January 22, 2021 | Biden's China Policy; US-EU-China Relations: Incentives and Disincentives
Biden's China Policy; US-EU-China Relations: Incentives and Disincentives
Today’s Focus:
Biden’s China Policy: Like Trump’s, but not insane (review)
The United States | China | The European Union
Biden’s China Policy: Like Trump’s, but not insane (review)
Yesterday, I commented on the growing sentiment that Biden’s China policy will be similar to Trump’s, but with less volatility. I have some more thoughts I’d like to share on this.
I’m struggling to come to grips with this idea of a “stable version of Trump policy” because instability and capriciousness seemed to define Trump’s essence. Without extreme volatility, I’m not sure we can call any policy a “Trump Policy.”
However, from the lens of US-China relations, Trump’s unpredictability was probably the most potent aspect of his approach to China. On their own, Trump’s policies didn’t lead to any real outcomes, nor did they alter China’s course in any meaningful way.
We could argue that Trump’s recklessness accelerated China’s push towards achieving more self-sufficiency through Xi Jinping’s ‘dual circulation’ economic strategy. I also believe that Trump’s ‘policies’ incentivized China to move quickly to agree to terms on a major investment agreement with the European Union.
In case it’s not clear how any of this benefited the US, it’s because none of this benefited US. However, it’s not clear that the Trump administration would have been more effective had they followed any underlying principles.
Many argue that Trump directly undermined what would have been an effective China strategy otherwise. I’m referring specifically to the plan outlined and declassified by Matthew Pottinger after his resignation as Deputy National Security Advisor.
Trump was undoubtedly an obstacle to the implementation of Pottinger’s U.S. Strategic Framework for the Indo-Pacific. But that doesn’t mean we should assume everything would have worked under a different president.
Even with Biden and Secretary of State Blinken at the helm, I don’t see how the US can extract full ‘compliance’ from China through policy alone. It doesn’t matter how ‘tough’ the policy is. If the US intends to adopt a China policy that is more than posturing, it needs to be willing to inject chaos into the relationship (unlikely). Otherwise, the US will end up reverting to pre-Trump engagement by default.
Attempts to re-engage with China may not be the worst thing. The Trump administration taught us that the United States’ most effective way of destabilizing China is to destabilize itself. That this is a foolish exercise should be self-evident. We need better options.
The United States | China | The European Union
I want to close out the week by touching on US/EU/China relations, specifically in the context of US exclusion from deepening trade relations between the European Union and China.
Earlier in the week, I wondered aloud on Twitter how the United States could hope to engage with Europe in light of the European Union’s pending investment agreement with China.
For context, the United States is considering ways to form a broad global coalition to counter China’s rising influence. The Trump administration declared its desire to form such a coalition in 2020. President Biden and his incoming Secretary of State Antony Blinken have expressed their agreement towards this sweeping multilateral approach.
Trump’s confounding lack of respect for long-established global alliances was clearly the greatest impediment to forming any coalition to anything, much less address a complex issue like China’s expanding influence.
Given Biden’s track-record with the Obama administration, there’s reason to be more optimistic that his new administration will be more effective in tackling this challenge. However, the fact that the European Union rushed to complete its investment agreement with China before Biden took office is forcing many observers to question EU-China relations' strength.
Back to my original tweet, I’m essentially asking how the United States can approach being ‘tougher on China’ while also respecting both the relationship and sovereignty of a critical ally to the United States, the EU. Will Biden attempt to dissuade the European Union from engaging with China unilaterally? Or will the US take a more forceful approach, and send a signal that the EU needs to pick a side?
I’m grateful for Harvard Business School Senior Lecturer Andy Zelleke’s insight into my question. Here’s his take:
I agree with Dr. Zelleke on his first point that ‘subvert’ likely is too strong of a word to describe how the US should approach any bilateral agreement between the EU and China.
Andy argues that the best way the US can counter China here is by simply offering a better deal for the EU to work with the US. This will be the fundamental challenge for President Biden and Secretary of State Blinken vis-a-vis Europe and China.
Incentives and disincentives will determine outcomes here. The US security guarantee means the EU can’t stray too far from US interests. The US is unlikely to tolerate further EU-China bilateral engagement without US involvement.
China Economy, Trade, Regulatory
Europe’s China deal: How not to work with the Biden administration
The mere prospect of a strengthened EU-US alliance forced Beijing to make concessions to Brussels last month – a lesson on the power of global coalition-building that Europe failed to take on
Domestic investment needed before new trade deals: U.S. Treasury pick Yellen
The Biden administration will prioritize domestic investments in workers and infrastructure before embarking on any new free trade agreements, Janet Yellen, U.S. President Joe Biden’s nominee for Treasury Secretary, told lawmakers.
Ant Group’s Valuation Seen Dropping to $108 Billion on Crackdown (Bloomberg)
Ant Group Co.’s valuation may be cut further under new measures proposed by China to curb market concentration in its online payments market, according to new estimates from Bloomberg Intelligence.
Jack Ma’s fintech giant may be worth less than 700 billion yuan ($108 billion) under the draft proposals, which could reduce the value of Ant’s Alipay service by half, according to senior analyst Francis Chan. Earlier this month, Chan lowered his Ant valuation to less than 1 trillion yuan, from about 1.44 trillion yuan.
China Says Crackdown on Fintech Not Aimed At Specific Firms
China’s banking regulator said recent measures to rein in financial technology firms that have hit hard at giants such as Jack Ma’s Ant Group Co. weren’t aimed any specific company and have been well received by some in the industry.
Some of the firms have a “relatively positive attitude” toward the new requirements and have achieved “initial effects” in their “rectification” efforts, Liang Tao, vice chairman of the China Banking and Insurance Regulatory Commission, said at a briefing in Beijing on Friday, without being specific.
Biden’s First Foreign Policy Move: Reentering International Agreements (Council on Foreign Relations)
Biden has moved to rejoin the Paris Agreement and the World Health Organization. They likely won’t be the last international agreements and institutions that the United States reenters.
Extra Interesting Stuff:
Thanks for reading! Happy Friday, and see you Monday!
Kevin
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