The Economic Reason China Needs the US More Now Than In the Recent Past

The Chinese economy has suffered from a series of blows, including the near collapse of its over-developed and heavily leveraged real estate market, the withdrawal of US and European investment due to harshly intrusive Chinese government policies and the effect of sanctions on China's ability to compete in technology. 

The result is that Xi Jinping has prudently decided his "wolf warrior" approach to foreign relations is harming the once-booming economy on which the legitimacy of his rule depends. Jl 

David Sanger reports in the New York Times:

When President Biden met President Xi Jinping Wednesday on the edges of Silicon Valley, there was a subtle but noticeable shift in the power dynamic between two countries that have spent most of the past few years denouncing and imposing sanctions on each other. For the first time in years, Chinese President Xi desperately needed a few things from the US, starting with a revival of American financial investments in China and a break in the series of technology export controls that have crimped Beijing’s ability to make the most advanced semiconductors and AI breakthroughs they enable.

When President Biden met President Xi Jinping on Wednesday on the edges of Silicon Valley, there was a subtle but noticeable shift in the power dynamic between two countries that have spent most of the past few years denouncing, undercutting and imposing sanctions on each other.

For the first time in years, a Chinese leader desperately needed a few things from the United States. Mr. Xi’s list at the summit started with a revival of American financial investments in China and a break in the series of technology export controls that have, at least temporarily, crimped Beijing’s ability to make the most advanced semiconductors and the artificial intelligence breakthroughs they enable.

All this may explain why Mr. Biden’s aides were able to negotiate, fairly quickly by Chinese diplomatic standards, a potentially major agreement on stopping the flow of the chemical precursors for fentanyl to the United States and a resumption of military-to-military communications, critical for two superpowers whose forces bump up against each other every day.

 

“Restoring these military-to-military contacts, and not just at the secretary of defense level, but also at the regional command level and the operational level, is really critical to helping to avoid miscalculations and mistakes,” Secretary of State Antony J. Blinken said in an interview on Thursday.

The lurking question now is whether Mr. Xi’s charm offensive — on full display Wednesday night as he entertained chief executives — marks a lasting shift or a tactical maneuver.

While Mr. Biden’s aides said they were pleased by the concrete outcomes of the summit, they readily conceded that those may be short-lived. China’s record of steady compliance and enforcement with similar agreements in recent years has been spotty. And it is possible Mr. Xi was simply looking for a way to get through China’s roughest era of bankruptcies, property-value collapses and loss of consumer confidence in four decades.

Nonetheless, Mr. Biden seems happy to take advantage of the breathing space, hoping that he will have more time before the presidential election to rebuild manufacturing competitiveness and hem in China’s gains in the Pacific.

Few American officials doubt that when he can, Mr. Xi will reignite his effort to displace the United States as the most skilled military, technological and economic power in the world.

While Mr. Xi turned down the temperature on Taiwan a few degrees, telling Mr. Biden he would not move precipitously against the island, American national security officials emerged from the meeting believing that he is still intent on eventually bringing the island under the mainland’s control. And they see no evidence that Mr. Xi’s appetite for more territory in the South China Sea or more nuclear weapons will abate.

Still, the change in tone, even if temporary, was welcome. It began over the summer, when Mr. Blinken made a trip to Beijing that had been delayed by the Chinese spy-balloon incident. With the depths of the economic crisis in China becoming apparent, Mr. Blinken reported back that he was struck by an eagerness there for visits by Treasury Secretary Janet L. Yellen and Commerce Secretary Gina Raimondo. There were quiet meetings in Vienna, and then Washington, between Jake Sullivan, the national security adviser, and his counterpart, Wang Yi.

It was all intended to culminate in the meeting between Mr. Biden and Mr. Xi, which lasted for four hours on Wednesday at the Filoli mansion and gardens, a popular hiking, dining and wedding destination that suddenly became the playing field for the greatest geopolitical competition on earth.

During the meeting, Mr. Xi complained about the damage done to China by its portrayal as a villain in the United States, according to administration officials who would not speak on the record about the discussions. Mr. Xi voiced his longest and loudest protests about the cutoff of the fastest computer chips, which Mr. Biden responded would help the Chinese military. The two leaders were at fundamental odds on that issue: What Mr. Xi sees as economic strangulation, Mr. Biden sees as an issue of national security.

But the tone was always measured, sometimes friendly, leavened with Mr. Biden’s recollections of past trips with Mr. Xi in China, the United States and at summits around the world. Mr. Xi then fine-tuned his speech for the C.E.O.s to recall happier moments in the U.S.-China relationship.

“It did strike me that it was a speech that could be given seven or 10 years ago in the era of engagement,” said Michael Froman, the former U.S. trade representative and Citigroup executive, who recently became president of the Council on Foreign Relations and attended the dinner. “It was as if the era of ‘wolf-warrior diplomacy’ had never happened, and some of the events of the past few years had not occurred.”

In fact, the most striking element of the visit was Mr. Xi’s seeming abandonment of the “wolf warrior” tone — one the Chinese leader himself had encouraged.

The phrase came to embrace a Chinese diplomatic style, aimed especially but hardly exclusively at the United States, in which Chinese envoys described the end of an era of American dominance. China was rising, the wolf warriors declared, and America was in unstoppable decline. The arguments tracked closely with some that Mr. Xi himself made in speeches to party leaders and military officials in Beijing.

Mr. Xi dispatched one of his favorite wolf warriors, Qin Gang, to Washington as his handpicked ambassador. During Mr. Biden’s first year, the emissary spoke about “lies, disinformation” about China that were “spreading every day.” He complained, “China is being treated like a kid, being scolded by his or her parents every day. ‘You are wrong. You need to do this. You shouldn’t do that.’”

So when Mr. Qin was recalled from Washington to become foreign minister, there was an assumption in Washington that his approach had been a success — and he was being rewarded for the blunt, in-your-face diplomacy that once led Mr. Sullivan to ask aloud: “Who calls their diplomats wolf warriors?”

Mr. Xi appears to have rethought the wisdom of doing so. Mr. Qin disappeared over the summer, not long after meeting Mr. Blinken in Beijing. The conversations underway since have been largely practical, not polemical.

Mr. Blinken was able to negotiate outlines of the crackdown on the precursor chemicals for fentanyl during his summer trip, and the Chinese quickly made it illegal to trade in those chemicals — and in the past week or so began arresting violators, most identified by the United States.

“This is concrete stuff, and it goes to the single common denominator across our country that has been devastating communities,” Mr. Blinken said on Thursday.

The actions were reminiscent of a previous era when China would crack down on arms and technology companies selling parts to North Korea, or Iran. Still, American officials caution that they fully expect some of the makers of the chemicals will figure out how to avoid the sanctions, and they will come back on the market.

When the conversation on Wednesday turned to military-to-military communications, Mr. Xi repeatedly urged Mr. Biden to just pick up the phone and call him if there was a problem. Of course, calls between the leaders of the two countries are never that easy. (China in particular insists on orchestrating every word that will be uttered well ahead of time.)

But the real test will come in the negotiations ahead. While American officials said little about it, the Chinese side heralded a new “working group” that will examine the risks of artificial intelligence in weapons systems, including nuclear weapons. China has never entered talks about the size and purpose of its nuclear arsenal, saying it had so many fewer than Russia and the United States do that it wanted to reach parity before making any commitments.