Summits come and go, usually leaving little trace of their long-term significance. The meeting scheduled this week between U.S. President Joe Biden and Chinese President Xi Jinping on the sidelines of the G20 summit in Bali could be different. The geopolitical stakes are high. Both sides know it. And so does the rest of the world.
China and the United States are locked in a strategic competition over which of them will emerge as the preeminent global power by mid-century. Although the future of Taiwan looms large in this contest, much more is in play than China’s determination to achieve its long-standing objective of national unity. China aims to build a new global order that is based on Chinese rather than American power, and that is more reflective of Chinese national interests and values. Needless to say, the United States has no intention of giving up its position.
The central question at the summit is whether Biden and Xi decide to put a floor under a U.S.- Chinese relationship that has become more and more adversarial. If they don’t, the relationship, the current state of which I refer to as “unmanaged strategic competition,” is likely to become even more destabilized in the future. But if they do decide to stabilize the relationship, the next challenge is how to achieve that—in particular, how to work out what measures are needed to reduce the risk of accidental war for the period ahead.
The domestic prism through which Xi views China’s position is important for Biden to understand. Xi has just emerged politically dominant from the 20th Party Congress. The main advocates of the economic-reform faction of the leadership have been replaced by party officials with a history of personal loyalty to Xi. Xi’s predecessor, Hu Jintao, was unceremoniously escorted from the conference stage after he appeared to have concerns about the final leadership list. Although no trace of the incident appeared in Chinese official media, its rapid unofficial dissemination via social media is politically damaging, in part because it showed a lack of respect for the elderly, still venerated in Chinese society. That aside, Xi emerged from the Congress strengthened rather than weakened. He alone will determine any new approach to the U.S. relationship.
The vulnerability Xi will have to worry about in the years ahead is the economy. China’s rate of economic growth, at about 6 percent over the past decade, was fundamental to social stability because it ensured adequate employment and rising living standards. But major headwinds are now driving growth down. Chinese society is aging rapidly, the birth rate is collapsing, and the workforce is shrinking. Xi has pushed economic policy to the ideological left, with greater emphasis on the party, state enterprises, industrial policy, national self-sufficiency, and redistribution, and less emphasis on the market, the private sector, and international economic integration. As a result, business confidence in China is faltering.
Xi’s determination to enforce zero-COVID lockdowns seems set to continue into 2023 (although the less stringent Hong Kong model may be trialed in some of China’s southern cities). On top of this, the acceleration of technological decoupling from the U.S. and growing foreign-investor skepticism toward China, together with the global macroeconomic effects of both the Russian invasion of Ukraine and monetary-policy action by major nations in response to inflation, are combining to bear down on China’s future earnings from exports and investment.
Whether or not Xi’s advisers give him all the bad economic data, he will arrive in Bali with a reasonable awareness that his economy is weakening. He may therefore be more inclined to seek greater geopolitical stability for the period ahead, to give himself room to solve China’s growth problem.
In his Party Congress report, Xi depicted an international environment that had become more threatening to China. For 40 years, such reports repeated a form of the mantra “Peace and development remain the underlying trends of our times.” Decoded, this meant that Beijing saw no prospect of any conflict that would involve China or distract it from its economic priorities. The 2022 report dropped the formulation and warned instead of “dangerous storms” ahead, and called on the Chinese military to step up combat readiness and prepare for war. Without signaling an imminent military confrontation over Taiwan, Xi was putting the country on a more aggressive national-security footing with regard to the United States. But China still needs time to prepare itself adequately, both militarily and economically, before making any attempt at a forcible return of Taiwan to Chinese sovereignty.
As Xi approaches his meeting with Biden, he may well judge that he needs a pause in Beijing’s escalating tensions with Washington to avoid any inadvertent crisis involving the U.S. before China is fully prepared. Beijing is also likely to have observed closely Russia’s lack of preparedness for its military invasion of Ukraine, thereby reinforcing the logic of patience and caution.
