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Biden and Xi – A Paradox

President Biden is likely to pay most of his attention on domestic challenges – primarily Covid-19, nursing the US economy to better state of recovery, keep fiscal challenges in check and bridging the polarization gap left by Trump, at least this year to firm up his presidency. As far as foreign policy is concerned, I doubt there will be any major initiatives to stir up more uncertainties. On this count, keeping the status quo on various stances on China, from where the Trump administration had left, is likely to be the near-term phenomenon. Any new moves will likely take place in 2022 and beyond and changes can be significant.

Some parallel lessons could be learned from the Obama administration. Biden has chosen many of Obama’s leading advisers to run his security and foreign policy administrations. He is relying on tried and tested diplomats, security experts and scholars to steer the ship, a sharp contrast to Trump’s transactional approach. A return to a more traditional foreign policy and diplomacy-based approach, as a model of professionalism, prudence, and stewardship of American national interests, Biden hopes that this would win the US respect and the other countries might see it as an honest arbiter once again.

I take the view that Democrats will not be universally friendly one to China based on moves made during Obama presidency. The Obama administration reoriented military capabilities to Asia Pacific. He brought Japan into the Trans-Pacific Partnership (TPP) trade pact excluding China membership and established a permanent U.S. mission to ASEAN meeting regularly to forge strategic partnership to hedge against rising China ambitions then. Similar patterns will likely recur with stronger US relationships with the Atlantic and other allies in the Asia Pacific region.

As far trade relationship is concerned, it is likely tariff adjustment and reorientation could happen this year as numerous studies have shown that it hurts US consumers more than China. However, a non-tariff measure will likely be adopted including on market access and intellectual property rights. The tension facing China’s tech industry is not likely to ease especially in areas of 5G, artificial intelligence, robotics and other high-tech areas but Biden will also likely to re-engage China to cooperate in some less technologically sensitive areas.

Under this scenario, President Xi will continue to push harder for self-sufficiency. China also has just become the largest member of the Regional Comprehensive Economic Partnership (RCEP) covering around 30% of global GDP and population. China has also offered the European Union multiple concessions in a landmark investment agreement but it has firmly refused to budge on a make-or-break issue on labour rights – marks a contrast to fellow Communist state Vietnam. The new partnership between China and the EU complicates the incoming U.S. administration’s game-planning. It was Obama’s rejection of establishing a “new type of great power relations” with China that pushed President Xi Jinping to “go west,” kicking off the Belt and Road Initiative that calls for creating a new Silk Road economic zone linking China and Europe by land and sea then. In a nutshell, Xi will firmly safeguard the security of state power, system and Party’s ideology at all costs.

Chee Seng, Wong CIO, Athena Advisors