CHINAMacroReporter

'A Complex Inheritance: Transitioning to a New Approach on China'

Breaking Down Biden's China Challenges

‘For the Biden administration to successfully transition to a new and more effective China strategy, the various existing Trump measures should not be treated in the same way.’
by

Scott Kennedy | CSIS

|

Center for Strategic & International Studies (CSIS)

January 23, 2021
'A Complex Inheritance: Transitioning to a New Approach on China'

‘Although the Trump administration has tried to intentionally handcuff its successors, the Biden administration has substantial flexibility to reshape America’s China policy.’

  • ‘To successfully transition to a new and more effective China strategy, the various existing measures should not be treated in the same way.’

‘Instead, they can be sorted into four categories (see below figure):'  

  1. 'Unilateral Multilateralism'
  2. 'Isolate China'
  3. 'Bilateral Stabilization'
  4. 'Modified Restrictions and Reforms’

'Each of these should be handled differently.’

1. ‘Unilateral Multilateralism’

‘The first group (in blue) is composed of actions the Biden administration should unilaterally eliminate without even engaging in negotiations with others.’

  • ‘Reversing these policies will begin the process of repairing those ties and strengthening the United States’ influence in multilateral fora.’

'Fortunately, the Biden administration has signaled that it wants to support the World Trade Organization (WTO) and not undermine it, rejoin the Paris Agreement, maintain U.S. troops in Europe and Asia, rejoin the World Health Organization (WHO), and return to the Iran nuclear deal.'

  • 'Taking these steps early will help clarify that the world’s most serious challenge is China, not U.S. allies and the international institutions they helped build.'

2. ‘Isolate China’

‘At the other end of the spectrum (in red), the Biden administration needs to maintain and, in some cases, expand restrictions where Chinese actions are beyond the pale and violate basic principles of human rights, threaten intellectual freedom, or flout the law.’

  • ‘The incoming administration should make human rights a presidential priority and expanding restrictions where possible.’
  • ‘The administration also needs to maintain restrictions and vigilance on dangerous Chinese behavior within the United States.’

3. ‘Bilateral Stabilization’

‘Although rebuilding confidence among U.S. allies and being tougher on China in certain areas have their challenges, far more complicated are issues that fall in between these extremes, which should be divided into two other separate categories:’

  • ‘bilateral stabilization (in green) and modified restrictions and reforms (in purple).’

‘This category includes: rolling back the Section 301 tariffs; ending the tit-for-tat expulsion of journalists; reopening the Houston and Chengdu consulates; ending the dispute over the attempted extradition of Huawei executive Meng Wanzhou and the arbitrary detentions of Canadians Michael Kovrig and Michael Spavor; removing the threat to ban WeChat and TikTok; eliminating plans to issue shorter visas for Chinese Communist Party (CCP) members; and restoring the Fulbright and Peace Corps programs in China.’

  • ‘These measures have hurt the U.S. economy, eroded U.S. soft power, done little to advance U.S. national security, and damaged the United States’ relationships with allies, all without imposing substantial costs on China.’

‘Removing these policies may help stabilize U.S.-China ties.’

  • ‘That said, taking these steps should not be done unilaterally but rather through bilateral negotiations in which China either reciprocates or addresses the U.S. concerns that prompted the restrictions to begin with.’

4. ‘Modified Restrictions and Reforms’

‘The final category of policies, modified restrictions and reforms (in purple), is the thorniest, as it is composed of steps a Biden administration might not have adopted on its own but that nevertheless align with broadly held concerns about the downside risks of both bilateral engagement, particularly with regard to advanced technology, as well as the basic rules defining China’s engagement with the rest of the world.’

‘The Trump administration’s offensive on technology initially centered around a single company, Huawei.’

  • ‘Banning its equipment in U.S. 5G networks and restricting exports of certain U.S. technologies to Huawei likely make sense, but over the longer term, the United States and its allies need to develop a comprehensive certification and monitoring system for trusted products and services that applies worldwide, including to Chinese producers.’

‘The United States also needs to reevaluate the benefits and downsides of the “foreign direct product rule” (FDPR), which in this case, starting in May 2020, extended export controls on U.S.-based firms to any company, U.S. or otherwise, producing goods from outside the United States.’

  • ‘Invocation of extraterritoriality needs to be done extra carefully because of the effect on U.S. allies and the precedent it sets for others, including China.’

‘The U.S. Commerce Department has added over 400 Chinese companies to its traditional Entity List and another one for military end-users, while the Department of Defense has identified over 40 companies it claims are controlled by the Chinese military.’

  • ‘The Biden administration needs to evaluate and set standards that appropriately protect national security, can be implemented together with U.S. allies, and, if adopted by China, would at least in principle not be objectionable.’

‘The Trump administration, through the Department of Justice’s China Initiative, also puts a great deal of energy into rooting out Chinese espionage and cyber theft, particularly directed at U.S. industries and institutions of higher learning.’

