China This Week | Why China seems to have the upper hand after the Trump-Xi meeting

The context

Several important areas of concern, from China’s export controls on rare earth minerals to the US seeking to reduce their trade deficit through agricultural trade, were raised. The US government’s fact sheet said their “historic agreement includes Chinese commitments to:

• Halt the flow of precursors used to make fentanyl into the United States. (referring to the opioid that Chinese firms help manufacture and send to the US, adding to the addiction crisis in the country)
• Effectively eliminate China’s current and proposed export controls on rare earth elements and other critical minerals.
• End Chinese retaliation against U.S. semiconductor manufacturers and other major U.S. companies.
• Open China’s market to U.S. soybeans and other agricultural exports.”

In exchange, the US has reduced the tariffs on China to 47%, slashing the earlier rate by 10%. It also agreed to halt investigations into China’s allegedly unfair trade dominance.

The Chinese Foreign Affairs Ministry echoed these sentiments in its release. Xi said that “The business relationship should continue to serve as the anchor and driving force for China-U.S. relations, not a stumbling block… The two sides should think big and recognize the long-term benefit of cooperation, and must not fall into a vicious cycle of mutual retaliation. The two teams can continue their talks in the spirit of equality, mutual respect and mutual benefit…”

In a way, Trump agreed with China on the point about equality, referring to the relationship as that of “G-2” nations.

China also used its recently released GDP numbers to make a point, with Xi quoting the better-than-expected growth and trade numbers to say, “This is not an easy accomplishment given the domestic and external difficulties. The Chinese economy is like a vast ocean, big, resilient and promising. We have the confidence and capability to navigate all kinds of risks and challenges.”

The commentary

First, let’s look at China. Global Times is often known for a belligerent and nationalistic tone, usually aimed at the international audience. Its editorial argued, “In the past few years, many of the practical difficulties in China-US ties have largely stemmed from misguided perceptions of China among some people in the US.”

But, it also supported the Chinese government’s approach towards engagement with the US, driven by the simple fact that it cannot shun the world’s largest economy. “A recent Chicago Council on Global Affairs poll showed that a majority of Americans (53 percent) now say the US should undertake friendly cooperation and engagement with China… According to the South China Morning Post, this is the first time since 2019 that a majority of Americans surveyed said they preferred a policy of “friendly” cooperation and engagement with China.”

While Xi stated that China does not seek to displace any country’s position in global affairs, and is primarily concerned about its own well-being, the editorial ended by underlining a greater purpose: “As the world’s most important bilateral relationship, people look forward to China and the US making new and greater contributions to world peace and development under the strong strategic leadership of the two heads of state.”

The conclusion

In-person meetings and summits between world leaders often attract great attention, but that can be disproportionate to their actual impact on global relationships. China and the US have a long list of issues that they want the other nation to address, but such meetings can only do so much in sorting out structural problems in trade, technology, and other areas.

In many ways, however, even commentary from Western analysts and media pointed to Xi walking away stronger. The New York Times said in an analysis that when Xi left the meeting, “he projected the confidence of a powerful leader who could make Washington blink.” The reason for this assessment was that most of the actions asked China to build on earlier areas of cooperation (like fentanyl), while still letting it maintain some leverage in the powerful rare earths sector. Meanwhile, the fundamental trade issues that the US had with China remain.

In a similar vein, Kerry Brown, a professor of Chinese Studies and director of the Lau China Institute at King’s College London, wrote for Time Magazine, “There are still many ways the trade truce can fall apart. But with a U.S. tariff rate now roughly in line with most of its Asian neighbors, the Chinese today must feel that even the worst outcomes they worried about some months back will not come to pass. And that despite all the earlier hard talk from the White House, Trump offers China an historic opportunity to gain status and strength on the international stage.”

Finally, Andy Browne of Semafor took an interesting long-term view, arguing that three important bets that the US government has made on China over the decades have failed — when their bilateral ties were established in 1979, when China was allowed to join the World Trade Organisation in 2001, and when Trump first sought to act against Chinese exports in his first term.

The policies were aimed at bringing China into the Western fold, believing its economic liberalisation would similarly impact its politics, and finally, that tariffs would slow down its growth, respectively. None proved true. Even now, when China’s economic growth model faces several challenges in the form of overcapacity and deflation, forcing it to manage the relationship, the country still holds enough sway that “Ultimately, Trump backed down from a fight against a technological superpower that would have been too costly for the US,” Browne wrote.