That bipartisan sentiment makes it difficult for those trying to advocate a more cautious and less aggressive approach to the world’s second-largest economy, such as former U.S. Treasury Secretary Larry Summers, who was instrumental in helping China bail out the World Trade Organization. (China officially joined this international organization in December 2001). “I’m a fan and a friend of China in many ways,” Summers said in a virtual conversation with Clay Chandler. Luckthe magazine’s executive editor for Asia at the Fortune Innovation Forum in Hong Kong on Thursday.
The US and China “really have no alternative but to find Lifestyle to collaborate if either of them wants to succeed,” he said. “I find it very difficult to imagine scenarios where the US is very successful while China fails, or where China is very successful and the US fails.”
Summers compared the US and China to “two guys who don’t like each other very much, don’t know each other very well, and end up in a lifeboat that requires two oars, in a very rough sea, far out to sea.” shore.”
However, Summers said some of Beijing’s actions are preventing those more accommodating of China from making their case for better relations.
“I have to say that sometimes China seems to be doing everything it can to make it difficult for Western policy debates to become less confrontational or deterrence-oriented,” he said. “What… is coming out of China makes it much more difficult for those of us who want to emphasize negotiation and cooperation.”
Relations between the US and China have been on a downward spiral since former US President Donald Trump imposed huge tariffs on imports from China. The Biden administration has largely selected to save Trump tariffs.
In recent years, Washington has blocked sales of advanced chips and chip-making equipment to Chinese companies, and has also banned U.S. investment in Chinese companies in sectors such as quantum computing, artificial intelligence and semiconductors. The US is also encouraging companies to “de-risk” their supply chains from China and move operations to other countries, including those that are friendlier to the US.
Chinese officials have criticized the policy as a violation of global trade rules, even filing cases in the WTO.
Summers predicted those complaints would fall on deaf ears, given China’s own reliance on industrial policies, protectionist measures and subsidies. “I don’t think China is in a strong position to complain about industrial subsidies…[and] nationalist economic policy.” he said Thursday.
Working with allies
The Biden administration, unlike its predecessor, says it is more open to working with allies to contain China. The United States, for example, persuaded Japan and the Netherlands to impose their own controls on the sale of chip manufacturing equipment to China.
But domestic political pressure could undermine these efforts. US politicians, including President Biden, have criticized Japanese steel company Nippon Steel’s $14 billion deal to buy US Steel on national security grounds.
Nippon Steel, for its part, tried to defend its acquisition by saying it would create a steel giant capable of competing with China.
Summers has previously criticized efforts to block the deal. “There is not even a remotely plausible national security justification for questioning the Nippon-US Steel deal. Japan is a loyal ally.” He said Bloomberg TV in January.
The economist on Thursday again mentioned the idea of trying to keep US Steel in domestic hands. “Industries that use steel employ more than 60 times as many people in the United States as the steel industry,” he noted.
“When we do something that increases the price of steel with different types of economic constraints, we have to think very carefully about whether we’re helping American workers online or hurting them,” he continued.
Where is the US-China relationship going?
Other speakers at the Fortune Innovation Forum noted that even amid trade tensions, there are still some positive trends in the U.S.-China economic relationship. Chinese President Xi Jinping met with U.S. company executives on Wednesday after the China Development Forum, a summit in Beijing for Chinese officials and foreign business leaders.
“There has been less criticism coming out of Washington this year about American business leaders doing business in China,” Ben Harburg, managing partner at global investment firm MSA Capital, said Wednesday at the Fortune Innovation Forum. “Those narratives that it was a betrayal to do business in China have been toned down a little, and it’s given people a little more confidence to show their feathers.”
Washington and Beijing have worked to restore ties in recent months, including the Xi-Biden summit last November.
Graham Uden for FORTUNE
However, speakers at the Fortune Innovation Forum were wary of predicting that US-China relations will improve anytime soon.
“The geopolitical situation will not improve. In any case, I think I will be very happy if the situation does not deteriorate further,” Victor Fung, chairman of Fung Investments, said on Wednesday. Fung, who headed supply chain management company Li & Fung, predicted that “geopolitical repression” could lead to “total fragmentation” of supply chains to avoid direct trade between China and Western markets.
Harburg predicted that U.S. policy could again worsen relations with China. “Trade tensions are here to stay and will continue to escalate over the years,” he said, “especially as we go through an election cycle where everyone is going to have to compete to see who gets tougher on China.”