U.S. Commerce Secretary Balances Toughness and Warmth in China Visit Dialogues
The Lede: U.S. Commerce Secretary Gina Raimondo wrapped her four-day trip to China on Wednesday where she juggled her department’s tough economic stance with Washington’s push for increased dialogue. This comes amid deteriorating economic conditions and a souring business environment for foreign firms in China.
What We Know:
- The secretary’s trip lasted from Sunday to Wednesday. At the end of her trip, Raimondo described her visit as an important beginning and emphasized that the U.S. was not targeting China, although she stood firm and leveled criticism.
- On Monday, Commerce Minister Wang Wentao and Raimondo agreed to establish a formal channel of communication between the two countries on commercial issues and exchanging information on export controls. Raimondo also raised the issue of restrictions on American businesses including Intel and Micron. China's recent curbs on gallium and germanium exports came up in the two-hour-long conversation.
- On Tuesday, Raimondo and Chinese Premier Li Qiang discussed the protection of trade secrets and U.S. limits on chips. Raimondo rejected a proposal to ease export controls on sensitive industries with military applications. Meeting with the Chinese Minister of Culture and Tourism Hu Heping, Raimondo highlighted the importance of people-to-people exchange. Both agreed to hold the 14th China-U.S. Tourism Leadership Summit in China in the first half of 2024.
- Raimondo wrapped up her four-day China trip on Wednesday at the U.S. aircraft maker Boeing’s maintenance hangar in Shanghai. Discussions focused on the expansionary needs of the Chinese airline fleet and the possibility of Boeing making significant quantities of sales to China in the next decades. She also discussed space commerce and areas of economic cooperation with China’s Vice Premier He Lifeng.
- During her trip, Raimondo also met with American business people at a reception in Beijing, spoke to an economics class at New York University’s Shanghai campus, and toured Shanghai Disneyland. She is the first U.S. commerce chief to visit China in five years.
The Background: U.S. business sentiment in China declined in recent years due to a flurry of Trump administration tariffs and the country’s ‘zero-COVID’ policies that disrupted travel, manufacturing, and trade. Recently, the two countries have been exchanging increasingly strict measures on sensitive industries ranging from rare earth metals, to semiconductors, AI, and quantum computing technologies. The Chinese government has become increasingly strict in implementing anti-espionage policies on foreign firms with operations in the country. Scrutiny and raids on offices have led to foreign firms reducing their presence in China or pivoting to alternative countries.
Likely Outcomes:
- This visit is the latest in a series of high-level visits by U.S. officials to China as the two countries increase dialogue. The maintenance of this style of diplomacy will be the minimum required effort to create a space for both sides to express their positions and hear from their counterparts in their highly competitive relationship that will likely persist in the foreseeable future.
- By agreeing to communicate restrictions and policies at a high level, both sides will be able to act with more certainty as red lines will be clearer in definition. From here, each side may focus on the areas of mutual interest and benefit while being cognizant of the areas of friction. This is especially critical as the two sides convene regularly according to their stated goal of communicating on export controls and protection of trade secrets among other topics.
- Both sides will likely start to think more about such lines of communication for military and security matters, but China has so far rejected U.S. offers to establish this type of bilateral dialogue.
Quotables:
“Increasingly I hear from American business that China is uninvestible because it’s become too risky. So businesses look for other opportunities; they look for other countries; they look for other places to go.” – Gina Raimondo, U.S. Commerce Secretary
“China needs to recognize that they can no longer rely on the sheer mass of their market to attract that type of foreign investment. Even among Chinese companies, there have been efforts to relocate outside of China.” – Naomi Wilson, vice president of policy, Asia and global trade at the Information Technology Industry Council
“Boeing’s near-term future in China hinges much on a Beijing-Washington rapprochement, which appears unlikely any time soon. China seems content to drag deliveries of existing 737 orders, never mind placing new ones.” – Shukor Yusof, founder of Endau Analytics
Good Reads:
US commerce secretary warns China will be ‘uninvestable’ without action on raids, fines (AP)
U.S. engages in frank talks amid warnings China has become ‘uninvestible’ (Washington Post)
US commerce secretary rejects Chinese appeal to ease export controls (AP)
US raises concerns by Micron, Intel with China (Reuters)
The U.S. and China Are Talking Again. Where It Will Lead Is Unclear. (NYT)