Examining the Complexities of U.S.-China RelationsMay 4, 2021

China and the United States are resetting their bilateral relationship – but not in the same way. While the Biden administration has made clear that it wants to recast the tone and use of diplomatic instruments, and leverage more global consensus, even as substance on key issues has not shifted, President Xi has equally stated that he sees a new world order emerging, one in which China and the U.S. are equals. The first diplomatic engagement between the two countries, a.k.a. the “Alaska talks,” began with mutual finger-pointing on issues such as human rights/social justice, regional dynamics and other longstanding hot buttons. Many observers called the talks “frosty” or “contentious.” However, the dialogue itself taking place represented a significant step and has laid groundwork for further discussion on issues like climate change, e.g., Ambassador Kerry’s trip to Shanghai. This begs the question: can the United States and China cooperate and disagree at the same time?

Current and future discussions will also set the tone for commercial opportunities and can create risks for companies, as they may inadvertently flame tensions with missteps in an atmosphere still fraught with mistrust. Growing demands for companies to be more socially responsible, plus Biden administration efforts to reframe trade and foreign policy to resonate with non-D.C. audiences, add novel dimensions to the
relationship. Brands and companies - increasingly expected by their stakeholders to weigh in on political and other issues while having a clear, consistent set of beliefs and values - must be aware of these dimensions, too.

With the new administration seeking to re-establish the United States as a diplomatic leader and convener, there is strong interest in maintaining the
substance of policy while reframing the approach. Aspects of U.S.- Chinese relations therefore can be depicted on an issues-based spectrum that covers three main categories with some overlap: Cooperation, competition and confrontation.

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COOPERATION

Despite existing tensions, there is ample opportunity for China and the United States to cooperate on shared goals, such as ending the coronavirus pandemic.

Distrust related to China’s alleged handling of the coronavirus outbreak remains high among American policymakers, members of the American public and leaders from around the globe. But it will be critical for the U.S. to work with China in partnership with the World Health Organization, COVAX and other multilateral institutions, as well as through bilateral and other means, to help control and ultimately end the coronavirus pandemic.

America and China will also need to work together on climate change. Ahead of Cop26, both countries have indicated that climate change is a long-term priority, particularly net-zero as well as other goals. President Xi and Special Presidential Envoy for Climate John Kerry both addressed the World Economic Forum on the subject. Kerry explicitly called for the private sector to take leadership in addressing climate. Companies with interests in both the U.S. and China that are active on climate issues, as well as other areas of potential cooperation, will have a critical role to play in bridging ambitions of both countries.

COMPETITION

As scholars at the Carnegie Endowment for International Peace point out, “Strategic competition between the United States and China is not new at all. It is a feature, not a bug, of the U.S.-China relationship.”

Economic growth is among the most obvious areas where other countries benefit from competition between the United States and China. As each
country strives to improve its own economic conditions, the rest of the world is enriched through global purchasing and trade. In terms of innovation, the two countries have been competing to be the first mover in myriad technologies – from space exploration to computing, robotics to consumer goods – that advance countless areas of scientific study and create new products that revolutionize everyday life. This has been made crystal clear during the coronavirus pandemic, which has not only created the need for novel vaccines and global distribution but which has rocked traditional supply chains and global economic well-being. Each country’s successes egg on the other. That said, as these issues intersect with areas like national security, they risk creating flashpoints between the two countries.

One area of competitive concern is 5G technology. After the U.S. spent years persuading allies to exclude Chinese companies in the build-out of 5G networks, the EU recently turned to China as a strategic investment partner. This agreement comes as China surpassed the U.S. as the largest recipient of direct foreign investment. While the Biden administration has reengaged European allies since taking office (such as by rejoining the Paris Climate Accord), the 5G agreement between Europe and China introduces a level of economic and diplomatic competition with China in the Western world.

The reality of global innovation and standard setting is much more complex and interconnected than the simplistic zero-sum competition some politicians have characterized it as. This becomes apparent when
considering the contributions to global 5G progress made by a host of countries, including America, China, members of the European Union, Japan, Korea and other technology innovators.

CONFRONTATION

Even with a change in administration, the United States and China still find themselves at loggerheads on certain policy issues where frustration and strain have evolved into hostility. We see four key areas for potential confrontation: National security, military action, economic liberalization, and human rights and democracy.

Unlike the unilateralism of the previous administration, President Biden has committed to relying on traditional multilateral institutions and
consulting with like-minded allies before moving to escalation. With career foreign policy experts and scholars at the helm, the process and steps will be clear and somewhat familiar. But the Biden administration is unlikely to walk back Trump-era actions without some concessions and negotiation.

Much of this postural realignment stems from national and data security concerns, which have increasingly dominated conversations on both sides
and undermined cooperation in areas of otherwise shared interest. On the domestic U.S. front, Chinese companies are having their access to U.S. financial markets and U.S.-based capital restricted by the U.S. government’s listing specific companies as “Communist Chinese military companies” through the Section 1237 provision of the 1999 National
Defense Authorization Act. With the U.S. restricting Chinese companies’ access to capital, China will look elsewhere for investment opportunities and markets, including in the European Union and Southeast Asia.

Perhaps the largest concerns are related to military and commercial issues, and how they impact the positions of the United States and China as global leaders. Through its ambitious Belt and Road Initiative, China has been investing in the domestic future of countries throughout the world in a way that often comes into perceived conflict with American power
projection. In addition, China’s and the U.S.’s actions in areas such as the South China Sea have been met with regional and global concern.

Washington, the UK, Australia and other governments have grown increasingly critical of China’s alleged treatment of domestic political dissidents and ethnic minorities, including the Uyghurs in China’s western
Xinjiang region, pledging to take international action. China, for its part, has called out American domestic issues, particularly related to racial justice and police brutality, and questioned what it sees as interference in
domestic affairs as well as what Chinese officials see as double standards.

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CONCLUSION

Navigating the evolving balance between the United States and China will continue to be a priority for global businesses. The different dimensions across which the United States and China interact create both risk and opportunity for companies that operate in both countries (or wish to), particularly in areas where China and the United States share common ground – and where the possibility of healthy, open competition exists.

Have questions? Connect with the authors.

Shaila Manyam is an SVP and Senior Director at BCW, leading international public affairs, thought leadership and reputation management for clients including governments, private sector companies and international organizations. Shaila is also a former U.S. diplomat, U.S. Embassy spokesperson and senior policy advisor. You can reach Shaila at [email protected]

Matthew Ballard is an SVP and Senior Director at BCW, where he works with a broad range of technology companies, directs thought leadership initiatives, conducts media relations and provides counsel to clients seeking to navigate cybersecurity and technology issues. You can reach Matt at [email protected]