  • ‘These efforts are sorely needed and will likely have to be expanded.’
  • ‘At the same time, it is important to proceed without demonizing any racial group and to not unnecessarily squash academic and research exchanges between the United States and China that help generate new innovations and promote greater Chinese appreciation for the United States, all of which can strengthen U.S. economy and national security.’

‘Finally, although the Trump administration’s frustration with the WTO and other international institutions is understandable, the Biden administration needs to work harder with allies and other like-minded countries to resolve differences, resuscitate the WTO, and have it and other organizations work to the advantage of the United States.’

  • ‘Although China has made major headway in making these bodies safe spaces for authoritarian state-capitalist countries, the United States should in no way concede defeat on any of the big substantive issues (e.g., the core importance of market economies and constraints on government interventionism, the multi-stakeholder model for internet governance, and 5G) and operational norms (e.g., transparency, accountability, and staying within defined mandates).’
  • ‘An invocation from several years ago in defense of TPP still applies: “If we don’t make the rules, China will.” ’

More

CHINAMacroReporter

March 21, 2022
Faint Cracks
For some time now we’ve taken it for granted that Xi Jinping has so consolidated his power that his will is China policy.
keep reading
March 13, 2022
Is China in a Bind?
It wants to support Russia, but also wants to support the international order from which benefits and doesn’t want to alienate the major economies its own economy is intertwined with.
keep reading
February 19, 2022
Under Construction: Two (Opposing) World Orders
Years ago, before the so-called ‘New Cold War,’ when asked what China issue interested me most, I said, ‘China and the liberal world order.’
keep reading
December 30, 2021
Q&A 4 | Is China Exporting Inflation?
'‘China has its own issues. If you look at the CPI inflation, it looks more moderate. ‘If you look at the producer price inflation, it looks more severe.’
keep reading
December 30, 2021
Q&A 2 | Will the Gender Imbalance Keep Housing Prices Firm in the Medium Term?
‘The part of housing prices caused by gender-ratio imbalance is not going to go away in the medium term. But the government has ways to create volatility in the housing market.’
keep reading
December 30, 2021
Q&A 3 | Property 2022: Stabilization or Growth?
‘The goal is to stabilize housing prices while having housing sector grow.’
keep reading
December 30, 2021
Shang-jin Wei Presentation-3 | Analyzing the Gender Imbalance Data
‘Compare these with graph showing the impact of the same factors on rental prices...'
keep reading
December 30, 2021
Shang-jin Wei Presentation-2 | Gender Imbalance as a Driver of Housing Prices
‘Why does gender imbalance have such an outsize impact on China’s housing prices?'
keep reading
December 30, 2021
Q&A 5 | Will Xi Continue to Favor the State Over the Private Sector?
‘He wants to see a bigger role for the state in the economy. But in the last two years, he has done some course correction. For example, after talking up the role of state-owned firms and building stronger, bigger state-owned firms, he is talking about the equal importance for the private sector.’
keep reading
December 30, 2021
Q&A 7 | Why Did Beijing Ban Online Tutoring?
‘Each policy in isolation – whether its banning online tutoring or protecting data or enforcing anti-monopoly regulations or any other - has its rationale.’
keep reading
December 30, 2021
What Are Your Top of Mind Concerns?
I asked the participants what are their top of mind concerns about China.
keep reading
December 7, 2021
Getting (Xi Jingping's) Priorities Straight
How do you make investment or business decisions in the face of the uncertainties created by Xi Jinping's reshaping China's economy? In this issue, I'll give you a few different ideas on how you might deal with that uncertainty.
keep reading
December 7, 2021
Look Through the Rights Lenses
Getting down more to the nitty-gritty, if you’re evaluating a sector or a company, get your lenses right to get the details right.. Stonehorn’s Sam Le Cornu gives a good example of this in a Bloomberg interview.
keep reading
December 7, 2021
Sometimes You Just Have to Roll the Dice
Telling someone to align him or herself with Beijing's priorities still is generally good advice.And, when I tell you what those priorities are, I know I am right - until I'm not.
keep reading
December 7, 2021
Watch What Beijing Says - and Does
Besides listening to Xi Jinping, you can discern Beijing’s priorities and its likely actions through its big policies - and this is my point here.
keep reading
November 23, 2021
'Biden Has a Summit With Xi, but No Strategy for China'
‘Neither Taiwan nor strategic arms are a hot campaign topic, and China is not yet at the forefront of public consciousness. To ensure America’s eventual strategy is workable, political leaders need to debate the challenges so citizens can appreciate the implications of the choices they will have to make.’
keep reading
November 23, 2021
Xi Jinping's Leadership: 'The Inevitable Outcome of History'
Mr. Xi is the hero of a Resolution on the history of the Chinese Communist Party that painted his leadership as the inevitable outcome of history and all but gave him his third term. Tony Saich of the Harvard Kennedy School did a terrific analysis on this - you'll find it below, after my take.