America’s and China’s political and economic circumstances therefore have some parallels as the two countries’ leaders make their way to Bali. Biden is emerging from the domestic test of his party’s standing in the midterms in better shape than expected. And as divisive as U.S. politics has been, a remarkable bipartisan consensus has governed America’s China strategy. Like Xi, Biden faces severe economic problems, even if the causes are different: The Federal Reserve’s difficulty controlling inflation has forced a tightening of monetary policy that raises the risk of a recession. In other words, neither the Americans nor the Chinese will arrive at the G20 feeling confident about their national economy.
Biden and Xi will also both be preoccupied with the war in Ukraine. For the U.S., its Ukraine strategy has been successful so far: American intelligence has helped Ukrainian commanders direct battlefield operations; American and allied equipment has met the needs of the Ukrainian military; and the Russian invaders have been checked and repulsed without causing Vladimir Putin to escalate the conflict directly against NATO or through the use of tactical nuclear weapons. Avoiding escalation remains one major U.S. concern; another is steering the Ukrainian leadership away from an open-ended pursuit of a military solution and toward negotiating an acceptable political outcome.
For China, the invasion of Ukraine seemed at first a reasonable proposition from Russia, which had recently become Beijing’s strategic partner “without limits.” Beijing expected Moscow to achieve its military objectives quickly, demonstrating the weakness of the U.S. and the West, even as China’s technical neutrality would avoid undermining its political standing in Europe. But China’s strategy failed miserably as Ukraine’s resistance proved effective. This has forced Beijing to distance itself from Russia, as it did at the Shanghai Cooperation Organization Summit and through Xi’s recent statement opposing any use of nuclear weapons in the Eurasian continent (which includes Ukraine). Yet China cannot afford to abandon Putin and make an enemy of him, because it wants to keep Russia as a strategic partner. Xi therefore arrives in Bali on the defensive about Ukraine—though in a better position than before, thanks to his nuclear stance, which came as a result of American and European urging. Indeed, Xi’s intervention on that score brings a rare positive note to the leaders’ summit.
For his part, Biden comes armed with a full repertoire of China strategies: one devised by his secretary of state, Antony Blinken, to “invest, align, and compete”; National Security Adviser Jake Sullivan’s plan to invest, build coalitions, and shape China’s geopolitical environment; and a new National Defense Strategy that aims to both confront and deter the “pacing threat” posed by the Chinese military. This whole framework has been reinforced by recent U.S. export controls on semiconductors and microchip technology to China. The U.S. will now seek to gain support for this approach from its Asian and European allies, as it did when it banned Huawei’s delivery of 5G. The U.S. Chips Act, together with these recent export bans, should be seen as part of a process of technological decoupling between the U.S. and China, and possibly a wider economic decoupling over time.
A crucial missing piece of the Biden administration’s China strategy remains America’s chronic inability to address the trade, investment, and industrial-policy interests of its friends and allies. The overwhelming protectionist sentiment of the U.S. Congress ignores the legitimate economic interests of its strategic partners. This is where China is always ready to step in.
Despite this, the growing coherence and potential effectiveness of Biden’s China strategy has got Beijing’s attention. Xi may therefore see merit in lowering the temperature of the relationship, even if only temporarily, perhaps in the hope that a more isolationist Republican administration will be elected in 2024 or 2028.
At the Bali summit, neither side thus believes it has a decisive upper hand. Because of this, neither side wants to risk accidental war—because each side believes that there is a risk it could lose. Both sides believe they need more time. In China’s case, the objective is to achieve an overwhelming military and technological advantage, and to secure an acceptable degree of economic resilience that could withstand any future Western sanctions in response to a military action over Taiwan. Beijing would also like to engineer a West that is more divided over Taiwan, particularly in Europe, on the question of financial and economic sanctions against China in the event of a future U.S.-China conflict. As for the U.S., it needs time to enhance its capacity to deter any Chinese attack on Taiwan by strengthening its partnership with allies and by enhancing Taiwanese national-defense capabilities.
