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US aims to maintain military advantage over China by controlling tech
“In critical areas, essential for our national security, we're not going to permit trade,” Burns says, “There's a lot of complaints that I receive from my Chinese counterparts about our de-risking strategy, and I remind them you're doing the same thing.”
Prohibiting the sale of semiconductors isn’t about limiting China’s economy or tech industry, but about maintaining America’s advantage in the race for military development. Burns points to growing tensions in the Indo-Pacific, where the US is keenly interested in maintaining military superiority, and says that so far Washington’s action has been limited to a small yard. Limiting chip exports, he says, is the only way to prevent Chinese leadership from acquiring powerful technologies that could tip the balance of power.Catch GZERO World with Ian Bremmer every week on US public television (check local listings) and online.
Where the US & China agree - and where they don't
“This is largely a competitive relationship,” Burns tells Bremmer. It’ll likely be a systemic rivalry well into the 2030s between the two largest economies in the world and the two strongest militaries in the world, so what happens here is very consequential.”
Catch GZERO World with Ian Bremmer every week on US public television (check local listings) and online.
President Joe Biden shakes hands with Chinese President Xi Jinping on the sidelines of the Asia-Pacific Economic Cooperation summit, in California, on Nov. 15, 2023.
Last dance with China?
Slide to the right.
Slide to the left.
And … pivot.
The diplomatic dance, dubbed “the pivot” by President Barack Obama back in 2011, is all the rage again in San Francisco, where 21 countries have gathered for the Asia-Pacific Economic Cooperation forum (APEC), and this year everyone is watching one dysfunctional couple on the dance floor: Biden and Xi.
The original Obama pivot was about increasing US influence in the Asia Pacific — read: pushing back on growing Chinese influence, military might, and Beijing’s Belt and Road Initiative – and it also meant pivoting away from places like the Middle East. So, choreographically speaking, it was a step from the Middle East to a bigger step to the Far East, as it were, and it caused friction with China. But the steps are more complicated today.
With the Russia-Ukraine war and the Israel-Hamas war raging, the US can’t just pivot away from its old stomping grounds, and yet it can’t pivot away from China either. China is similarly stuck. It’s suffering from slow growth and wants to make sure the world doesn’t descend into chaotic wars that might screw up its export markets, so it also needs to start dancing with the US again.
That’s why Chinese President Xi Jinping slid on over to San Francisco to meet with President Joe Biden for the second time. They have got to start dancing again. What is the metric of success here? It’s a low bar. Open up lines of communication. Put a floor under the deteriorating relationship. Avoid a war in Taiwan. Get back to business.
On the plus side, they reestablished military-to-military communications, which is important in a world where Chinese planes and ships are dangerously buzzing US and other NATO military assets in international waters near Taiwan. A bad accident could trigger a nightmare scenario, so a direct line matters. And they made progress on stopping the deadly fentanyl export problem.
But they didn’t get much done on rules around AI, semiconductor exports, or efforts to help stop the war in the Middle East by leaning on Iran. And Taiwan remains a festering diplomatic wound. So this ain’t no thaw. Oh, and, Biden called Xi a “dictator” immediately after their sit-down, so …
Still, the fact that they met and talked is a huge win.
An even bigger sign of warming relations came not from the lead dancer but the chorus line: Top US CEOs from companies like Apple and BlackRock gave Xi a warm round of applause and ate with him while Xi lapped it up. And why shouldn’t he? Xi, after all, is desperate to boost foreign direct investment, which is in its worst shape in 25 years. Show Xi the money.
If nothing else, the summit showed that the economic links between the two countries — ChiMerica — are too critical to toss away. So Biden gets a small win here.
Now, let’s pivot to Canada, a much lonelier figure on the dance floor.
Justin Trudeau has terrible relations with China and is not meeting with Xi at the summit, which means his Indo-Pacific strategy is really in shambles. It's not entirely his fault. China has kidnapped Canadians and interfered with elections, according to the government. Not exactly a great incentive to warm things up. Still, Canada can't ignore China.
I spoke with a senior source from the prime minister’s office who would not say much about what they wanted to accomplish at APEC with China, which is the main game here. All I got was a short note saying, “We need to engage where we need to, on issues like climate, and challenge where we have to. Our focus is continuing to deepen relations and trade, and trade is up 22% with APEC members.”
OK, but trade with that region is up globally, and it doesn't address the key question: What leverage does Canada have with China?
“Canada lacks credibility in the Indo-Pacific region, where, despite its new Indo-Pacific strategy and membership of the CPTPP [Comprehensive and Progressive Agreement for Trans-Pacific Partnership], it is seen as insufficiently and inconsistently engaged,” my colleague Graeme Thompson told me. “In the context of the geopolitical competition between the US and China, Beijing sees Ottawa as petulant and weak. The comparison with Australia, which is a serious military power for its size with a real, sustained, and long-term diplomatic and strategic focus on the region, is illuminating — and not flattering to Canada.”
The Australian PM, meanwhile, recently made a visit to China to meet Xi — this despite taking a very hawkish stance and upping its military profile with submarines and alliances like the Quad. And yet, here they are, warming the wires with China. Why? As my colleague says, Australia has paid its military dues in the region, and Canada has not.
