Yet these meetings offer little reassurance to MNCs navigating the most unstable business environment in China in decades
The recommencement of engagement between senior officials from China and the US is a positive development met with acclaim by the business world. Notably, some executives are championing for increased economic collaborations between the two nations. High-profile figures such as Elon Musk, Tim Cook, Patrick Gelsinger, among others, have even had the opportunity to meet with senior Chinese officials during their visits to China since its reopening.
Recently, a noticeably higher number of US executives have been able to visit China, a trend viewed as a positive sign for US businesses. For the first time since the COVID outbreak, executives now have the opportunity to personally interact with their teams, partners, clients, and other stakeholders. Indeed, virtual engagement is no substitute for face-to-face meetings. For companies that have heavily invested in China over the past decade and continue to rely on it as one of their largest markets, personal visits of US executives convey a symbolic message underscoring the close business and trade ties between the two nations.
However, China’s business environment has undoubtedly undergone significant changes. Beneath the headlines flaunting numerous official visits, China has recently strengthened control over data, information, and adversarial actions like espionage under the guise of enhancing national security and interests. The definitions of national security and interests, however, could be highly subjective. This posture is unlikely to be improved by a handful of meetings between top US and Chinese officials. Therefore, executives may find themselves navigating uncharted waters during their visits to China and may want to bolster their legal, compliance, and government relations operations to handle rising uncertainties stoked by persistent tensions.
In more extreme cases, executives might need to reconsider whether embarking on a personal trip to China is advisable, and if they do decide to visit, they should take proper precautions. In light of recent incidents involving foreign (mostly American) consulting firms, it is not uncommon now for foreign executives to bring burner phones and laptops to China, purely as a safety measure. Additionally, they should be mindful of potential exit bans, which have already been imposed on several foreign businesspeople for reasons largely undisclosed to outsiders. In today’s unpredictable world, it’s always wise to exercise caution.
Overview
- When China abandoned its zero-COVID policy at the end of last year, the expectation was high for a swift resumption of mutual visits by senior officials from both China and the US. Indeed, US Secretary of State Anthony Blinken had a scheduled visit to Beijing in February.
- However, due to the unforeseen “balloon incident”, Blinken’s plans were thwarted and he subsequently cancelled his trip. It was not until June that he finally embarked on his journey to China, where he met Chinese leader Xi Jinping.
- Prior to Blinken’s visit, there had been a few mutual visits by other senior officials from both countries. Notably, CIA Director William Burns made an unannounced visit to China in May.
- The most goodwill seems to have come from meetings between economic officials, particularly during Treasury Secretary Yellen’s visit to Beijing. There, she met with Premier Li, who leads China’s State Council, and several other top current and former economic officials.
- However, the two nations have yet to reestablish military communication channels, as China insists on the US lifting sanctions on Li Shangfu, China’s Minister of National Defense. The US, for its part, has thus far declined to comply.
Our View
The US-China relationship, unstable for the past few years, deteriorated in part due to a lack of face-to-face engagements between senior officials, leading to escalated mutual distrust. These tensions hit new lows earlier this year, particularly after the “balloon incident”.
But behind-the-scenes efforts persist from both countries to prevent further degradation of the relationship, fully aware that any misstep could trigger undesirable conflicts and potentially plunge the world into chaos. This is especially true given the recent precarious encounters between Chinese and US military forces in the South China Sea and the Taiwan Strait, which, if mishandled, could rapidly escalate to full-scale conflicts.
The recent flurry of meetings has somewhat eased the strained relationship, at least temporarily. The encounter between US Secretary of State Anthony Blinken and Chinese leader Xi Jinping notably set a boundary to the declining relation and paved the way for further engagements, although no agreements were reached. Treasury Secretary Yellen’s visit was marked by warmer talks and calls against “decoupling”, yet it also ended without any significant agreements.
These meetings demonstrate that neither China nor the US wishes for an uncontrolled downward spiral in their relationship. The US intends to establish standard communication channels with China, ensuring there’s a means for dialogue in case of unforeseen incidents. Likewise, China is hesitant to further exacerbate US-China relations, given the domestic economic challenges it currently faces. Consequently, they agreed to engage and establish “guardrails” for better relationship management. However, to presume that the relationship has reached rock bottom and will only improve would be misguided. The two countries currently harbor deep-seated suspicions of each other, and the rivalry is structurally ingrained, with differences too vast to reconcile easily. While meetings between senior officials can foster understanding, comprehension alone is unlikely to yield substantial improvement. Tensions will remain high for the foreseeable future.
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