Biden’s America: China not in a rush to push for a reset

As the Biden administration prepares to take office, China will view his presidency with a mix of optimism and caution.

Although the Biden Administration will be able to effectively stabilize the downward spiral in China-US relations by improving basic diplomacy and predictability in bilateral exchanges, it will be unable to rapidly mend the discord sowed by the previous administration.

What will not change

China is not in a rush to push for a reset with the US. However, what could change is China being prepared to embrace a different strategy and approach.

China and the US could move to fast-track tariff reductions in several strategically important areas, in agriculture for example, once the new administration takes office. It is still unclear how additional tariffs will be removed more broadly.

Politically, Biden cannot remove the tariffs without the appearance of significant compromise on the structural reform of the Chinese economy. New negotiations will take time to restart. Recently, the US has already moved to limit Chinese access to sensitive US technology and financial markets, which could hamper further trade negotiations.

All about perspective

The US will seek to repair relations with its traditional allies in Europe and Asia, to reestablish the foundations of the US-led international system. The Biden administration will rejoin the WHO and the Cop21 Paris Climate Agreement, as well as restart contributions to the WTO and advance the stalled nominating processes of appellate judges awaiting confirmation.

In China, however, these actions may appear as an attempt to “gang up” on a global rival, which could have an unfavorable effect on China-US cooperation more broadly.

Ideological and geopolitical disagreements will play an increasingly important role in the bilateral relationship, and China will not tolerate any US legislation or diplomatic moves regarding Hong Kong, Taiwan, Xinjiang, or Tibet that it sees as infringing on its sovereignty.

It is unclear how important these issues will be to the new US administration, but there will definitely be pressure from some domestic constituents to take a harder line.

Possible areas for cooperation in short term

There are opportunities to fast-track progress on Chinese purchase agreements for US products in areas of strategic importance to both sides, e.g. agriculture, aircrafts, etc. Both sides may also consider reestablishing people-to-people exchanges and greater support and assurances to Chinese students and workers in the US. With Biden’s renewed focus on the environment, there are certainly ways to cooperate on climate change.

FIPRA CHINA’s recommendations for global firms operating in China

• Protection: Build strong internal awareness of risk assessment and prevention, as well as crisis management capabilities to protect existing operations and future growth.
• Promotion: Continue strategic and multifaceted engagement with Chinese government stakeholders at all levels to build trust and win their support through the “In China, For China, With China” narrative to reinforce the long-term commitment.
• Business planning: Build in-depth understanding of China’s macro-political and economic environment for the next five years, to harmonize with the Chinese government’s priorities to fully leverage policy-driven opportunities for a new win-win post pandemic.

FIPRA China, known locally as Yuan Associates, stands ready to assist global firms in understanding the regulatory and policy implications of the new Biden administration on your business.