In a world of multiple crises, there is no room for single pivots or isolating superpowers. And you can't hold a grudge. That is the reality. There has to be a united democratic front that presses bad actors, rogue actors, and superpowers that are a threat – China being one — to play by the international rules of trade and justice. That club is expensive to join and requires muscling up. That's the Aussie model, and the US likes it. So does the UK.
Biden and the US are signaling that they are pivoting back to the big dance with China. Meanwhile, Canada looks like it is still pivoting away — does that mean Trudeau has had his last dance with China?
President Joe Biden gives thumbs-up as he walks with Chinese President Xi Jinping on the sidelines of the Asia-Pacific Economic Cooperation in California on Nov. 15, 2023.
Biden calls Xi a dictator
Joe Biden and Xi Jinping spent four hours together on Wednesday, coming to agreements on curbing fentanyl production and improving military communication. But Biden referred to the Chinese leader as a “dictator” in a press conference afterward, which suggests there are limits to the rapprochement.
The two men met on the sidelines of the Asia-Pacific Economic Cooperation summit in San Francisco, Calif., with both sides having signaled a desire for better cooperation beforehand. It was the first meeting between them in more than a year and came amid historically high tensions. Their long chat and new agreements suggested an easing of tensions, but Biden’s off-the-cuff remark has irked the Chinese.
“Well, look, he’s a dictator in the sense that he is a guy who runs a country that is a communist country that’s based on a form of government totally different than ours,” Biden said. China’s foreign ministry was less than impressed and called the dictator label “extremely wrong and irresponsible political manipulation.”
Much like China’s floating of a spy balloon in US airspace earlier this year quickly popped holes in Biden and Xi’s diplomatic progress following their meeting at last year’s G20 summit, will Biden’s remark have a similar effect?
Justin Trudeau also attended the APEC summit in California, and Canada-China relations are also at a low ebb. At last year’s G20 in Indonesia, Trudeau and Xi exchanged tense words after the PM complained about Chinese interference in Canadian politics. Under political pressure over the government’s apparent failure to deal with the issue, Trudeau in September announced a public inquiry into the matter.
While Ottawa will stay closely aligned to the US on such matters, it remains to be seen whether it will follow Washington’s lead on improved diplomacy with Beijing.
We’ll be watching to see whether Trudeau manages the trip without squabbling further with Xi — the two are not expected to meet. “[Canada’s] goal is to stop the hole from getting deeper in Asia," Carlo Dade, director of the trade and investment center at the Canada West Foundation, told the CBC.
Logos of FTX and Binance, crypto exchange competitors.
What We're Watching: Crypto chaos, China-El Salvador trade, inflation across the Atlantic, Biden-Xi meeting
Is this crypto’s Lehman moment?
The crypto market’s bad run got even worse this week after FTX, a major crypto exchange, imploded. Headed by billionaire crypto-star Sam Bankman-Fried, FTX was revealed to be in a dire financial position earlier this week, and Binance, the largest exchange and an FTX competitor, considered bailing FTX out, but dropped the idea at the eleventh hour when it became clear FTX was insolvent and its customers couldn’t withdraw assets. Federal investigators are now looking at Bankman-Fried to find out whether his company violated financial regulations. Not only did Bankman-Fried lose more than 90% of his $16 billion fortune in mere days, but the news also sent the broader crypto and stock markets into a tailspin. Bankman-Fried, a big Democratic donor, had been making inroads in recent months with lawmakers on Capitol Hill to shape regulation with favorable terms for the crypto industry. But lawmakers and other crypto lobbyists will now want to distance themselves from the crypto king facing serious allegations of financial impropriety.
China and El Salvador talk trade
China and El Salvador will soon begin negotiations on a free trade deal, Beijing said on Thursday. The relationship is a new one. It was only four years ago that San Salvador cut ties with Taiwan in order to establish formal relations with China. Since then, El Salvador has signed onto Beijing’s ambitious Belt and Road Initiative, and China has agreed – in principle at least – to invest in a number of infrastructure projects in the Central American country, including a sports stadium, water treatment plants, and a $40 million cultural center in the capital. El Salvador’s democracy-flouting President Nayib Bukele needs all the economic help he can get after pinning the country’s economic revival on cryptocurrency, which is clearly not having a very good run. Washington has had to tread carefully with the norm-defying Bukele – China’s bid to rival US influence in Latin America gives the young populist leader options.
Inflation: good news in the US, bad news in Europe
The US economy got some good news on Thursday: Monthly inflation in October dropped to 7.7%, down from 8.2% in September, and is now at its lowest level since January. This suggests that the US Federal Reserve’s ongoing efforts to rein in inflation are working. But across the Atlantic, it's a different story. As the war in Ukraine wages on, inflation remains above 10% in the Eurozone, where the European Central Bank has adopted a more cautious approach to monetary policy out of fear that raising rates too fast could inflict economic pain, particularly on the more sluggish southern European economies. But as cost-of-living pressures persist, thousands of people across Greece, Belgium, and France took to the streets this week to protest “suffocating inflation.” Belgian trade unions say gas prices have gone up by 130% this year, while Greek officials say they’ve risen by more than 300%. European governments are keenly aware that with winter coming, the chill of inflation is only going to get deeper.Putin’s out, but