First things first, a quick mea culpa. In reporting some of the more contentious back and forth in the Saturday call between US Secretary of State Antony Blinken and China’s top diplomat Yang Jiechi, we interpreted a comment from a Chinese official that President Xi Jinping would not be asking President Joseph Biden for a phone call to indicate that the long-overdue call between the two heads of state could be on hold for a bit longer. Despite the stilted nature of the weekend opener between their respective foreign envoys, protocol and politics of course dictated that the summit phone call indeed be held now.
On to the more material points, and the call itself:
The picture has become increasingly clear through these last few weeks of a Beijing eager to start the process of de-escalation with the United States, beginning with the resumption of regular bilateral talks including the “US-China Strategic and Economic Dialogue,” which we understand is likely to happen before mid-year, and leading to a roll back, even if partial, on tariffs, but which has been frustrated by the political headwinds in Washington – at least for another three months or so.
As a reminder, the feelers from Beijing on tariffs include a circuitous suggestion that we wrote about by Premier Li Keqiang during a State Council leadership meeting in January that China could step up its 2021 import target for US goods to $200 billion if the Biden administration were to agree to lower, or even remove, all “additional” tariffs by August 31 of this year (see SGH 2/4/21; “China: A Message for Washington, and Commodity Targets”). That “offer,” and political cover for de-escalation, may not amount to much, given its already familiar $200 billion number, and has not yet been formalized, but the trade issue does look set for movement around the middle of this year.
Indeed, our understanding is that in Wednesday’s call, President Xi explicitly asked President Biden to consider a “simultaneous lifting of punitive tariffs at an appropriate time this year.”
In the meantime, China and the US will demonstrate cooperation with a teleconference and the formal resumption of talks between the two countries’ climate change teams, and a video call between their CDC and “Prevent Epidemics” teams shortly after the Spring Festival.
Xi Presses Biden to Re-Open
The atmosphere of Wednesday’s call between Presidents Joseph Biden and Xi Jinping was relayed to us through a very high-level official in Beijing as “friendly and far better than the tit-for-tat between Yang Jiechi and Antony Blinken.”
Xi of course congratulated Biden on his election win, and Biden passed along Chinese New Year best wishes, with both leaders laughing at some points on the call. More pointedly, apart from Taiwan, this source noted that the two leaders did not go into any detail on the other contentious issues of Hong Kong, Xinjiang, or Tibet, while they did touch very briefly on geopolitical issues including North Korea and Iran.
But while the two leaders did not have “specific” talks on Hong Kong, Xinjiang, Tibet, or the South China Seas, Beijing notes that they did outline their respective “principled positions” (the US read-outs put greater emphasis on these issues).
President Xi went on to say that China-US relations are currently at an important juncture, and that he would be willing to work with President Biden to take substantive actions to improve relations.
Xi stressed (as had Yang), that the Taiwan question is the most important and sensitive issue at the core of China-US relations and hoped Biden would continue to abide by the “One-China Principle,” as have previous US administrations. President Biden for his part reiterated his commitment to the One-China Principle “of previous US administrations,” that the US will not have official relations with Taiwan, and that the US will continue to enforce and abide by its “Taiwan Relations Act” (Beijing’s read-outs in turn put greater emphasis on this).
Of greatest direct interest to markets, the two leaders went on to agree to strengthen economic and trade exchanges and cooperation to ensure a substantial increase in bilateral trade volume this year. And lest the point be lost Xi explicitly conveyed his hope that “punitive tariffs will be lifted simultaneously by both sides at an appropriate time this year to get China-US relations back on track.”
Regarding specific next steps, the two Presidents indicated they will seriously consider resuming the US – China Strategic and Economic Dialogue by the middle of this year, and to a subsequent phone conversation before May.
On the near hanging fruit Xi agreed with Biden that the two countries should work together first on climate change and on fighting the epidemic before expanding into other areas.
To follow up, our understanding is that the climate change teams from China and the US will formally resume working talks and hold a teleconference shortly after the Spring Festival. The “Prevent Epidemics” teams and CDC experts from both sides will also hold a video conference shortly after the Spring Festival.