic growth target for 2023 of around five percent, but the recovery has been far slower than expected, and the sense of inevitable continued economic success has disappeared.

Xi’s record abroad has been equally problematic. Tensions with the United States, growing frictions in the Taiwan Strait, and alignment with Russia have brought the United States and its allies together. Access to Western technology and markets has been constrained, and global supply chains are gradually reducing their disproportionate reliance on China. The Belt and Road Initiative (BRI) has attracted criticism for failed projects that have added to the debt load of developing countries.

The combination of problems at home and abroad has led to a crisis of confidence among Chinese citizens, who have become far less certain about their individual and collective futures than at any time in the last three decades. Xi Jinping himself may exude self-confidence and believe that the “East is rising and the West is declining,” but he has not persuaded his populace of this prediction. Hence, Xi needs to stabilize relations with the United States and the West more generally, not only for foreign policy reasons but to rebuild confidence at home, which is central to generating growth and maintaining social stability.

That is why China’s bark has been bigger than its bite. Xi attended the APEC summit and held the bilateral meeting with Biden despite the fact that Washington made essentially no concessions to get Xi to California. In the months leading up to APEC, the administration issued an executive order on outbound investment, stepped up export controls on the semiconductor industry, and held firm in not inviting Hong Kong chief executive John Lee to the APEC leaders’ meeting. Beijing has sent signals of potential penalties through its investigation into a few consulting firms and by placing several minerals on its export control list, but it has not pulled the trigger on any of these yet, fearful that doing so would accelerate the decoupling it still hopes to avoid.

Sources of Stability

Xi’s problems at home and abroad have left the impression that his conciliatory moves are tactical gestures that will be only temporary and fade away once China’s economy rebounds and domestic confidence in his leadership is restored or will disappear suddenly if Lai Ching-te, Taiwan’s current vice president and the Democratic Progressive Party (DPP) candidate, wins Taiwan’s presidential election in mid-January and China is compelled to react with dramatic moves. Such concerns are entirely reasonable, but observers should appreciate that the sources of recent tempering of stresses are rooted in three structural characteristics of the relationship.

The credible military deterrents that the United States and China both maintain against the other form the first source of stability. China’s relative power has risen dramatically in recent years, and the United States and others take as credible Chinese threats to use force in the Taiwan Strait if Taiwan were to cross any of Beijing’s red lines. Conversely, the U.S. credibility to provide defensive support to Taiwan and its allies has been strengthened through the development of the Quad and AUKUS, improved bilateral relations with countries around China’s periphery, and its support to Ukraine. Equally important, although there are “green” and “blue” wings in Taiwan’s political spectrum regarding their ideal preferences for cross-strait outcomes, in the context of realistic constraints, the vast majority of the population — and the political parties — are one or another shade of turquoise. In sum, the astronomical costs of an outbreak of hostilities have created a widely shared preference in favor of maintaining the status quo.

Second, although U.S.-China bilateral trade and investment ties have stagnated, the two countries are still embedded in an extensive web of complex interdependence across all aspects of their economies and broader societies, which extends to countries around the world. Interconnectivity has created certain vulnerabilities, such as overdependence for critical goods and the potential transfer of dual-use technologies, but it also has created extensive economic and national security benefits that raise the costs of conflict and the value of continued interaction to both sides. Understandably, neither side is keen to abandon such ties. The fact that other countries are deeply connected to the United States and China further raises the costs to Washington and Beijing from taking precipitous actions. Interdependence is no panacea, but it is a structural feature shaping the choices of all parties.

Finally, the resumption of regular people-to-people ties, track 2 dialogues, and official consultations, in the wake of their collapse due to the Covid-19 pandemic, provides another set of stabilizers. Washington and Beijing have established roughly a dozen working groups on a wide range of topics, and the two governments now have normal interactions at the cabinet and working levels. So far there has been one recent congressional delegation, in October 2023, and there likely will be more in 2024. Communication does not necessarily generate momentum for extensive cooperation, but it provides pathways for reducing misunderstanding about policies and broader developments in both countries and elsewhere.

Looking Ahead to 2024

The new normal of what could be called “competition without conflict” does not presage a return to the era of engagement, but the United States and China deserve credit for reducing the chances of the worst negative tail risks, including outright decoupling and military conflict. That said, the short-term incentives and long-term structural features of relations guarantee absolutely nothing. Maintaining momentum in 2024 will require a series of steps on the domestic, bilateral, and multilateral fronts.

Most urgently, every effort must be taken to avoid an escalation of tensions and outright conflict in the Taiwan Strait and South China Sea. The outcome of the Taiwan election is in doubt, but there should be no doubt that all sides need to act with prudence once the results are announced, and that extraordinary vigilance will be needed through the inauguration of Taiwan’s next leader in May and their first few months in office. Equally complex will be finding a way to defuse tensions involving China and the Philippines around Second Thomas Shoal in the face of Beijing’s increasingly aggressive moves.

Next, with the creation of new channels for dialogue, the United States and China need to move forward with consultations on all fronts, including on trade, technology, artificial intelligence, climate, and security issues. Given the previous dearth of communication, discussion itself will be valuable, but before long it will be reasonable to expect the two sides to refine their agenda in each working group and gradually shift from consultations to negotiations that deliver substantive results.

It will be equally important for the Biden administration to expand and deepen consultations and coordination with allies in Europe and Asia on China policy. General agreement about de-risking needs to be accompanied by more concrete alignment or harmonization with regard to the implementation of economic security in a range of sectors (semiconductors, EVs, and critical minerals being the most urgent), rules related to the digital economy, carrying out commitments from the latest UN Climate Change Conference (COP28), and how to resuscitate the WTO and keep the global trading system from collapsing.

Finally, the Biden administration needs to further develop the architecture of its China policy. The administration deserves credit for putting meat on the bones of its three-pronged strategy of “invest, align and compete,” enunciating the goal of de-risking while maintaining extensive economic ties, and resuming extensive dialogue. It can build on this progress by clarifying the goals of its China policy. This begins by further articulating how the United States aims to strengthen and reform the rules-based international order and then, on that basis, how relations with China should be managed in light of those broader goals. Equally important is to begin an evaluation of the effectiveness of its approach across a range of areas. For example, what are the right metrics to measure progress with regard to advancement of American technology innovation, reduced overdependence on China, and the imposition of security-based restrictions on Chinese industry? That will then offer a foundation for judging whether U.S. policy is making progress, having unintended consequences, or both.

In short, in 2024 the Biden administration needs to take steps to institutionalize the various elements of its China policy. Doing so could mean making measurable progress and having a less volatile year than many foresee, which would make its approach less vulnerable to criticism from Beijing, other countries, and other domestic perspectives. The last source of disagreement is particularly important given that China policy undoubtedly will be a central topic of discussion in the lead-up to the United States’ congressional and presidential elections in November.

Scott Kennedy is senior adviser and Trustee Chair in Chinese Business and Economics at the Center for Strategic and International Studies (CSIS).