As President Biden and Chinese leader Xi Jinping prepare to meet next week, markets are searching for any signs of eased tensions between the two superpowers. Major breakthroughs are unlikely, but even incremental progress could reassure American businesses.
Polling shows Americans increasingly view China as a threat, reflecting strains over trade, tech theft, human rights and military disputes. With bilateral relations under pressure, the summit provides a critical opportunity for direct leader engagement.
Small victories like lowering trade barriers, opening investment access or restarting military talks could aid economic activity. But experts caution against expecting transformative deals from a single meeting. Just keeping communication flowing may be the summit’s main achievement.
What Economic Issues Could Biden Raise?
While large agreements seem unrealistic, Biden has some possible economic “asks” including:
- Easing investment limits and licensing barriers in sectors like tech and finance
- Reducing tariffs on billions in US exports to China
- Strengthening intellectual property protections
- Allowing greater market access for US digital services
- Appointing a new ambassador to restore diplomatic channels
Even incremental concessions could boost US corporate revenues and ease economic frictions. But comprehensive trade breakthroughs remain unlikely.
Could Military Communications Restart?
With military tensions rising, lack of crisis communication channels heightens accidental clash risks. Any progress restarting substantive Pentagon-China defense talks would be reassuring.
Small steps like crisis hotlines or protocols could reduce miscalculation risks. But wholesale agreements look doubtful given current animosities. Just symbolic progress could ease market concerns.
How Might Markets React to a Stalemate Summit?
Failure to achieve tangible deliverables may signal prolonged tensions, heightening economic uncertainties. Markets have low expectations, limiting downside risks.
But an unproductive meeting could still shake confidence that strained relations might improve anytime soon. Investors may grow warier of ongoing business impacts.
Why Do Americans Increasingly See China as a Threat?
Economically, China is seen as a tech innovator challenging US dominance. Meanwhile, Beijing’s authoritarian actions clash with American values.
For Republicans, Trump’s China antagonism further hardened views. Being tough on China holds appeal across the political spectrum.
Though foreign policy rarely swings votes, it helps build a strong narrative. Both parties are vying to look toughest on China.
Can Small Steps Matter Without a Major Reset?
While the summit alone probably won’t dramatically shift relations, modest progress on trade or security matters.
Even limited deals could marginally ease tensions, benefiting US companies. But big breakthroughs remain unlikely in the current climate of distrust.
Preventing a complete breakdown and keeping leader communications open are perhaps the summit’s most critical purposes. Small positives would be welcomed by markets, but expectations are muted.
With China ties plumbing new lows, the summit provides a vital channel for Biden and Xi to address the many friction points head on. That alone carries symbolic significance, even if major reconciliation remains distant.