How China is preparing for a new Trump Presidency

Not much has changed in the past four years, but this may serve to harden resolves. While some may hope for speedy resolutions, China plans to double down on key issues.

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Presidents Biden and Xi met for their last meeting during the APEC summit last weekend, talking for over two hours about the state of current relations and plans for the future.

On the surface, the meeting seemed to go well and even bore some positive fruit. Western media has gushed over an agreement to avoid giving artificial intelligence control of nuclear weapons systems, discussions over the possible release of US citizens imprisoned in China,

Xi even referenced Thucydides Trap for goodness sake, indicating that it would be in neither power’s interest for current disagreements to escalate to fullscale warfare.

However, a key message seemed to underline the meeting: China is not willing to back down on any issues it deems key for its domestic security, and is willing to push back where necessary. Reports from Beijing have stated that Xi “underscored that "a new Cold War should not be fought and cannot be won. Containing China is unwise, unacceptable and bound to fail”,” and an editorial from China Daily following the meeting highlighted 7 'pillars of wisdom’ that both sides (but really the US) should uphold to maintain normal relations:

(1) having the correct strategic perception of the folly of a new Cold War; (2) of matching words with deeds; (3) of engaging with each other on an equal footing; (4) of not challenging redlines and paramount principles; (5) of increasing dialogue and cooperation; (6) of building bridges to bring the two peoples closer together; (7) and of the two countries shouldering their international responsibilities by carrying out constructive interactions.

The usual vagaries aside, there were some stronger sentiments expressed, such as the fact that “Beijing will remain firm and resolute in safeguarding China's territorial integrity and development interests and it will not sit idly by should its strategic security and core interests be under threat,” and that the US and China must demonstrate "skilful stewardship” lest they “roil the relationship or even set it back to the detriment of both countries and the world.”

This message is, of course, not for Biden, but for incoming President Trump. Trump and Xi already have a well-established frenemies relationship, which was put under much stress during the 2016-2020 period by an escalating trade war and the outbreak of Covid-19 (which Trump helpfully referred to as the ‘China virus’). 

However, like the Obama administration before, the Trump administration failed to resolve any longstanding issues plaguing the China-US relationship: geopolitical, economic, technological or otherwise. Under the Biden administration, things have arguably worsened with the deepening of the Russia-Ukraine conflict and China’s refusal to back down on territorial claims.

So what are the current issues plaguing the relationship? How does China envision its relationship with the US evolving – or not evolving – in the coming years? And what, if anything, can really change in a four year period?

Red lines

China’s official “four red lines” for engagement with the US are that they must not aim to “undermine the Communist Party’s grip on power, push the nation toward democracy, contain its economic rise or encourage independence in Taiwan.” I think we can all agree that the US isn’t really in a position to do anything about the first two – as much as they’d still probably like to – but the latter two are constant sources of contention between the two nations.

On economics, not much has changed in the past decade, and little more can be expected to change under Trump 2.0. It was Trump who officially started the trade war all the way back in 2018, introducing the first tariffs that sparked a back-and-forth that has now embroiled several other countries and many new fields. 

The current focus is on technology, with the US increasingly concerned that China will either (1) steal their software/hardware, (2) steal the plans to their software/hardware, (3) steal something as yet unidentified that will allow them to create better software/hardware. These fears are not entirely unfounded. China has all but admitted that some of their biggest tech companies are opening up offices in Silicon Valley to poach workers from US firms. As the race to produce better AI rages and the US maintains its ban on chips to China, the only viable option really is the sneak attack:

“Alibaba has approached engineers, product managers and AI researchers who have worked at OpenAI and some of America’s largest tech companies. One source said that the company is putting together a team focused on Alibaba International Digital Commerce Group’s AI-powered search engine Accio for merchants…

a former OpenAI researcher told the news outlet they had been inundated with messages from Chinese tech firms — including Alibaba and food delivery platform Meituan — seeking information about their background and offering employment opportunities.”

