Xi Jinping’s Loss Is Biden’s Gain

 

In the China-US Competition, Xi Jinping’s Loss Is Biden’s Gain

Instead of seeking to transform China, the Biden administration is content to see China’s foreign and domestic policies hamper its competitiveness.

 

Xi Jinping is having a bad year. Amid intensifying competition with the United States, the Chinese president has pushed through a raft of policies that are damaging China’s economy and driving countries in Asia and around the world to partner with the United States. Xi’s zero-COVID policy is hurting the Communist Party’s credibility, and his tacit support for Russia’s invasion of Ukraine is tarnishing China’s international image.

Although China emerged from the first wave of COVID-19 as the only major economy to avert recession, recent crises in the property sector, aggressive technology regulations, rising energy costs, and lockdowns in major cities have battered the Chinese economy. Business sentiment has hit a wall, and foreign companies are increasingly wary of committing more capital to China. Others are considering leaving for good.

China’s foreign policy scorecard has been similarly spotty. Tensions remain hot on the China-India border, and Beijing’s aggressive actions in the South and East China seas continue to elicit negative responses. Although China’s new security pact with the Solomon Islands may be a rare bright spot, Xi’s assertiveness has led regional U.S. allies and partners to strike a thickening web of agreements aimed at parrying Beijing’s influence in the Indo-Pacific.

Xi’s poorly camouflaged support for Russia’s invasion of Ukraine has also damaged China’s global standing. Over the past few years, Beijing had succeeded in enticing several European capitals to expand economic ties with China despite the United States’ deep reservations. In failing to condemn Moscow’s invasion, however, Beijing has begun to lose Europe’s trust.

At home, China’s heavy-handed COVID-19 lockdowns are starting to stir domestic dissent. The party’s grip on power remains ironclad, but many Chinese citizens are becoming disillusioned with Xi’s obduracy. Young, talented Chinese are considering relocating abroad, evidenced by the explosion of emigration enquiries on the Chinese web.

There is, of course, time and space for Xi to change course. He could, for example, enact more flexible COVID-19 containment measures, cautiously back away from Putin, and lessen the state’s command of the economy. At the 20th Party Congress this fall, Xi could choose to elevate pragmatic apparatchiks above their more dogmatic peers. Xi’s tenure, however, has been marked more by rigidity than flexibility, and we should expect more of the same in the short term.

Amid this backdrop, the Biden administration is set to unveil its long-awaited China strategy. Secretary of State Antony Blinken will soon deliver a speech outlining the administration’s approach to Beijing, but the broad contours of Washington’s China strategy can already be gleaned from its policies and actions over the preceding year-plus.

At the center of Biden’s approach is a two-part recognition. First, unlike its predecessors, the Biden administration recognizes that the United States’ ability to influence Beijing is limited. Whereas prior administrations tried to encourage Beijing to liberalize through engagement or to pressure reforms through competition, the Biden team understands the limits of Washington’s sway in Zhongnanhai.

Second, large swaths of the U.S. government likely believe that Xi is taking China in the wrong direction. Instead of seeking to transform China, the administration is content to see China’s foreign and domestic policies hamper its competitiveness. As a result, the Biden administration has waited to substantively engage with Beijing to settle the long list of tensions in the relationship. Patience has allowed the administration to prioritize domestic renewal while shaping Beijing’s regional strategic environment.

So far, Biden has elected to leave many of the Trump administration’s policies on trade and technology in place. This is despite the fact that punitive measures have done little to induce reforms in China. Instead, Xi has doubled down on preferential support for state-owned enterprises and his aspirations to achieve technological self-sufficiency. The Office of the U.S. Trade Representative’s 2021 report on China’s WTO Compliance states that “it would be appropriate to assume that the problems currently posed by China will be with us for some time, rather than expect that China will willingly make fundamental changes to its state-led, nonmarket approach.” This may be by design: Rather than pressure China to liberalize, Biden’s Trade Representative accepts the reality – as well as the weaknesses – of China’s economy. Moreover, the administration is likely pleased with Xi’s drive for common prosperity, which has wiped billions of dollars off the market caps of China’s largest technology companies.

From a zero-sum perspective, Beijing’s losses may be Washington’s relative gains. According to the Lowy Institute’s Asia Power Index 2021, the United States’ economic, diplomatic, and military power grew more than any other country in the region last year. Unlike after the global financial crisis when China’s economic rebound drove the global recovery, the United States emerged from the COVID-19 pandemic as the world’s primary engine of economic growth. In 2021, for the first time in 20 years, the U.S. economy grew faster than that of China, driven in large part by unprecedented fiscal and monetary stimulus. While some of this support has stoked inflationary demand without easing pandemic-induced supply shocks, by and large the U.S. economy remains stronger now than before Biden entered the White House.

In the security domain, Beijing’s international conduct has prompted U.S. allies and partners to improve their defenses, coordinate strategically, and share cutting-edge technologies. The Quad is already redrawing the contours of Indo-Pacific security, while the AUKUS agreement could do the same in the coming years. Furthermore, Japan has become more active in regional security, striking defense pacts with Australia, Thailand, and the United Kingdom.

Washington does, however, face myriad China-related challenges. Beijing still aims to unify with Taiwan, enlarge its nuclear forces, and strike security deals with countries near U.S. allies, such as Solomon Islands. Although Biden has improved the United States’ positioning in the Indo-Pacific since Trump left office, his modest Indo-Pacific Economic Framework has left regional countries disappointed.

Biden’s forthcoming China strategy will likely feature more of the same: an emphasis on domestic renewal, alliances, and patience in dealing with Beijing. These initiatives have already borne fruit and could continue to do so as Beijing doubles down on its inflexibility.

Going forward, the risk is that China grows more disruptive as its hopes of ascendance confront the realities of Xi Jinping’s self-defeating policies. As many administrations before Biden’s knew, there is danger in allowing China to isolate itself and, as former President Richard Nixon wrote, “to nurture its fantasies, cherish its hates and threaten its neighbors.” The worry is that Biden focuses so narrowly on outcompeting China that he sacrifices broader efforts to mitigate conflict and promote global prosperity.