Before the new administration takes office, we may well see further US actions on China during the transition that will be hard to reverse. The Trump Administration has invested great effort to reorient US China policy and may try to lock in its approach that sees the Chinese Communist Party as a grave threat. Actions could include new restrictions on Chinese companies deemed to be controlled by the Chinese military, actions against China’s internet and cloud computing giants, and sanctions over human rights issues involving Hong Kong or the Uyghur minority in Xinjiang. The Phase One trade deal, however, will likely remain intact, as will US tariffs on $370 billion in Chinese goods.
We should not expect a Biden-Harris Administration to immediately undo most of the actions taken by the Trump Administration given the bipartisan consensus favoring a tough stance toward China. And a Biden Administration’s greater emphasis on human rights may lead to continued friction and use of sanctions.
But Biden sees China more as a competitor than an existential threat, and his Administration will likely focus more on bolstering America’s advantages to compete with China than on confronting China at every turn. This will likely result in three significant changes in approach to the economic relationship with China:
First, a priority on strengthening US competitive capacities through investments in R&D in areas such as advanced manufacturing, telecommunications, and artificial intelligence; workforce development; and infrastructure.
Second, much greater strategic focus and effort on working with other countries on multiple levels to confront the challenges of China’s economic and political systems. This will not simply involve rallying allies to stand up to China, but to shape the global order to promote allied interests and values. We will not likely see a major trade deal in the near-term, but we could see narrower agreements in key sectors or efforts to craft common standards in areas like data security and telecommunications infrastructure. We may also see less unilateral action and more efforts to coordinate on export controls and sanctions.
And third, a shift away from the Trump Administration’s push to decouple broadly from China toward a more targeted and selective approach. This may involve more focus on specific technologies and objectives rather than sanctioning entire Chinese companies, more effort to define the boundaries where national security or human rights concerns require limiting technology flows, and a narrower focus on key sectors in promoting reshoring.
How might China respond? China is likely to play it cool and act with restraint during the transition as it waits for the new administration. It would be relieved to see a shift away from US rhetoric that to the ears of the Communist Party sounds like calls for regime change, and it would seek to stabilize the relationship by re-establishing more lines of communication at senior levels and by pursuing a Biden Administration’s openness to cooperating in some areas where interests overlap.
But China’s long-term assessment of US intentions appears to be set and will not change. It believes the United States is determined to impede China’s technological development and to undermine the rule and influence of the Communist Party. Thus, China will continue its efforts to reduce or eliminate dependency on US technology, replacing US technology deeper and deeper in its supply chains, and to orient its economy to rely more on domestic consumption. China will also continue to develop new legal tools that can be used for retaliation — such as its Unreliable Entity List and new Export Control Law — but it will likely continue to exercise restraint to avoid driving away foreign investment or accelerating the movement of supply chains out of China.