Key Takeaways:
Sullivan's visit marks a positive step in the China-USA dialogue. Both sides are working to keep their competition and disagreements under control, and future meet-ups may be anticipated.
Economic and political concerns drive the dialogue. China is driven by domestic economic pressures and the USA by the presidential election.
The visit is expected to stabilize tensions between China and the USA, and over Taiwan for the next two months. However, KSG assesses that the US-China ‘cold war’ is set to continue beyond 2030 due to largely unavoidable friction points.
New trade talks are unlikely to bring concrete breakthroughs in China-US trade relations. Intel, Nvidia, and their partners should keep a close eye on the talks as their recent actions in the China market have attracted significant attention and may be discussed as an important topic.
NSA Sullivan’s visit
On 27th August, Jake Sullivan, the National Security Adviser (NSA) of the USA, visited China in the wake of the US presidential election. During his three-day visit, meetings were held between Sullivan and high-ranking Chinese officials such as Xi Jinping, Zhang Youxia (vice chairman of the Central Military Commission), and Wang Yi (Foreign Minister of China) concerning a wide array of issues, including the ease and management of tension, enhancing future communications, trade, South China Sea, and conflicts in Ukraine and the Middle East. Future meetings between China and the USA were also scheduled during Sullivan’s visit. A phone call between Xi and Biden will take place in the upcoming weeks, and the second-round deputy minister-level meeting of the China-US commerce and trade working group will be held in Tianjin, China by 9th September.
Following the Woodside Summit between Xi Jinping and Joe Biden in November 2023, the intention to increase dialogue has become a central part of China-US relations. Over 2024, it has included:
Visits by the Secretary of State Antony Blinken and the Secretary of the Treasury Janet Yellen to China.
Sullivan’s visit suggests that the dialogue between China and the USA are moving forward, and both sides are keeping their intention to sustain open communications. It indicates that both sides are working to keep tensions under control and do not want to escalate the current situation.
Why both favour dialogue over escalation
KSG’s analysis and interviews suggest that China and the USA are driven by economic and political concerns to keep external tensions under control. For China, domestic economic issues have created significant pressure on its government to sustain healthy foreign relations to secure export channels.
The USA on the other hand is growing increasingly conscious of its overstretch across the globe. In addition, publicly facing assessments of the USA’s ability to contest China successfully in the South China Sea are also worsening from a US perspective.
This moment presents itself as a time where mutual concessions are desirable.
Looking forward:
KSG assesses that the hegemonic competition between China and the USA is likely to be less intensive in the two upcoming months until the new US president is elected. Conflict over Taiwan is also unlikely to break out in this brief period.
Although South China Sea issues were discussed during Sullivan’s visit, KSG anticipates the possibility of a reduction of tensions to be low in the long-term, as the USA intends to continue its support of the Philippines in its territorial dispute with China, and support the defence of Taiwan. Despite this momentary period of rapprochement, KSG assesses that the US-China ‘cold war’ is set to continue beyond 2030 due to these largely unavoidable friction points.
As part of the joint effort to manage tension and disagreements, China and the USA will work together to promote further dialogues on trade and investment in the upcoming Tianjin meeting. However, KSG’s analysis (based on the previous round of China-US commerce and trade working group meetings) suggests that solid breakthroughs are unlikely to be seen for sectors the USA considers core security interests, including data, AI, and semiconductors. Trade barriers against Chinese light-industry products may also persist, continuing to impact the manufacturing industry and the new energy industry.
Intel and Nvidia have been ‘caught under the radar’ for their continued involvement in the Chinese market and have triggered attention from Washington given the sensitivity of the industry they are in. KSG believes that US private sector involvement in Chinese sophisticated technology will become an important topic in the upcoming Tianjin meeting. These two companies, their partners, and other companies involved in Chinese dual-purpose industries will need to assess tangible outcomes from the talks, and any indicators that can be seen within statements. KSG will produce such a report after the talks.
The status of Sino-US competition will need to be re-evaluated after the US presidential election according to the new president’s strategies. Kamala Harris is likely to continue the strategy of the current administration, whereas Donald Trump will take a strategy of constriction and containment towards China. KSG will produce such a report after the election.
Sullivan’s discussions with China, alongside those upcoming, are unlikely to result in concrete changes in Ukraine and the Middle East, as previous talks between China and the USA on those topics have all ended with little progress.