20.11.2018 Author: Vladimir Terehov

Has a Ray of Hope Appeared in Relationship Between the US and China?


The New Eastern Outlook has been covering the current shape and transformation of Sino-American relations on a regular basis. This is quite understandable as the discussion involves one of the aspects of the global political game that impacts the development of the situation in not only the Indo-Pacific, but the entire world.

This topic was last reported on one month ago, and at the time the outlook on the actual state of the relationship between the two leading nations was, at best, not optimistic.

The impact of the trade war, which had begun in earnest, is compounded by the latest tensions in the South China Sea, caused by the dangerously close maneuvers initiated by US and Chinese warships on 30 September. A few days later, the Vice President of the United States, Mike Pence, referring to the latest incident, confirmed the US military’s long-term intention to ignore PRC’s claims of dominance in vast swathes of and islands in the South China Sea.

As expected, Beijing’s reaction towards the decision (also made by the US at the end of September) to sell Taiwan components for its jet fighters for $330 million was negative. This is the second move, of this nature, made by the current US administration. A year earlier the United States signed an agreement with Taiwan to supply it with various U.S.-produced arms worth $1.4 billion.

Both of these transactions are in line with Trump administration’s overall policy course to gradually “accord US-Taiwan relations” a (quasi-)“intergovernmental dimension”. This negates Washington’s public statements about respecting the One-China policy, critically important to Beijing.

Prominent representatives of world politics are understandably weary about the consequences of continuing tensions in the relationship between the two world powers. Over the last three months, the International Monetary Fund’s Chairwoman, Christine Lagarde, has already appealed to the two sides twice, urging them to cool their heels and refrain from tit-for-tat retaliation (following the eye for an eye principle) in the sphere of trade.

Clearly, the danger that these retaliatory attacks will spiral out of control is fully understood both in the US and China. And on 8 November, the leaders of the two nations had a telephone conversation, during which they “expressed optimism about resolving their bitter trade disputes”. Further efforts in this direction will be made by trade experts, and at the high-stakes meeting of the two leaders at the end of November in Argentina, which will host the scheduled G20 summit.

The following day (i.e. on 9 November) negotiations (in a 2+2 format) between the US and Chinese Ministers of Foreign Affairs and Defense took place in Washington. Notably, China’s diplomatic interests were represented by Yang Jiechi, the Director of the Office of Foreign Affairs of the Central Committee of the Communist Party of China that oversees the nation’s Ministry of Foreign Affairs.

At the final press conference, the negotiation participants’ description of the outcomes were moderately positive. Still, the parties seemingly retained their original negotiating positions with regard to the more pressing political and military issues. And they voiced different reasons for the tensions in the South China Sea.

Consequently, James Mattis announced the Pentagon’s intention to seek “ways to lessen tensions” (in the South China Sea), maintain “open lines of communications between” their militaries “and reduce the risk of miscalculation”. But at the same time, he restated the long-standing position that “the United States will continue to fly, sail and operate wherever international law allows”.

Yang Jiechi, in the meantime, insisted that “the US should stop sending its vessels and aircraft close to Chinese territory in the South China Sea”.

As for the economic sphere, various business ties, established over decades, between the US and PRC have not hastily taken the turn for the worse in response to the ongoing trade war. As a result, in the first three quarters of 2018, China’s trade volumes with the US increased by 6.5%, in comparison to those in the same period last year.

The company Boeing, together with its Chinese partners, is finishing construction (which started in March 2017, in China) of the completion and maintenance center for the latest version of its most popular passenger jet model (737). The first jet will be delivered to its client as soon as December of this year. The plant’s expected production capacity is 100 aircraft per year, and China will be their main buyer.

Notably, one third of Boeing’s business is oriented towards the Pentagon, but for several decades now, the company has been moving manufacturing of civilian aircraft to China. However, up until recently, this meant production of certain components of passenger jet frames only. For the first time in history, a nation that is a key US geopolitical rival will have completion plant of an American aircraft manufacturer in its territory.

And this is not an isolated case. Further proof of continuing interest, by US companies towards China’s giant product market and establishing joint ventures, is the fact that the United States was one of the most represented countries (with the exception of the host, of course) at the China International Import Expo (CIIE), which opened on 5 November in Shanghai. The exhibition hosted 172 countries and 3,600 companies.

The first CIIE was meant to highlight the sudden thrust forward along the course, outlined long before, towards a more open Chinese economy as opposed to the “protectionist” trend in Washington.

The keynote speech, made by China’s leader at the opening of the exhibition, emphasized the importance of multilateralism (not only on an economic level) behind the policy course to lower tariff barriers on foreign goods and investments entering the Chinese market. General Secretary Xi Jinping announced that, in the next fifteen years, PRC will purchase various foreign goods and services, worth $30 and $10 trillion, respectively.

The statement unveils tempting prospects for companies exporting to the Chinese market, and American businessmen have no intention of missing out on these new opportunities.

The delegation from the state of California to CIIE (whose trade turnover with China accounts for 30% of all the Chinese-American trade) made it clear that they are against the trade war, started by Washington, and support further development of bilateral trade and economic ties.

Hence, the events that have taken place in the last few weeks allow talk (albeit with caution) about potential cessation of the growing tensions in the relationship between the two world leaders.

Still, the problems are unlikely to disappear (especially instantaneously), as they are varied and possibly even fundamental in nature. Hence, on 7 November, Donald Trump, for reasons unknown, chose to cast a negative light on the so-called Made in China 2025 strategy, unveiled by Chinese Premier Li Keqiang as far back as March 2015 during the Third Session of the Twelfth National People’s Congress.

The aforementioned strategy, encompassing the period up to 2025, is a plan, devised by the Communist Party of China, to transform China into a world economic power. It also mentions China’s willingness to not only implement a host of key projects in the high tech sphere, but to also make them a priority for PRC’s economy.

The mere existence of the Strategy 2025 upset the US President, who expressed a firm intention not to cede US hegemony in the high tech sphere to anyone. The Chinese did not expect such a strong reaction from the US, as they did not fully grasp the danger China’s technological development poses to the US hegemony

Nevertheless, the revival of a multilateral dialogue between the two global leaders is a positive sign to the world of politics. For other key world players, the dialogue, for one, means that the unpleasant necessity of making a hard choice between, say, “red and white” has been postponed. And countries, such as Australia, still have the opportunity to continue their maneuvers within the force field, created by the US and China.

Admittedly though, remarkable events, in one way or another connected to Australia, deserve their own review.

Vladimir Terekhov, expert on the issues of the Asia-Pacific region, exclusively for the online magazine “New Eastern Outlook.”


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