Late last month, Kurt Campbell, President Joe Biden’s main adviser on China and the Indo-Pacific region, said at a virtual seminar sponsored by Stanford University, “The dominant paradigm” in U.S.-China relations “is going to be competition,” adding, “The period that was broadly described as ‘engagement’ has come to an end.”
Some gasped at the remarks because Campbell, a longtime China hand and President Barack Obama’s assistant secretary of state for East Asia and Pacific affairs, has been a product of the engagement era and, at times, a spokesman for it, though more cautious—and, lately, skeptical—than many.
Campbell did not mean that diplomacy with China has come to an end—he elaborated that the Biden administration would be “countering China when we need to and cooperating with China when it’s in our interests to do so”—but his remarks amounted to a declaration that Biden would push on with a variation on the hardball policy that began during the Trump years.
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There are differences between Trump and Biden on the issue. Though they basically agree on the diagnosis of Chinese President Xi Jinping’s increasingly assertive actions and aims, they disagree on how to respond. Donald Trump launched a trade war with Beijing, alienated every ally the U.S. would need in the broader competition, and poisoned the political climate at home. Biden stresses cooperation with allies and demonstrating the unifying power of American democracy as the key ingredients to countering China’s ascension.
But 4½ months into Biden’s presidency (a short time, but enough to send clear signals), it is not clear how he and his team plan to thread the needle on China policy—the fine balance between competition and cooperation.
As a case in point, it is worth examining Biden’s executive order, issued on June 3, stiffening an order signed by Trump in November, barring Americans from holding stock in firms that make up what Biden calls “the Military-Industrial Complex of the People’s Republic of China.” Biden’s order expanded the number of banned Chinese companies from 31 to 59, some of which are engaged not in weapons manufacturing but in surveillance technology.
The purpose, as a White House fact sheet put it, is to “ensure that U.S. investments are not supporting Chinese companies that undermine the security or values of the United States and our allies.”
It seems like a good idea, but two puzzles stand out. First, few if any U.S. mutual funds, ETFs, banks, or any other sizable entity are pouring capital into these companies to begin with. Michael Hirson, head of China and Northeast Asia at the Eurasia Group, told me in a phone conversation that U.S. investment firms moved their money out of these sorts of Chinese companies several months ago, to the extent they ever held shares at all. In any case, he added, these Chinese firms don’t need U.S. investors, as they “have access to ample credit from China’s banking system.”
Jordan Schneider, China technology analyst at the Rhodium Group, thinks that these firms might be helped by their inclusion on Biden’s blacklist. “They could tell the [Chinese] government, ‘Hey, we’re important enough for America to put us on the list, so you should give us more money,’ ” Schneider told me.
In any event, the order’s focus on stock investments seems misplaced. Several U.S. firms sell software and hardware to some of these Chinese companies—parts and software that improve China’s ability to oppress and spy on citizens. Emily Weinstein, research analyst at Georgetown University’s Center for Security and Emerging Technology, told me that such sales affect American security and values far more than equity investments. Yet, she said, Biden’s executive order does nothing to limit these transactions.
In March, the Biden administration did issue an “interim final rule” allowing the Commerce Department to review, modify, and even block commercial transactions between U.S. and foreign parties for certain “information and communications technology services.” No actions have been announced as yet, but the rule could cover the sorts of sales that concern Weinstein. That is where a battle on this front may be waged—not only between the U.S. and China, but also between the Biden administration and certain American tech companies.
But a larger concern needs to be raised amid these rising tensions between Washington and Beijing. It is hard to see how the United States can achieve many of its foreign policy goals while stoking a new cold war with both China and Russia, especially in a world where power blocs are splintering and tangible support from allies cannot be guaranteed. Campbell and Laura Rosenberger, another White House China specialist who also spoke at the Stanford seminar, paid lip service to the idea of cooperation with Beijing when it serves our interests. Secretary of State Antony Blinken has expressed the same view. Biden has often mentioned the many hours that he spent talking with Xi when they were both vice presidents, the implication being that he can draw some kind of leverage from their personal relationship. Maybe they can. Maybe not. Meanwhile, John Kerry, Biden’s envoy on climate talks, has been talking with his Beijing counterpart—but Secretary of Defense Lloyd Austin was rebuffed when he tried to revive talks between U.S. and Chinese military officers. In all but the harshest years of the real Cold War, there were more avenues of conversation and cooperation between the U.S and the Soviet Union than there seem to be now between the U.S. and China.
In this context, Biden’s upcoming talks with European leaders and with Russian President Vladimir Putin will be particularly interesting. Will he be able to lure the European allies into some positive steps to strengthen democracy and promote joint economic policies that go beyond mere China-bashing? And will he be able to launch productive talks about anything with Russia, despite the many conflicts we have with that country?
Then there are the still larger obstacles on the homefront. Campbell and Rosenberger said at Stanford, just as Biden has said on many occasions, that a main pillar of our competition with China is to show ourselves and the rest of the world that democracies can deliver, that—contrary to Xi’s global message—autocracies cannot do a better job of governing, that U.S. leadership is not cracking up.
Biden is banking on the fact that many leaders are chafing against China’s more assertive tactics and don’t much like the idea of China setting the rules of a new world order. This is a fact worth stressing. Disturbing as many of its activities are, China is not on the verge of taking over Asia, much less reshaping the world. The U.S. still enjoys many alluring advantages—political, economic, and cultural. It is the only nation with a global military presence and a network of alliances. But its edge, in all these realms, is fraying.
What if it turns out, contrary to Biden’s wager, that democracies can’t deliver? What if the tensions and deadlocks in American society and politics intensify? What do we do about China then, what does the rest of the world do, and what can we do together in the meantime? Do we have a Plan B? Right now, it isn’t clear that we do.
