The meeting between Biden and Xi conveyed a significant message for U.S. business in China

22 Nov, 2023

The meeting between Biden and Xi conveyed a significant message for U.S. business in China

The recent meeting between U.S. President Joe Biden and Chinese President Xi Jinping in San Francisco is seen as a pivotal moment that establishes a foundation for U.S.-China business relations. Analysts highlight the significance of this summit in reducing uncertainty for businesses.

Wang Dong, executive director of the Institute for Global Cooperation and Understanding at Peking University, emphasized the consensus emerging from the summit. He noted that the meeting provided a clear signal that both countries are committed to fostering cooperation based on reciprocity and mutual respect, crucial for the global economy.

For U.S. businesses, the hope is that the new tone set by the leaders can translate into a more normal economic relationship. Jake Colvin, president of the National Foreign Trade Council, sees an opportunity for a mutually beneficial relationship where both countries adhere to rules, potentially leading to the reduction of tariffs and retaliatory measures.

During the summit, Biden maintained firmness on export controls for national security reasons. The leaders also affirmed the importance of addressing the risks associated with advanced artificial intelligence (AI) systems, emphasizing the need for U.S.-China government talks. Additionally, military-to-military talks, on hiatus for over a year, are set to be restored.

Gabriel Wildau, managing director at Teneo, views the meeting as a signal that full decoupling is not on the table, indicating that investments in China remain permissible, especially in non-sensitive industries.

While the Biden administration has sought restrictions on U.S. investment in Chinese companies involved in advanced tech for military development, the meeting suggests that complete decoupling is not the objective. The administration has been cautious about affecting the vast majority of trade and consumer-related business that remains unaffected.

The Biden-Xi meeting spurred actions such as the resumption of more flights between the two countries, indicating a positive impact on diplomatic and business relations. Notably, Mastercard received approval from the People’s Bank of China for its joint venture to begin processing domestic payments.

However, the long-standing issues for U.S. business operations in China persist, and no immediate major deals have been announced following the summit. As the positive atmosphere from the meeting is assessed, uncertainties regarding the longevity of the consensus achieved and potential risks tied to the upcoming U.S. presidential election and Taiwan's elections are also considered by experts.

Eurasia Group suggests a "managed decline" in U.S.-China relations through 2024, with a lower likelihood of serious deterioration but zero chance of substantial improvement. The overall sentiment is cautiously optimistic, recognizing the challenges of managing the relationship in the long term.