Biden-Xi Summit Set to Highlight Economic Dependence Among US and China

Biden-Xi Summit Set to Highlight Economic Dependence Between US and China

The highly anticipated summit between U.S. President Joe Biden and Chinese President Xi Jinping is expected to put the spotlight on growing economic interdependence between the two superpowers, despite ongoing political tensions.

Scheduled to be held virtually on November 14, 2022, the meeting comes amidst trade disputes, tech wars, human rights criticisms and Taiwan tensions. However, economic reliance especially in trade and finance might compel cooperation.

Biden-Xi Summit

Growing Calls for Bilateral Economic Dialogue

Ahead of the summit, there have been growing calls for more sustained economic dialogue between the U.S. and China from businesses. Companies increasingly want both countries to ensure economic links remain intact even as strategic rivalry simmers.

The U.S.-China Business Council has highlighted how bilateral trade reached nearly $690 billion in the first nine months of 2022, up 11% from last year. There is concern recurring tensions could derail economic engagement.

Similarly, the American Chamber of Commerce in China said increasingly “complex global challenges” required cooperation between the world’s biggest economies. It requested a yearly economic summit alongside enhanced dialogues.

Supply Chain Interdependence

One key facet of U.S.-China economic bonds is deep supply chain integration built over decades. Multinational firms have complex production networks across the Pacific making decoupling difficult.

For instance, China accounted for 15% of total U.S. merchandise imports in 2021 worth around $506 billion. Top imports are computers and electronics, machinery, furniture and auto parts that American firms rely on.

Similarly, China depends on U.S. exports like oil seeds, aerospace products, semiconductors, vehicles and medical equipment. Disrupting supply chains poses high costs for businesses in both economies.

Bilateral Trade in Goods

Total bilateral trade in goods hit roughly $690 billion in January-September 2022. American exports to China grew by 4% while imports from China jumped 11% amidst soaring demand stateside.

China remains the third largest U.S. goods trading partner after Mexico and Canada. Top American exports are agriculture products like soybeans, advanced machinery, oil and gas, autos and aircraft.

Chinese exports span a vast range of consumer goods, electronics, machinery, furniture and telecom equipment. The U.S. trade deficit with China may reach a record $380 billion in 2022 as imports outpace exports.

Rising Chinese Investment into America

Growing Chinese investment into the United States is another aspect of interconnected economies. Total Chinese FDI into America was around $68 billion in 2021.

Chinese firms are increasingly acquiring U.S. assets, investing in R&D and advanced technology and targeting growth opportunities like electric vehicles. While some Chinese deals get rejected over security concerns, most sail through despite politics.

Major Chinese investments in recent years include the $5.4 billion purchase of GE Appliances by Haier in 2016. Beijing-based NIO has also opened electric car design centers in America.

American Businesses Deeply Embedded in China

Concurrently, American businesses remain deeply embedded in China with billions invested into manufacturing, R&D and joint ventures. There is massive U.S. exposure across automotive, tech, aviation, agriculture, fast food and other sectors.

American FDI stock in China touched $116 billion in 2021 with companies like Microsoft, Boeing, Tesla and Starbucks expanding operations. Almost every major U.S. corporation has sizable China presence. Managing an economic decoupling without disrupting business activities poses challenges.

Intertwined Technology and Supply Chains

Complex technology supply chains that criss-cross the Pacific make total decoupling nearly impossible. American firms like Apple rely on Chinese suppliers for phones, laptops and gadgets ultimately sold in the U.S.

China also depends on American semiconductors, software and high-tech components feeding its export industries. In 2021, U.S. tech product exports to China exceeded $150 billion despite Washington’s efforts to restrict tech transfers on security grounds.

Strategic Competition and Cooperation

U.S.-China rivalry is likened to a marathon with many facets of cooperation coexisting despite tensions over Taiwan, human rights, trade disputes and technology ambitions.

The Biden-Xi summit represents an opportunity to put economics into a separate lane that allows steady collaboration even as geopolitical disagreements persist. Finding areas of mutual interests will be key.

For China, securing stable economic ties is vital when growth has slowed to just 3% in 2022 amidst real estate woes, Covid disruptions and declining exports. For the U.S., uninterrupted flows of Chinese imports that American households and firms rely on remains crucial.

Risk of Economic Decoupling

However, the risk of weaponizing economic interdependence cannot be discounted. The U.S. has shown willingness to deny China access to key technologies like advanced semiconductors that fuel its industries.

China can retaliate by pressuring U.S. multinationals to obey its political stances. It can also deepen ties with non-U.S. nations across trade, technology and finances to circumvent American pressure.

The tide seems to be shifting away from globalization towards fragmented geopolitical blocs with different tech standards and payments systems. This "slow decoupling" could accelerate if political relations deteriorate further.

Impact on the Global Economy

A broader disengagement between the world’s biggest economies will also impact the global economy. Global growth is already reeling from the Ukraine war, energy shocks and lingering pandemic disruptions.

Deeper friction that disrupts bilateral trade and investment flows would damage multinational supply chains, spur inflation, depress asset prices, staunch business sentiment and destabilize emerging markets.

It will force every nation to pick sides instead of objectively engaging across geopolitical divides. Companies around the world would need to re-optimize operations and supply chains at heavy cost.

Outcome Hinges on Political Will

Ultimately, preventing an economic uncoupling requires responsible political stewardship. Leaders in Washington and Beijing must separate politics from economics where possible and let data-driven analysis guide policy.

They need to listen to feedback from businesses and communities impacted by decoupling pressures. Pragmatism is vital or both powers risk provoking mutual economic destruction.

The Biden-Xi summit offers a chance for breakthrough and bracing U.S.-China economic engagement. But it requires statesmanship and enlightened self-interest from both leaders during a low point in relations. Managing economic interdependence amidst strategic tensions will likely dominate the agenda.

Conclusion

The deep economic bonds between the U.S. and China built over half a century serve as a moderating force amidst political frictions. Bilateral trade, investment, tourism, supply chains and technology links sustain millions of jobs and livelihoods. Weaponizing interdependence will inflict grave costs on businesses and communities.

As Xi and Biden meet, expectations are muted for breakthroughs beyond keeping communication channels open. However, just avoiding further deterioration in ties and putting a floor under relations could be considered positive. Keeping the economic ballast stable is in the self-interest of both superpowers tied together in so many ways.

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