US-China détente on the horizon

Yang Jiechi (1st R), Politbureau member of Chinese Communist Party met with US National Security Advisor Jake Sullivan (1st L), Luxembourg, June 13, 2022 

The Kyodo news agency reported on Monday that Japan, South Korea, Australia and New Zealand are holding a four-way summit on the fringes of the NATO leaders’ gathering in Spain next week. 

The report said Tokyo’s initiative on the quadrilateral meeting is seen “as an attempt to keep an assertive China in check in the Indo-Pacific after Russia’s invasion of Ukraine heightened concerns about its implications for the region where Beijing has been expanding its influence.” Kyodo underscored that the four-way meeting “would add a new dimension to the multilateral cooperation framework in pursuit of a free and open Indo-Pacific.”

This is no doubt a paradigm shift. Without doubt, Kishida’s initiative has the full backing of Washington. The Biden Administration has been encouraging South Korea to bury its hatchet with Japan. The recent election of the right-wing president in South Korea, Yoon Suk-yeol, is indeed helping matters.

The presidential office in Seoul has welcomed the Japanese proposal on security framework: “We view the proposal as an intention to pool the strengths of the four countries in Asia.” Earlier, the US president Biden, in a similar vein, also took a hand to draw New Zealand, which has been a  reluctant security partner, to get active in the Indo-Pacific strategy to contain China. The visit by Prime Minister Jacinda Ardern to Washington in late May at Biden’s invitation successfully accomplished the White House agenda. 

The raison d’être of the Japanese initiative needs some explanation. The general expectation has been that the NATO is slouching toward the Indo-Pacific as part of its transformation as a global security organisation. Japan is raring to go on the path of militarisation of its foreign policy. At the annual Shangri-La conference at Singapore recently, Kishida expounded in his keynote address a new doctrine called “realism diplomacy for a new era”, which envisaged “the fundamental reinforcement of Japan’s defence capabilities in tandem with reinforcing the Japan-U.S. Alliance and strengthening our security cooperation with other like-minded countries.” 

The biggest gainer here is of course the Biden administration. Without having to mothball its Indo-Pacific strategy, Washington is outsourcing it to its closest Asian allies. The Nippon cited Japanese government officials as saying, “Through the meeting (in Spain), Kishida… hopes to promote efforts to realise a free and open Indo-Pacific, with China in mind, and beef up cooperation with NATO members.”  

Biden has discreetly kept the US out of the new quadrilateral framework in Asia-Pacific. But he has his priorities too. He weighs in that this is not the time to quit the pitch of the US’ “strategic competition with China.

There is a groundswell of opinion in the US asking the White House to put an end to Trump’s trade war with China and eliminate the tariffs imposed on Chinese imports, because the tariffs have proved to be a form of punishing taxation on tens of millions of American households.

Price hikes have overtaken the coronavirus pandemic as the most discussed kitchen table topic in the US. Inflation is a regressive tax which disproportionately pummels low income groups and retirees. And the root cause lies with the Biden administration and the US central bank. 

Biden’s fiscal stimulus (American Rescue Plan) has opened a Pandora’s Box. Fiscal spending is always risky, being potentially inflationary, and more so, when coupled with the Federal Reserve’s extraordinary loose monetary policy. On the other hand, the domestic shortages of manufactured goods in the US is unlikely to improve, given the disruption of free trade, the weaponisation of sanctions against America’s trade partners, the higher barriers for technology export, etc.

Meanwhile, multiple other factors are aggravating the economic crisis — the pandemic is permanently stretching the labor force while the American baby boom generation is retiring, which is pushing up wages; the skyrocketing rental costs are hitting affordable housing; the plunging US stocks due to investor fears over inflation erode company earnings and consumer demand.

Last Wednesday, US Treasury Secretary Janet Yellen confirmed she is pushing for the Biden administration to roll back some tariffs on Chinese goods that “aren’t very strategic” but are instead hurting US consumers and businesses. She has been pushing hard in the recent weeks and months but the anti-China hawks in Biden’s circles kept ignoring it.

Within the US administration, discussions were going on whether to extend beyond July the punitive “Section 301” tariffs imposed under the Trump administration on hundreds of billions of dollars of Chinese products. Yellen is only the lead advocate within the Biden administration calling for a rollback of China tariffs, and a growing number of like-minded people are putting pressure on the Biden administration to waive tariffs on Chinese items to combat the dangers of inflation, such as the influential National Retail Federation, which represents thousands of retailers in the US including Walmart and Target. 

No doubt, Beijing is watching closely. The spokesperson of the Ministry of Commerce reiterated last Thursday that the removal of additional tariffs on China amid high inflation is “in line with the fundamental interests of US consumers, businesses, and would be beneficial for the US, China and the world.” A  commentary in the Global Times noted on Monday, 

“As the US is facing the most serious inflation challenge in 40 years and extremely heavy economic pressure, it seems like Washington is looking to China for some hope, as US President Joe Biden recently told media he is seeking dialogue with China’s top leader and is in the process of making his mind up on the tariff issue.” 

Of course, Biden doesn’t need to be told that if history is any guide, when Americans struggle to afford necessities including food, fuel and shelter — and, when they are most likely to vote out the incumbent ruling elite.

Without doubt, China will be open to a détente. But the Biden Administration is agonising how not to expose its weaknesses too much to China. Certainly, China will expect a quid pro quo for underwriting the American economy.

China will hope for a level playing field in China-US trade and economic relations, which will open vistas of partnership that cannot be easily shut down without causing jolt to the US economy and domestic politics. Besides, one thing will lead to another and China has other trump cards to play — such as climate change, infrastructure development, etc. 

In the final analysis, Biden’s and Xi’s political interests converge, as for both, 2022 happens to be a crucial election year.

To be sure, the  geopolitical implications of a US-China détente will be profound for the world community — most of all, for Russia. President Vladimir Putin’s remarks on China at last week’s SPIEF conference in St. Petersburg hinted that Moscow is sensing a shift in the tectonic plates. To quote Putin, 

“We find it interesting and beneficial to be partners with China, especially since we enjoy stable and trust-based political relations. I have excellent friendly personal relations with President Xi Jinping in the full sense of the word, which creates a good atmosphere for building ties between our countries. However, this does not mean that China should play along with us or support us every step of the way. We do not need this, after all. 

“There are interests of the state. Just like us, the Chinese leadership is acting primarily out of its national interests, but our interests are not at odds with their interests, and that is what matters. When issues arise – and they always arise at the agency level in the course of work – the nature and quality of relations between our countries makes it possible for us to always find solutions. I am confident it will stay that way going forward.” 

When Russia attacked Ukraine and the West imposed sanctions against Moscow, Washington threatened China that any move on its part to help Russia circumvent the sanctions would trigger severe punishment. Now the wheel has come full circle and the US needs China’s helping hand to salvage its economy. This is Thucydides Trap turned upside down — an emerging power rescuing an entrenched great power, whose extravagance pauperised it.