On September 24, after more than 1,000 days of detention by the Canadian authorities, Huawei company’s Chief Financial Officer Meng Wanzhou returned to China after reaching a deal with the U.S. Justice Department with regard to fraud charges against her. Notably, contrary to some pervious speculation, Meng pleaded not guilty and there was also no fine against her in the deferred prosecution agreement (DPA). This is a big victory for Meng herself and for Huawei as it was admitted by the U.S. side that the legal case against Meng was shaky from the very beginning, perhaps mostly motivated by then-U.S. President Donald Trump’s desire to destroy Huawei’s leading position in the global 5G competition.
On the same day, two Canadian citizens, Michael Spavor and Michael Kovrig, were also allowed to return to Canada after over 1,000 days spent in jail in China. Some speculated that the releases amount to an unofficial hostage exchange between the United States, Canada, and China, but the White House press secretary Jen Psaki denied the link between the two cases by saying that the U.S. Department of Justice made an independent legal decision.
In a way, the release of Meng Wanzhou has resolved a very thorny issue in China-U.S. relations. The issue was started by Trump, but the consequences fell on the shoulders of the Biden administration. Since Joe Biden took over the White House in January 2021, China-U.S. relations have not warmed up as many expected when Biden won the presidential election last November; and one of the main reasons was the case of Meng Wanzhou. Its importance was underscored by the fact that Chinese President Xi Jinping personally mentioned her case during a phone call conversation with Biden in early September.
So, with the Meng case out of the way, can we expect a more positive China-U.S. relationship soon? There are three reasons to remain cautious.
First, although Meng has returned to China, the U.S. pressure on Huawei will continue to grow as the China-U.S. tech competition gets more serious. Compared with the Trump administration, the Biden administration is much smarter in terms of applying diplomatic, legal, and moral weapons in efforts to destroy or at least slow down China’s tech aspirations. Huawei is a leading Chinese tech company and thus also becomes the leading target of U.S. economic coercion. Indeed, the U.S. Justice Department will continue to investigate the charges against Huawei, and we can expect a multi-agency effort from the Treasury, State, Commerce departments to sideline the company. One could even argue that as long as the U.S. government continues to thwart China’s tech ambitions, China-U.S. relations will not be stable and positive.
Second, beside the tech competition issue, it seems that structural factors are the true cause behind the worsening relations. It is a bit surprising that the Biden administration, in the last eight months or so, has not changed one single policy toward China that was initiated by the Trump administration. It is true that there have some minor improvements such as issuing student visas, lowering the tone, vaccine admission, and so on; but the main policy areas such as tariffs, strategic competition, and security pressure remain the same and could even get worse.
One reason is perhaps that the Biden administration is so worried about being attacked by the Republicans in the mid-term elections next year, and thus playing the “tough on China” card is a rational and defensive approach. Another reason could be that within the Biden administration there is a deep understanding that China must be stopped at all costs before it is too late as China is seen as trying to displace the U.S. global leadership role. Whatever the real reason, it is clear that top advisers to Biden have largely abandoned the “peaceful coexistence” approach toward China, though in practice the Biden team is much more careful and strategic, unlike the reckless moves we saw in the last administration. The Biden administration inherited the spirit of the Trump team’s approach to China, even if they have discarded the form.
The last reason for us to be more cautious about future China-U.S. relations is the lack of common understandings in almost all policy areas, including climate change. A one time, climate change was regarded as one notable area where we could see some real cooperation between the world’s largest economies, but now that hope is also drifting away slowly. Despite the fact that both economies place high value on addressing climate change, the differences in their economic development stages lead to different policy implementations. Currently in China there is a serious shortage of electricity, which resulted from multiple factors, including, as some criticized, the too quick transition to green energy by cutting the use of coal, which still accounts for more than 50 percent of China’s power production. This simply shows how difficult it is to achieve real cooperation between the two, even when their fundamental interests align well.
Of course, one does need to become too pessimistic in seeing a cold war coming, as neither side has appetite for that. Clearly, a full economic decoupling is impossible despite the ongoing trade conflicts and tech competition, but we will need more patience before we can see some real improvement in the relationship.