Twists and turns of China’s complex US rivalry

The trajectory of their relationship will have far-reaching implications for the rest of the world

The world has witnessed a complex tapestry of economic and technological dynamics between the United States and China. Last year marked a period of continued economic interdependence and techno-strategic rivalry.

Despite a nominal dip in American imports from China, bilateral trade volumes remained substantial. US exports to China totaled US$135.8 billion and imports stood at $393.1 billion between January to November.

Yet trade represents only a facet of the economic bond between the US and China. Policymakers, aware of the perils inherent in economic decoupling, have started to pursue such a course. 

High-level meetings and initiatives, like the US-China economic and financial working groups established in 2023, offered a positive glimpse of potential bilateral relations. 

A meeting between US President Joe Biden and Chinese President Xi Jinping in November highlighted Beijing’s willingness to partner with Washington.

In contrast, the high-tech landscape in 2023 was tense. 

External pressure

The US reinforced its global stance against China’s ascendancy, supported by American political parties. In response to escalating external pressure, terms like “struggle” and “fight” resurfaced in China’s strategic discourse

Key issues such as the ongoing tariff war and stringent export controls on critical technologies continued to underscore the intense rivalry between the world’s two superpowers.

Moving into 2024, the US-China economic and technological relations are poised to undergo a shift, characterized by enhanced communication, selective cooperation, and balanced management of both interdependence and competition.

There is an understanding among senior officials of the potentially devastating repercussions associated with misunderstandings and miscalculations in the US-China relationship. This year is expected to witness increased economic dialogues between Beijing and Washington.

China and the US are locked in a high-tech showdown. Photo: Social Media / File

US Treasury Secretary Janet Yellen, speaking at the US-China Business Council in December, expressed the intention to reinforce communication channels to avert escalation from disagreements.

Similarly, Chinese commerce officials are preparing for an inaugural vice-ministerial meeting to better comprehend American concerns while conveying China’s commitment to robust economic ties.

Commercial cooperation will likely pivot towards climate finance and financial markets. 

China is also expected to further open its market to attract US businesses and investment amid global economic uncertainties, alleviating trade tensions.  Still, this year will witness intensified technological competition. 

Presidential election

National security concerns will continue to drive fierce rivalry between Beijing and Washington. The US government is likely to escalate its pressure on China, especially in the high-tech sector.

Both political parties in the United States will have a sharp focus on Beijing’s policy due to the presidential election. 

A tougher stance to counter China’s growing high-tech industry is expected to be a significant part of the political narrative, reflecting the strategic importance surrounding this area. 

It is possible that more American voices will call to revoke the Permanent Normal Trade Relations with China, in the hopes of reversing the decline in US manufacturing.

On the Chinese side, industrial policy is poised to gain momentum in this tug-of-war. 

The glitzy expo for the Belt and Road project. Photo: Social Media

An increasing number of nations, including the US, are strengthening state intervention and vying for global technological competitiveness. 

Domestically, Chinese policymakers plan to leverage industrial policies to ascend the value chain and sustain economic growth. Beijing will adopt an active fiscal policy, increasing government expenditure and focusing resources on major initiatives. 

Earlier this year, more than a dozen provinces and cities announced ambitious plans to issue special bonds to support massive investment in new-generation information technology, biopharmaceuticals, and AI.

To mitigate potential economic friction with the United States and buttress exports, Chinese policymakers will further look towards Southeast Asia, the Middle East, Latin America, and Africa.

Global approach

Beijing will continue strengthening and expanding commercial exchanges with countries involved in the Belt and Road Initiative. This transition signifies a shift from a “reactive” to a “proactive” global approach.

Yet again, 2024 is destined to be another eventful year for China and the US, shaped by a multitude of domestic and systemic factors. 

The trajectory of their economic and technological relationship will have far-reaching implications for the rest of the world.

Yuhan Zhang is a Political Economist based at UC Berkeley and Adjunct Assistant Professor at the G20 Center of Beijing Foreign Studies University’s International Business School. He also runs the China’s Economy and the World blog.

This article is part of an East Asia Forum special feature series on 2023 in review and the year ahead. Read the original here.

The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy of China Factor.