It indicates that complete decoupling is not being considered, and investments in China are still acceptable, particularly in non-sensitive industries, according to one analyst.
The recent meeting between President Joe Biden and Chinese President Xi Jinping in San Francisco has established a clear foundation in their relationship, reducing uncertainty for businesses, analysts have noted. This encounter, occurring for the first time in about a year on the sidelines of the Asia-Pacific Economic Cooperation conference, has generated a considerable consensus.
Wang Dong, the executive director of the Institute for Global Cooperation and Understanding at Peking University, emphasized the importance of the summit, stating, "What you get from this summit is a very clear signal the two countries, they are committed to what we can call recouple, in a way, on the basis of reciprocity and mutual respect. I think this is very important for both countries and indeed for the global economy as well."
Fundamentally, the U.S. and China are navigating ways to collaborate where possible.
"For U.S. businesses, the hope is that this kind of new tone can translate into a new normal for the economic relationship, where there’s a mutually beneficial relationship where China plays by the rules and the United States and China can get back to a more normal economic footing, have some of these tariffs and retaliations drop away," said Jake Colvin, president of the National Foreign Trade Council based in Washington, D.C. He shared his insights from participating in the Asia-Pacific Economic Cooperation CEO Summit in San Francisco last week.
Despite not yielding on export controls during conversations with Xi, Biden maintained a firm stance based on national security concerns. However, a White House readout indicated that "the leaders affirmed the need to address the risks of advanced AI systems and improve AI safety through U.S.-China government talks."
Additionally, both sides agreed to reinstate military-to-military talks, which had been on hold for over a year.
"For the business community, the meeting demonstrates that full decoupling is off the table and that investment in China remains permissible, at least in non-sensitive industries," noted Gabriel Wildau, managing director at Teneo, in a note on Friday.
He emphasized that the meeting signals a desire from both leaders to avoid a negative trajectory and instead cooperate where interests align.
While the Biden administration has aimed to limit U.S. investment or business involvement with Chinese companies developing advanced technology that could contribute to military capabilities, officials have highlighted that the vast majority of trade and consumer-related business remains unaffected.
Top-down messaging
Similar to U.S. official visits to China earlier this year, the Biden-Xi meeting has prompted tangible outcomes, such as the resumption of additional flights between the two countries.
In a noteworthy development, a direct flight from Beijing to Washington, D.C., took off on Tuesday, marking the first such flight since the onset of the Covid-19 pandemic, as reported by state media.
Ian Bremmer, president of the consulting firm Eurasia Group, highlighted various positive shifts in personal experiences with Chinese counterparts following the Biden-Xi meeting. These changes included revived promises of licenses, clearer anti-espionage rulings, enhanced access to Chinese decision-makers, favorable treatment by the Chinese media, and more, as shared by decision-makers.
On Monday, Mastercard announced that its joint venture in China had received approval from the People’s Bank of China to commence processing domestic payments. The venture had been awaiting approval for nearly four years since its application to begin preparations was approved in principle.
Wedding versus marriage
Following the meeting with Biden, Xi addressed a dinner gathering of prominent U.S. business executives, posing the fundamental question of whether the two countries are "adversaries or partners."
"I was very heartened by the fact that there were so many companies that were invested in the U.S. and China having a positive relationship," noted Gary Dvorchak, managing director at Blueshirt Group, who attended the dinner.
"In a negative U.S.-China environment, many of those companies could have chosen to stay away. Why would I want my CEO to have a picture with Xi Jinping?" he remarked. "It would have been very easy for the whole thing to be massively negative and for people not to show up."
Looking ahead, Dvorchak likened the dinner to a wedding, stating, "The happy day is a happy day. How is the marriage?"
Upcoming election risk
Over the weekend, Eurasia Group stated that it is now more likely for the U.S. and China to experience a "managed decline" in their relationship until the end of 2024, with a reduced likelihood of "serious deterioration." However, the consulting firm sees no chance of a "substantial improvement."
With the U.S. presidential election scheduled for November 2024 and Taiwan planning its elections in January, there are concerns about the sustainability of the positive atmosphere. Beijing views Taiwan as part of its territory, while the U.S. officially recognizes Beijing as the sole government of China but maintains unofficial relations with Taiwan.
Jin Canrong, deputy dean, professor, and doctoral supervisor at the School of International Studies at Renmin University of China, described the Biden-Xi summit as "very good" with some consensus. However, he expressed doubts about the long-term prospects, stating that managing the relationship is a challenging task. From a Chinese public perspective, there is skepticism about how the achieved consensus can be implemented, given the perceived history of the U.S. not fulfilling its promises.
Jin Canrong also holds the position of deputy director at the Center for American Studies at Renmin University of China.
No ‘splashy deliverables’
Long-standing challenges persist for U.S. business operations in China, and substantial agreements are not forged overnight.
Contrary to media reports suggesting that the Chinese government might use the Biden-Xi summit to announce a commitment to resume purchases of Boeing's 737 Max aircraft, no such announcement has materialized. Boeing has not yet responded to CNBC's request for comment.
Jake Colvin noted, "This meeting didn't result in any splashy deliverables. It was successful in putting a floor under the relationship and setting a new tone for cooperation and for problem-solving." However, he emphasized that companies will continue to focus on derisking and diversifying supply chains, making decisions based on the actual conditions on the ground in China.
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