The US is also struggling to plug holes in trade routes originating from China or Chinese companies based abroad. Following Trump’s Mexican cars speech during his campaign trail, there has been much to suggest that China really is trying to get their goods into the US market via other avenues, or – worse? – treading on the US’ toes in surrounding nations. Recent news of a brand new Chinese megaport opening up in Peru has stoked fears that the US’ sphere of influence has been undermined as trade routes between Asia and South America that completely bypass North America have been opened up.

“there is a strong perception that the US is losing ground in Latin America as China forges ahead with its Belt and Road Initiative (BRI).

Prof Álvaro Méndez, director of the Global South Unit at the London School of Economics, points out that while the US was taking Latin America for granted, Xi was visiting the region regularly and cultivating good relations.

"The bar has been set so low by the US that China only has to be a little bit better to get through the door," he says.

Looking ahead, South American countries such as Peru, Chile and Colombia would be vulnerable to pressure because of the bilateral free trade agreements they have with the US, which Trump could seek to renegotiate or even tear up.

Like the rest of the world, Latin America is bracing itself for a bumpy four years - and if the US and China start a full-blown trade war, the region stands to get caught in the crossfire.”

(I’ve also mentioned somewhere else, either a newsletter or podcast, that China often buys factories in Belt and Road countries like Vietnam but don’t mention that they’re China-owned so they can avoid tariffs, but I can’t find the reference right now so just take that as an unsubstantiated rumour.)

In order to combat these ‘unfair trade practices’, there have even been calls for the US to revoke China’s Permanent normal trade relations (PNTR) status, which could potentially lead to even higher tariffs and potentially worsen inflation. But I’m not an economist and these are just recommendations, and I think Trump knows better than to ban Temu. In any case, there are plenty of countries willing to step up and plug the trade gap if the US decides to take things a step further, which gives China the upper hand in this one.

When it comes to Taiwan, the situation has evolved into a sort of weird Mexican standoff, with everyone working hard to get bigger guns and point them more menacingly than the other guy. As I’ve pointed out in a previous newsletter, Taiwan is in the awkward position of being allied with the US – which isn’t technically allowed to admit that Taiwan exists – and being increasingly reliant on China – which doesn’t want it to exist. Despite shows of military force and increasing antagonisms in the South China sea more generally, China seems intent on its aim of ‘peaceful reunification’, where everyone but especially the US butts out and minds their own business. 

This is not the only arena where the two have clashed. In the ongoing Russia-Ukraine conflict – where the US openly supports Ukraine and China feigns being neutral – Biden has asked Xi to step in and dissuade North Korea from supporting Russia any further. But in reality, the longer the war goes on, the better China looks in comparison to the US. While the US continues to pour endless money and weapons into an unpopular war effort, China can stand on the sidelines condemning, say, the use of long-range weapons to target Russia, and calling for a de-escalation while doing absolutely nothing.

Anyway, China’s military and America’s military aren’t talking to each other right now, so we’ll see what Trump can do about that.

Stale mates

In November 2020 (when I first started this newsletter!) I wrote on the US-China relationship that:

The problem is not personality, it’s just personal. The two nations are socially, economically, and politically incompatible. They have fundamentally different views on governance, international diplomacy, and what constitutes fair trade. Until one country becomes more like the other, spurts of friendly cooperation followed by periods of mud-slinging will most likely remain the ‘normal’ state of affairs.

Luckily for me, I rarely change my mind about anything, and my opinion stands to this day. Though I hate making predictions, this one is more of a reaffirmation than anything else: China and the US are about to enter another protracted battle of nerves, in which the key players have shifted, but the core issues remain the same. Trump is just as stubborn as Xi –  and their similarities seem to have led to a begrudging mutual respect – but a lack of decisiveness will merely prolong conflict on all fronts.

Prepare for what will likely be another four years of the same headlines.