SUMMARY
- The meeting between Joe Biden and Xi Jinping will not produce concrete outcomes, particularly on economic issues; the discussion will focus instead on avoiding a further downturn in the relationship and potential crisis over Taiwan, Ukraine and North Korea.
- While neither Biden or Xi is under pressure to make strong concessions, their concern over macroeconomic and Covid risks limits geopolitical downsides from the meeting
- Bilateral engagement is the least important aspect of the US-China relationship for both sides; they are more focused on extending their rivalry through domestic industrial policies and courting third countries.
- Midterms bolster Biden’s international standing and policy stance; Xi also has political momentum and will look to use G-20 engagements to show that he is back on the international stage after more than two years of Covid isolation.
On 14 November, President Joe Biden and General Secretary Xi Jinping will hold their first in-person meeting since Biden took office. The venue is the G-20 Leaders’ Summit in Bali, Indonesia.
The two men are far from strangers, having met many times as counterparts in the 2008-2012 period when Biden was vice president and Xi was China’s heir apparent. But the bilateral relationship and geopolitical backdrop has shifted dramatically since that period. They enter G-20 as explicit rivals for global leadership and with US-China tensions at their highest level since the 1970s.
In this note, Kim Wallace (22V’s head of Washington policy research) and I lay out the expectations and context for the meeting. We will discuss the key takeaways from the meeting following its conclusion on Monday.
The political context
Benign midterm results strengthen the Biden administration’s tough posture on competition with China, spearheaded by an aggressive containment of China’s access to US and western technology. Moreover, the last two US administrations’ China hardlines continue to be supported by US economic, national security and business interests. In the context of our low expectations for the presidents’ Bali discussion, Biden is under no pressure to offer Xi anything more than personal cordiality built on their multi-decade relationship.
Xi Jinping also has domestic political momentum, having just secured a third term with a massive consolidation of power at the 20th Party Congress. This is the first G-20 meeting that Xi will attend since 2019, having only recently made his first overseas trip since the pandemic. He will look to use his meetings with other leaders to convey that China is “back” on the international stage and challenging the US for global influence. His primary goal for the bilateral relationship is avoiding a crisis that disrupts his agenda and complicates his economic challenges, but like Biden he is under no significant pressure to make concessions on key issues.
Seeking a floor in the relationship
Both leaders will have limited expectations for what this meeting will achieve. It is not going to “reset” the relationship or produce concrete outcomes on issues such as trade and export controls. Far more than bilateral engagement, the two sides are focused on boosting their respective competitiveness through domestic industrial policies, and on courting third countries for influence. Biden seeks strong coalitions to push back on China, while Xi is using carrots and sticks – such as access to China’s markets – to avoid encirclement.
This doesn’t mean the meeting is trivial. Its main function is to use the channel between the two leaders to avoid a miscalculation or crisis on key flashpoints:
- Biden will stress that the US will continue to stand by Taiwan but that the overall US policy has not changed. This will mean little to Xi, who was disappointed that Biden did not exert more effort to discourage Speaker Nancy Pelosi’s visit this summer, and more broadly believes that the US is ‘salami-slicing’ its One China policy – including through Biden’s repeated “gaffes” pledging to defend Taiwan if attacked. While we continue to think the risks of military conflict over Taiwan is very low for the next 3-5 years, it will remain the most sensitive issue in the US-China relationship. And more tests are coming, including official visits – House minority leader Kevin McCarthy has already pledged to go if elected Speaker – and legislation that looks to bolster support for Taiwan.
- Biden will press Xi to use more pressure on Russia to de-escalate the Ukraine crisis. Xi will likely echo his recent statement to German Chancellor Scholz that China is opposed to use of nuclear weapons – a low-cost statement that was nonetheless viewed as constructive in Europe — but otherwise put the onus on the US to find a negotiated solution. While Beijing is unsettled by the crisis, Xi is too committed to his relationship with Putin – and Russia’s role as a counterweight to the West – to meaningfully distance himself from Moscow.
- North Korean leader Kim Jong-un is trying to attract global attention with a recent flurry of missile launches. Xi will continue to demur over US calls to approve new UN sanctions on Kim (Beijing and Russia blocked the last effort), but an eight nuclear test by North Korea would increase pressure on Beijing to act. The issue will remain another source of tension between Washington and Beijing, while also driving closer security cooperation between the US, South Korea and Japan.
With this backdrop, positive outcomes for this meeting would be a sense that the discussion is substantive and reasonably civil, and agreement for the two sides to revive dialogues and channels that Beijing severed this summer due to Speaker Nancy Pelosi’s visit to Taiwan. This includes military-to-military exchanges and dialogue on climate change.
National security concerns limit economic engagement
Discussion of trade and investment issues will be brief; the economic relationship is dominated by national security concerns on both sides, making progress difficult. Xi will likely bring up US export controls on China, but there is little prospect of easing given the nexus to national security and US disdain for China’s use of and export of surveillance technology and related human rights concerns.
Irrespective of the final 118th Congress balance of control, Republicans and Democrats will continue to press the White House to maintain, if not sharpen its China strategy. We are in consensus expecting additional Executive action to close AI and quantum science loopholes in export controls implemented this and last year. The administration is also likely to roll out a pilot program that monitors US outbound investment in strategic sectors in China, focusing on corporate investments and venture capital rather than portfolio flows.
Beijing is likely still sizing up the impact of sweeping US controls on export of advanced semiconductor technology to China. We continue to expect that Beijing’s response will be mostly symbolic and fall well short of measures such as weaponizing China’s rare earths exports. The focus for both Washington and Beijing is on shaping how companies and third-party governments (Taiwan, Japan, South Korea, etc.) respond to US controls. Beijing seeks as much leeway as possible and will encourage companies over time to “design out” US technology and preserve access to China’s market. For Biden, ensuring that other countries comply with the latest controls is thus critical to achieving its aim of limiting China’s advancement as well as to avoiding long-term erosion of US leadership in the sector.
