Biden and Xi Take Biggest Step in Years to Prevent US-China Clash

(Bloomberg) -- Before Joe Biden sat face-to-face with Xi Jinping on Monday night at a seaside resort in Bali, US officials played down hopes for any tangible progress. The outcome easily exceeded those low expectations.

At the end of a meeting that ran about three hours, the US said the two sides would resume cooperation on issues including climate change and food security, and that Biden and Xi jointly chastised the Kremlin for loose talk of nuclear war over Ukraine.

“I’m not suggesting this is kumbaya, you know, everybody’s going to go away with everything in agreement,” Biden told reporters after the meeting. “I absolutely believe there need not be a new Cold War.”

Chinese Foreign Minister Wang Yi called it a “new starting point,” saying the meeting went longer than planned. Both sides “hope to stop the tumbling of bilateral ties and to stabilize the relationship,” he said in a briefing with state-run media. 

Just four months ago, tensions between the US and China reached the highest point in years as House Speaker Nancy Pelosi flew into Taiwan, with some Chinese commentators calling on the military to “forcibly dispel” her plane. The incident underscored China’s inability to deter the US on its most sensitive issue, leaving a slighted Xi to cut off military and climate talks while sending fighter jets and naval ships to effectively surround the island. 

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More broadly, the episode sparked concern among leaders in the region and the world that the most powerful countries on Earth could one day stumble into a devastating war. With China providing diplomatic support to Russian leader Vladimir Putin and accusing the US of building an “Indo-Pacific version of NATO,” a doomsday scenario entered the realm of plausibility. 

On Monday in Indonesia, which is hosting this year’s Group of 20 summit, Presidents Biden and Xi — both buoyed by political successes at home — shook hands to kick off the first in-person meeting between leaders from the US and China since the coronavirus pandemic rocked the world. Biden said both countries have a responsibility to “prevent competition from becoming anything ever near a conflict,” and Xi said the two sides “need to find the right direction” and “elevate the relationship.”

“Right now there’s some cause for very cautious optimism,” said Ja Ian Chong, an associate political science professor at the National University of Singapore. “Both sides have stuck to what they’re saying, but there’s at least a sense that both sides don’t want to go off the brink.”

The two countries still have plenty of disagreements, including over Taiwan and US moves to limit China’s economic and technological advancement. A statement from China’s Foreign Ministry warned against US efforts at “suppression and containment” and was notably silent on Russia’s war in Ukraine. And the White House said Biden raised US concern about human rights violations in Xinjiang, Tibet and Hong Kong.

The tone of the meeting may lend additional support to China’s financial markets, which have been on a tear this month amid signs of a moderation in the nation’s Covid Zero and a property-market crackdown. The offshore yuan gained 0.7% versus the US dollar Monday while the Nasdaq Golden Dragon China Index of 65 Chinese stocks listed in the US extended their rally to a third day.

Working Together

In the short term, both leaders have an incentive to work together. While Xi is now China’s most powerful leader since Mao Zedong, and set himself up to potentially rule for life at last month’s Communist Party congress, he’s also dealing with an economy battered by Covid Zero and a property crisis.

At the same time, Biden wants to reassure allies and security partners in Asia that the US isn’t trying to provoke China into a military conflict. Many in the region who support a strong US military presence to deter China were also skeptical about the strategic value of Pelosi’s trip to Taiwan and are reluctant to get on board with the administration’s moves to curb advanced chip exports to China, which threaten to split global supply chains. 

Now the question is whether the US and China can build on this meeting to put their relationship — and the world — on a more stable footing. In one sign of optimism, US Secretary of State Antony Blinken plans to travel to China early next year to follow up. 

Biden also appears to have told Xi what he wanted to hear, and vice versa. Beijing’s readout of the meeting said the US “respects China’s system, and doesn’t seek to change it.” It added that the US offered assurances it didn’t want to form alliances against China, decouple their economies or contain the nation’s rise. 

China, for its part, reiterated in the meeting that it “has no intention to challenge or displace the United States.”

Taiwan Quandary

The biggest problem remains Taiwan. Biden sought to reassure Xi that the US’s Taiwan policy hadn’t change, and avoided saying that American troops would intervene in a conflict as he’s done on several previous occasions. 

China included a lengthy section in its readout calling Taiwan “the first red line that must not be crossed in China-US relations.” It added a warning for the White House: “Instead of talking in one way and acting in another, the United States needs to honor its commitments with concrete action.”

That will be tested soon enough as Congress considers the Taiwan Policy Act, which would formally designate the island a “major non-NATO ally.” Republican House Leader Kevin McCarthy, who may be in line to replace Pelosi, has said he wants to visit Taipei -- a move that could again feed military tensions in the region.

“This in-person meeting is merely a baby step to move forward a positive turn of China-US relations,” said Yu Jie, senior research fellow on China at London-based Chatham House. “It will not resolve any substantial grievances both sides have had against each other, but only slow down the deterioration of their relations.”

--With assistance from , , and .

(Updates with Wang Yi in fourth paragraph)

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