This creates an opportunity for what I’d call “managed strategic competition,” in contrast to the dangerous effects of the “unmanaged” version we have at present. This framework could yield mutual benefits by stabilizing a relationship currently in free fall and reducing the chance of an accidental war at a time when neither side wants that risk. Managed strategic competition involves three basic concepts within an overall joint strategic framework.
First would be to develop a set of minimal strategic red lines around the deeply contentious questions of Taiwan, the South China Sea, the East China Sea, and the Korean peninsula, as well as cyberspace and space itself. Such “guardrails” or “rules of the road” would enable each side to know which thresholds not to cross unless it is willing to incur a destabilizing response. The second concept would define the nonlethal nature of the other dimensions of this strategically competitive relationship—that is, security policy, foreign policy, international economic policy, ideology, and the future of the international order. The third part of the framework would carve out sufficient political and diplomatic space for the two sides to collaborate in areas of public goods—such as climate change, nuclear nonproliferation, global public health, and international financial stability—where U.S., Chinese, and global policy interests sufficiently coincide to justify suspending normal geopolitical competition in pursuit of a common set of interests.
Beijing dislikes the concept of strategic competition because the Mandarin words to translate the phrase, jingzheng and jingsai, convey a negative connotation for any state acting as a would-be competitor. For China to concede the notion that it is a strategic competitor of the United States would be to admit that it is in a race for global preeminence, which clashes with the official mantra that China seeks only a “fairer,” “more just” international order. Beijing also sees the language of managed competition and strategic guardrails as aiming to constrain China’s behavior, but not America’s. If, however, the two heads of state can agree on at least the broad outlines of a new framework for their bilateral relationship, anchored in the concept of nonlethal competition, such an in-principle agreement might just be able to unlock sufficient diplomatic creativity for both sides to begin developing those new rules of the road.
China and the U.S. could defy expectations if they agreed to such a “Bali Framework” that halts the deterioration in the bilateral relationship and enables officials to start work on a new set of principles and procedures. When it comes to diplomacy, words still matter. They represent the formal distillation of each side’s accumulated policy positions from which they can’t simply walk away. To chart a path ahead, both the Chinese and the Americans can refer to the joint communiqués of 1972, 1979, and 1982 that established the “one China” policy. The Americans can note the Taiwan Relations Act of 1979 and the Six Assurances delivered to the Taiwanese by the Reagan administration in 1982. The Chinese can similarly note the Anti-Secession Law of 2005 and earlier references to the status of Taiwan in the Chinese constitution of 1982. Following these preambular references, the two leaders might embrace a phrase such as: “The two countries are committed to a relationship based on peaceful competition, constructive cooperation, and all within a framework of necessary strategic guardrails.” Chinese and American officials could also be commissioned by their leaders to come back within six months with recommendations for these guardrails. Such an approach might be able to get us beyond the current strategic impasse.
What about the long term? From China’s perspective, why give the U.S., its allies, and Taiwan time to regroup after so many years when China has been in the ascendant? From the American perspective, why give China more time to make preparations for an action against Taiwan if a conflict there is inevitable? The answer to both concerns is that neither side seeks war in the period immediately ahead and both sides fear a war beginning by accident. In the end, the outcome over Taiwan will be shaped either by the success of U.S., allied, and Taiwanese deterrence or by its abject failure through inadequate investment, poor planning, and a collapse of political and economic resolve on the part of the democratic world in response to Chinese pressure and power.
Whatever that long-term outcome might be, I argue that buying time for the rest of this decade through a form of managed strategic competition is to the advantage of both sides. And who knows—as Deng Xiaoping once said, different leaders with different mindsets in a future setting may choose a radically different course. In other words, time should be seen as a friend, not an enemy, to both sides, notwithstanding their radically different worldviews.
In order to secure the future, our immediate challenge is to navigate our way through the present. And that will require careful statecraft indeed from Presidents Biden and Xi when they sit down together in Bali. The future of our precarious world depends on them both.