Even though the high-level US-China strategic dialogue in Washington, D.C. did not yield much, it is at least heartening to see the two powers communicating amicably. While both sides reiterated their respective positions without making any breakthrough in discussions that could result in a deal, a notable development was the categorical demand from US Secretary of State Pompeo and Defence Secretary Mattis for China to demilitarise the territories it had seized in the South China Sea – the first time this was called for so bluntly.
At the China International Import Expo (CIIE) held in Shanghai, Chinese President Xi Jinping promised a more open China and rejected the “law of the jungle” in what may be construed as a swipe against Trump’s “America First” policies. A day later, however, Chinese Vice-President Wang Qishan took a softer stance in his keynote speech at the Bloomberg New Economy Forum in Singapore where he sent a signal that Beijing stood ready to hold high-level talks with the US and work towards an eventual solution to the ongoing trade war, emphasising that it would be a win-win situation when both sides cooperate.
Encouragingly, US President Donald Trump dropped hints that he might be more amenable to the Chinese side at the planned meeting on the sidelines of the G20 summit in Argentina between him and Chinese President Xi Jinping in late-Nov 18. This was after Trump described a phone call with Xi as “a long and very good conversation” with “a heavy emphasis on trade”. Trump is reported to have instructed his cabinet secretaries to draft a possible agreement which he and Xi could sign. Top economic advisor Larry Kudlow has said that both sides are “communicating at all levels” while Secretary of Commerce Wilbur Ross has stated the possibility of a framework for a potential deal. Yet, the caveat to this recent thawing is that if no deal were to be reached eventually, the US could go on to raise existing tariffs to 25% and extend tariffs to all of China’s exports to the US.
The tenuous nature of the bilateral relationship was exemplified by the indictment of Chinese state-owned firm Fujian Jinhua Integrated Circuit Co. and Taiwan’s United Microelectronics Corp., along with three individuals, in the US for industrial espionage against American chipmaker Micron Technology Inc. Separately, the US charged 10 Chinese intelligent agents with trying to steal aviation technology from American corporates. It was also similarly on show at the Asia-Pacific Economic Cooperation (APEC) meeting held in Papua New Guinea when US Vice-President Mike Pence and Chinese President Xi waged a war of words peppered with snide remarks against the other side.
US national security adviser John Bolton had earlier vowed in a radio interview to turn the screws even tighter on China, saying that China needed to adjust its behaviour in the international, military and political areas. Bolton said that Trump believed China had taken advantage of the international order for far too long while Americans stood idly by. He also mentioned that if China had not been allowed to steal American technology, Chinese military capabilities will be far more diminished than it is currently. Hence, the US could take more action to restrict sensitive high-tech exports to China.
Assessment: Keen for an olive branch but not for capitulation
The US and China appear amenable to calling a truce in their trade war. Both sides have attempted to de-escalate tensions in recent days to create the conditions for a successful summit. China’s leaders seem to realise that their economy is in poor condition to withstand the shock of escalating trade clashes with the US. The Trump Administration, having ramped up the pressure on China, may judge it now timely to force some concessions out of China. Neither side wants tensions to go out of control.
If Xi and Trump can pull off such an agreement, it would represent a small first step in a rapprochement between the US and China. It is possible that China could offer some concessions on trade which would allow the US to reverse some of its tariff measures against China. But whether the more fundamental causes of the deterioration in the US-China can be resolved is questionable. This means that while a quick détente is certainly on the cards, this deal will likely be transient and temporary, suited for achieving short-term objectives only.
The recent proliferation of disputes on a range of topics such as industrial espionage, cyber hacking, maritime disputes in the South China Sea, Taiwan shows how considerable obstacles remain to a more cordial relationship. Fundamentally, this is a strategic contest for hegemony between a dominant superpower and a rising nation. Neither China nor the US are in a mood to make concessions on their broader strategic differences.