The Taiwan Banker

Both countries seek to lower tensions in the short term, but recognize that intense long-term competition is inevitable Ever since the U.S.-China trade war that began in March 2018, the relationship between the world’s two largest economies has been plunging from one nadir to the next. Those who thought the relationship had bottomed out during Donald Trump’s presidency learned they were wrong in August when China reacted furiously to the visit of U.S. Speaker of the House Nancy Pelosi by suspending multiple high-level dialogues with Washington. Since then, both China and the U.S. have signaled they want to pull back from the brink. The reasons are not hard to figure out. Chinese leader Xi Jinping has secured his third term and can afford to appear less openly confrontational with the United States. He also faces a grim economic situation at home due to his disastrous zero-Covid policy and does not need the added headache that comes with unstable relations with the U.S. For U.S. President Joe Biden, who is upbeat after a better-than-expected performance by Democrats in the midterm elections, stabilizing relations with Beijing can reduce the chances of an additional foreign policy crisis when U.S. resources are already stretched thin. Washington has its hands full assisting Ukraine to defeat Russia’s invasion of the country. It needs to keep an eye on capricious, nuclear-armed North Korea and nuclear-aspiring Iran as well. In an ideal world – the one American progressives sometimes inhabit – a more stable relationship would China would translate to a grand bilateral cooperative effort to tackle climate change without Washington making unreasonable concessions to the Chinese, such as reducing support for Taiwan. Beijing has previously hinted that absent such concessions, bilateral cooperation on climate change could be limited. However, following Biden and Xi’s November meeting, the two countries said they would resume climate talks that had been frozen since Pelosi’s visit to Taiwan. The White House said the leaders "agreed to empower key senior officials to maintain communication and deepen constructive efforts." China and the U.S. are the world’s two largest emitters of greenhouse gases. It is widely accepted that failure by the two countries to work together to combat climate change will augur poorly for the international community’s ability to halt its deleterious effect on our planet. Meanwhile, on December 11, various media reported that the US planned to send a delegation to China including Assistant Secretary of State for East Asian and Pacific Affairs Daniel Kritenbrink and National Security Council Senior Director for China and Taiwan Laura Rosenberger in the coming days that will follow up on the Biden-Xi meeting last month at the G20 gathering in Indonesia. The purpose of the meeting will be twofold. On the one hand, it will serve to continue “responsibly managing the competition” between the two countries and “explore potential areas of cooperation,” according to a U.S. State Department statement. It will also help set the stage for a planned visit to China by U.S. Secretary of State Antony Blinken in early 2023. The perils of great-power competition It is for the best that the U.S. and China find ways to constructively manage the many differences in their relationship and cooperate where possible. Provided that Beijing is sincere, climate change may turn out to be one area where the two countries can make meaningful progress together. Bilateral trade and investment will continue as well, despite the unprecedently harsh sanctions the Biden administration recently placed on China’s semiconductor sector. For now, China is responding to sanctions by filing a case at the World Trade Organization (WTO) that could take years to resolve. Some analysts have accused the U.S. of unreasonably waging war on China’s semiconductor sector, an assertion that fails to consider the long-term effects of China’s predatory mercantilism on the U.S. economy and the overdue need for a robust American response. For many years, China has been waging a stealthy economic war against the U.S. that has involved persistent intellectual property theft, forced technology transfer, flagrant import substitution in violation of China's WTO commitments, and calculated efforts to make China a manufacturing powerhouse at America's expense. It is highly unlikely that China's Communist leadership did not consider the constant offshoring of American industry would not comprehensively weaken the country in the long term, hollowing out its manufacturing base. That is bad for America in peacetime. In wartime, it could be catastrophic. Beijing now realizes that the U.S. is serious about safeguarding its vital interests, and will no longer let the CCP appropriate US technology to advance the military modernization of the People’s Liberation Army (PLA) or more generally co-opt U.S. companies to make investments that compromise America's national interest. The so-called “tech war” between the U.S. and China will continue to be a source of friction in the relationship, but its potential to disrupt bilateral ties will be secondary to disagreement over Taiwan. When it comes to Taiwan, the U.S. and China agree on almost nothing other than a preference for avoiding war. Chinese leader Xi Jinping has been clear about his intention to proactively pursue annexation of Taiwan and refuses to rule out the use of force to accomplish that objective, though he recently emphasized once again that he prefers to do it peacefully. Xi is not unique in his obsession with Taiwan; every Communist Party leader since Mao Zedong has viewed what they call “reunification” as “a sacred mission.” That said, Xi is the first Chinese leader to possess a military that could potentially prevail in a Taiwan Strait conflict, even if the U.S. intervened on Taiwan’s behalf. The U.S. maintains its one-China policy that recognizes Beijing as the sole government of China, but does not take a stance on Beijing’s claim of sovereignty over Taiwan. Further, from Washington’s perspective the one-China policy rests on an assumption that Beijing and Taipei will resolve their differences peacefully in a manner acceptable to Taiwan’s people. With that in mind, the Taiwanese people have shown no interest in becoming another Hong Kong or Macau, creating a political stalemate and stoking concerns that a political solution to the cross-Strait conundrum is slipping away. The U.S. will have to tread carefully, strengthening hard military power together with Japan and other allies that can deter China from using force against Taiwan, while also exploring options for mitigating Beijing’s constant gray-zone provocations against the island democracy, especially any effort to nationalize the Taiwan Strait. The U.S. has devoted enormous resources in preparing for a worst-case scenario – which is understandable – but it is also important to make China realize that it cannot continue its constant intimidation and coercion of Taiwan without paying a price.