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Beyond the Rhetoric: the Military, the Political and the Economic Dimensions of The Xi-Biden Summit

The meeting between Joe Biden and Xi Jinping on the sidelines of the APEC summit last week had important stakes for both leaders. For Xi, it represented a chance to engineer a period of calm in US-China relations that would allow him to focus on managing the economic turbulence China currently faces because of the COVID-19 pandemic and his own government’s economic policies. For a Biden Administration seeking to manage the Russia-Ukraine and Israel-Hamas conflicts, it provided an opportunity to prevent the US-China bilateral relationship from deteriorating further before the 2024 election races makes this more difficult by incentivising tough approaches to China by both parties.

The meeting resulted in a commitment to continue discussing the parameters of the competition between the two powers, but few tangible diplomatic results. Under the surface, the Biden Administration offered no concessions on key military, political and economic issues, while both leaders struggled to with economic statecraft.

Few Concrete Agreements

The return to communication between the two powers after a period 12 months without dialogue did signal a halt to the deterioration of the relationship.

Yet, those actors who hoped for a clear statement of the principles or “rules of the game” that would govern the US-China competition to allow them to make secure decisions on investments, supply chains and plant locations, will be largely disappointed. ??

The summit resulted largely in agreement to continue dialogue, rather than anything tangible. The restoration of communication between the US and Chinese militaries is a key deconfliction measure, given the rise in risky encounters between US and Chinese warplanes in the South China Sea. This could prevent crises arising from accidents or mistaken perception from arising in a key transit route for global trade.

The creation and of working groups in areas such as arms control, export controls, finance, and many others, to continue to discuss difficult issues holds out the hope of further agreements in the future, but these low-level processes can succeed or fail depending on the interest and commitment of higher-level policymakers.

The encouragement of more people-to-people exchanges is the low-hanging fruit of any summit between hostile powers – a commitment that is easy to make, relatively pain-free, and does not commit leaders to any further agreement.

The climate change initiative does not contain specific milestones for the reduction of emissions, or a clear commitment to wean both economies off fossil fuels.

The commitment by China to crack down on the export of fentanyl precursor chemicals to the US by Chinese organisations is probably the most tangible agreement, but it does not impact the broader parameters of the relationship.

No Substantive Concessions

There was little agreement on more substantive security and economic issues. Instead, Biden took the opportunity to restate his existing policy positions to Xi without giving any ground, demonstrating that the US did not perceive the need to make any military, political or economic concessions.

The US sustained and solidified its military commitments in the Indo-Pacific. Biden’s statement that the US supported peace in South China Sea and freedom of navigation in South China Sea implicitly criticised China’s territorial claims to the area and the ongoing tensions in the area between China and the Philippines – a key US ally.

Meanwhile, Vice-President Kamala Harris met with the leaders of US military allies in the Pacific such as the Philippines and Papua New Guinea on the margins of the APEC summit on 16th November, with readouts from both meetings stressing US military support for these states and the need to deepen defence ties, while the President agreed increased defence ties with Indonesia the day before the summit began.

These visible talks demonstrated the US commitment to maintaining the two arcs of military allies and bases - the First and Second Defensive Island Chains - which it uses to contain Chinese naval power in the Pacific.

On Taiwan, Biden reaffirmed the existing US “One China” policy, which stresses peaceful resolution of the question of Chinese sovereignty over Taiwan but also prohibits US support for a Taiwanese declaration of independence. Biden has previously stated that the US would militarily defend Taiwan in the case of a Chinese invasion but did not appear to stress this point at the recent meeting. However, this is unlikely to mollify a Chinese leadership which believes that the “One China” policy is gradually being replaced in US official thinking by a policy of supporting a Taiwanese declaration of independence.

On the economic side, Biden offered no concessions on current US measures which limit or prohibit the export of advanced semiconductors to China or investment by US firms in areas that might strengthen China’s military capacity. In fact, his statement that the US would take all necessary measures to prevent transactions damaging to US national security left the door open to further export control measures. This position offers little comfort to the Chinese government, which has argued that US tech restrictions are an attempt to retard its economic growth and an infringement of its “right to development”.