keep reading
November 23, 2021
'Xi Jinping has made sure history is now officially on his side'
‘While there are murmurs of opposition, the historic plenary session would suggest that the future is in Xi’s hands. However, when politics is so deeply personalised and centralised, there is only one person to blame if things go wrong. Unless, of course, we get a new resolution on history that tells us who led the party astray, despite Xi’s earnest attempts to keep policy on the straight and narrow.’
keep reading
November 9, 2021
'America's China Plan: A Proposal' by Clyde Prestowitz
Outcompeting China and avoiding global extension of its authoritarian and coercive policies and practices is not really about China. It’s about America.
keep reading
October 27, 2021
Why China Won't Invade Taiwan - Yet
Forget Evergrande and the energy crunch. After the recent flurry of alarming headlines, here’s the question I get most often these days from CEO’s and institutional investors: Will China invade Taiwan in the next few years?
keep reading
October 17, 2021
An Energy Crunch. China's Latest Crisis. They Just Keep Piling Up.
‍‘Over the next six months or more, the energy crunch in China will be an even bigger challenge than Evergrande. Will make the Evergrande problem look tiny and has huge global implications. The lights go out in China!’ one experienced and very well-respected reader of long residence in China wrote to me in response the last issue on Evergrande.
keep reading
October 7, 2021
Just How Contagious is Evergrande?
Just as a personal crisis can lead you to dig deeper into yourself, so the rapid-fire events in China - with trillions of dollars of business and investment on the line - have led us to (finally) go deeper into how China works – and to come to grips with uncertainties caused by Xi Jinping’s recent moves to reshape the Chinese economy and the Party’s social contract with the Chinese people.
keep reading
September 27, 2021
'This Time Feels Different'
Just when we thought we were getting used to Xi Jinping’s tech reforms and social-engineering regulations, the Evergrande crisis heats up.
keep reading
September 19, 2021
AUKUS: A New World Order?
‍In case you passed over the news of AUKUS, the new strategic alliance among the U.S, the U.K., and Australia, here a few headlines to encourage a deeper look.
keep reading
September 7, 2021
Xi Jinping: Today, video games. Tomorrow, well ... just be good.
Today's issue is a heads up on what may be Xi Jinping's efforts to reshape Chinese society.
keep reading
August 28, 2021
The Taliban: 'China's Perfect Partner'?
Breaking through the blow-by-blow reporting that started when the Taliban began its sweep to victory are the geopolitical analyses of who gains and who loses in Afghanistan.
keep reading
August 15, 2021
'Xi’s Dictatorship Threatens the Chinese State'
‘Mr. Xi is determined to bring the creators of wealth under the control of the one-party state.’
keep reading
August 15, 2021
'Are you tired of losing yet, America?'
As I write this, Taliban forces have entered Kabul and are reportedly occupying the Presidential Palace.
keep reading
August 15, 2021
China Economy: Industrial Production Down, Demand Resilient
China’s industrial production down 10%. Demand resilient.
keep reading
August 15, 2021
'China Signals More Regulation for Businesses in Coming Years'
‘The State Council’s statement provides a guiding context to interpret current regulatory thrusts. The blueprint as an attempt by Chinese authorities to help investors understand the motives behind the regulatory push.’
keep reading
August 5, 2021
‘Global investors shocked to have discovered that China is run by Communists.’
‘Global investors are shocked to have discovered that China is run by Communists.’
keep reading
August 5, 2021
'Shocked Investors Scour Xi’s Old Speeches to Find Next Target'
‘While China’s policy moves can feel ad hoc particularly to foreign investors, the changes are quite targeted on certain sectors.’
keep reading
August 5, 2021
Don't Say Xi Jinping Didn't Warn You
‘Global investors are shocked to have discovered that China is run by Communists.’
keep reading
August 5, 2021
'China Wants Manufacturing—Not the Internet—to Lead the Economy'
‘Social media, e-commerce and other consumer internet companies are nice to have. But in his view national greatness doesn’t depend on having the world’s finest group chats or ride-sharing.’
keep reading
August 1, 2021
'Stock Market: China Doesn’t Care How Much Money Investors Lose'
‘Does Beijing not care how much money foreign investors have lost? Does the government really want to close China Inc.’s access to the deep pool of global capital? The short answer is, no, the government doesn’t care.
keep reading
August 1, 2021
'Xi's Four Pillars of Regulation'
‘Broadly, Beijing is concerned about four pillars of stability: banking, anti-trust regulation, data security and social equality. All of Beijing’s major interventions reflect these concerns.’
keep reading
August 1, 2021
China's Tech Crackdown: 'Nobody Saw It Coming.' — Huh?
‘Carnage in China's financial markets signals the beginning of a new era as the government puts socialism before shareholders, and regulatory changes rip apart the old playbook,’ writes Reuters’ Tom Westbrook.
keep reading

Heading

Lorem ipsum dolor sit amet, consectetur adipiscing elit. Suspendisse varius enim in eros elementum tristique. Duis cursus, mi quis viverra ornare, eros dolor interdum nulla, ut commodo diam libero vitae erat. Aenean faucibus nibh et justo cursus id rutrum lorem imperdiet. Nunc ut sem vitae risus tristique posuere.