Biden charts path forward with Xi even as Taiwan tensions simmer

With expectations low heading into the first face-to-face summit between Joe Biden and Xi Jinping, they appeared to accomplish as much as politically possible: An agreement to keep on talking, without letting tensions over Taiwan and other disputes derail the U.S.-China relationship. 

The virtual meeting lasted longer than expected, running for more than three hours as the leaders covered a range of topics including trade, the pandemic, climate change, Taiwan and other hotspots. Although the two sides didn’t issue a joint statement at the end, both leaders separately stressed the need for more talks between their governments.

A senior administration official afterward described the tone as respectful and open, even as a statement afterward said Biden told Xi the U.S. “opposes unilateral efforts to change the status quo” regarding Taiwan. China likewise called the meeting “positive” and said it increased “mutual understanding,” while mentioning that Xi warned those playing with fire around Taiwan “would inevitably burn themselves.”

All in all, the meeting puts U.S.-China relations on a more stable footing compared with just a few months ago, when Biden called Xi in frustration as his administration ran into a wall while seeking to engage Beijing on climate talks. Shortly afterward, the U.S. reached a deal to release a top Huawei Technologies Co. executive from extradition proceedings in Canada—one of Beijing’s top demands. And last week the countries made a joint statement on climate that helped salvage the COP26 summit in Glasgow. 

While it’s likely the U.S. and China will continue to spar on Taiwan, Hong Kong and Xinjiang, the summit could spur lower-level talks to cooperate on issues like the economy, visas for journalists, Iran and Afghanistan, according to Susan Shirk, a former top State Department official who is now chair of the 21st Century China Center at the University of California, San Diego. 

“The folks in the U.S. understand that especially in its current structure, the Chinese political system is very centralized—Xi Jinping as the core leader, the people’s leader,” she said. “So having good communication, leader-to-leader communication, is more crucial than ever.” 

Investors found cause for optimism, pushing the onshore yuan up by as much as 0.3% against the dollar to approach the strongest level since 2018 as the summit got underway. Gains pared later in the day.

China Fast Track

The U.S. made clear ahead of the meeting that there would be no specific outcomes from the meeting, and that appeared to be the case. One of the only concrete deliverables was a Chinese announcement of an upgraded fast track for U.S. executives to enter China, which was welcomed by American business groups in the country. 

“I’m optimistic about the relationship,” said Ker Gibbs, president at The American Chamber of Commerce in Shanghai. “What’s needed to be said has been said. And it sounds like the two leaders are taking a very practical approach to the relationship.”

The tone of the summit marked a shift from both the final year of Donald Trump’s presidency, when relations sunk into a tailspin after Covid-19 spread around the world, as well as the first few months of the Biden administration. At the start, Biden referenced back to lengthy discussions the pair had about a decade ago when they both served as vice president. 

“We need to establish some commonsense guardrails, to be clear and honest where we disagree, and work together where our interests intersect, especially on vital global issues like climate change,” the U.S. president said. “You’re a major world leader, and so is the United States,” he added.

‘Rhetorical Molotov Cocktails’

Xi in turn said he was “very happy to see my old friend,” while saying the U.S. and China “need to increase communication and cooperation.” 

The fact that both leaders are talking to each other “following a really nasty relationship over the past several years” is an accomplishment in itself, said Kent Kedl, managing director for Greater China and North Asia at Control Risks, an international consulting firm. 

“It’s a lot better than just lobbying rhetorical Molotov cocktails at each other,” he said.

When the meeting ended, both sides released statements that reiterated their positions while striking an optimistic note about the future. The White House said they “discussed ways for the two sides to continue discussions on a number of areas,” while China said “the two sides agreed to maintain close communication in different forms.” 

On thorny issues of trade and restrictions on technology exports, both sides didn’t appear to make much progress. U.S. officials said the topic didn’t dominate the conversation, while China reiterated calls for the White House to avoid both “overstretching” the concept of national security in business dealings and politicizing trade issues. 

Domestic Problems

Still, both leaders have an incentive to smooth economic ties and the summit could pave the way for more trade negotiations, Raymond Yeung, chief economist at Australia and New Zealand Banking Corp., said in a note. Xi is seeking to bolster growth ahead of a crucial party congress next year at which he’s expected to secure a third term, while lower tariffs would help Biden as prices surge in the U.S.

The presence of Treasury Secretary Janet Yellen in the meeting indicated that cooperation on economic and financial issues may be possible going forward, said Huang Jing, professor at the Beijing Language and Cultural University.

“The competition between the U.S. and China is kind of a facade,” Huang said. “What’s beneath that is a race to see who can solve domestic problems and get their own house in order first.”