Biden also maintained the ideological dimension of the US-China struggle by raising China’s human rights violations in Hong Kong, Tibet, and Xinjiang. This will be read by Chinese officials as interference in China’s domestic political system and cuts across Xi’s statement at the summit that no power can remodel another, therefore the US and China should accept each other’s systems and conduct negotiations on this basis.

Missteps in Economic Statecraft

Both leaders made missteps when dealing with economic constituencies, highlighting difficulty in coordinating the economic dimensions of the US-China competition by both sides.

The Biden Administration’s difficulty in reaching agreement on the trade pillar of the Indo-Pacific Economic Framework (IPEF) in the run-up to the Biden-Xi meeting points to a tension in Administration policy between waging the economic competition with China and maintaining the support of working-class voters at home.

The purpose of the IPEF, initiated by the Biden Administration in 2022, is to create a US-friendly economic network that counters China’s economic heft in the Indo-Pacific with that of the US, and so prevents regional states from being swallowed into a sphere of influence dominated by China due to “economic gravity”.

The US called an IPEF negotiating round to be concluded on 12th November – just before Biden’s scheduled meeting with XI – to lock down the trade pillar of the framework and present the Chinese leader with the prospect of expanded US economic influence in the Indo-Pacific as a fait accompli.

However, it was the Biden Administration which called off negotiations on the trade pillar in the face of opposition from key Democratic Party senators, who argued that it lacked sufficient protections for workers and risked “exporting” American manufacturing jobs overseas. Next year is an election year and the increased salience of worker power working class voters, which GeoCompass discussed last week, created a dilemma for Democratic party leaders. The Democrats must placate unions and working-class voters to ward off the threat that they will seek to achieve their economic interests by voting for populist candidates – in the US context, this means Trumpist Republicans. However, this need to safeguard the domestic political system means that they need to impose additional worker-friendly conditions on any foreign trade deals made to improve the US’ ability to compete economically with China – potentially making these trade deals more difficult to negotiate than before.

It is likely that negotiations on the IPEF trade pillar will be resumed later and that the US and other member states will come to some agreement that will allow the process to move forward. However, the structural tension between placating working-class voters to safeguard the US’ domestic system and increasing US economic competition with China overseas will continue to impact trade negotiations.

Xi Jinping also made a misstep when dealing with a key economic constituency for China’s interests: American CEOs. Xi’s China has been facing increasing divestment from foreign companies due to a combination of US restrictions, China’s economic slowdown, and concerns by foreign businessmen that they face increasing restrictions and repression from the Chinese state.

Therefore, it was important for Xi to manage the concerns of US business executives. At minimum, this would result in the continuation of existing levels of investment in China. At maximum, stronger outreach could help to encourage a constituency in the US supportive of US-China economic ties, much as American farmers who sold grain to the Soviet Union during US-Soviet détente in the 1970s developed in interest in keeping this trade going when relations became more hostile after 1979.

On November 16th, Xi gave a speech to an audience of CEOs in San Francisco that included the leaders of the top 20 US companies with economic interests in China, including EV companies such as TESLA and tech companies such as Apple. Yet, rather than give a speech which spoke to the concerns of these businessmen, Xi’s remarks focused on the importance of building stronger US-China relations for the future through increased people-to-people exchanges.

This contrasted strongly with the speech Xi had prepared to deliver, which positioned China as the strongest supporter of an open global trading order and sought to assuage the concerns of US business leaders regarding interference, over-regulation and repression of foreign companies in China.

Xi failed to appeal narrowly to the concerns of the US business community, which, despite misgivings, still sees China as a lucrative market. By doing this, he failed to strengthen ties with a key interest group in the US.

The Bottom Line

In political-military terms, the summit involved little progress, with agreements to continue dialogue constituting its main output. The Biden Administration maintained the relationship with China in a holding pattern through restating its current security and economic positions regarding China. However, effective management of the economic dimension proved elusive for both leaders. US attempts to present China with an economic fait accompli in terms of an IPEF trade pillar agreement were derailed by electoral considerations and the complications thrown up by America’s internal political realignment. Xi displayed a tone-deaf approach to the US business community that failed to either acknowledge their concerns about investment in China or mobilise them to strengthen the US-China relationship in tangible ways.