The political landscape is often a turbulence of viewpoints, and nowhere is this more evident than in the ongoing discussions around U.S.-China relations. Larry Summers, former U.S. Treasury Secretary, recently shed some light on this during the Fortune Innovation Forum held in Hong Kong.
Summers, who played a pivotal role in China’s entry into the World Trade Organization back in December 2001, is known for his cautious stance towards the world’s second-largest economy. “I am, in many respects, an admirer and a friend of China,” Summers admitted during the forum.
He emphasized the necessity for the U.S. and China to find a way to cooperate for mutual success. In his words, “It is very difficult for me to imagine scenarios in which the U.S. is highly successful while China is failing, or where China is highly successful while the U.S is failing.”
The U.S.-China Relationship Analogy
Summers likened the relationship between the U.S. and China to “two guys who don’t like each other much, don’t know each other terribly well, and find themselves in a lifeboat that requires two oars, in a very turbulent sea, a long way from the shore.” He expressed concern over some actions from Beijing that make it challenging to advocate for improved relations.
U.S.-China relations have been strained, especially since the Trump administration imposed hefty tariffs on imports from China, a policy largely maintained by the Biden administration. This has resulted in the U.S. blocking the sale of advanced chips and chipmaking equipment to Chinese companies and encouraging companies to shift their supply chains away from China.
China’s response has been to criticize these policies as violations of global trade rules, even going as far as filing cases at the WTO. However, Summers predicted that these claims would not be well-received, considering China’s own reliance on industrial policy, protectionist measures, and subsidies.
Working with Allies
The Biden administration has been more open to working with allies to contain China, as evidenced by its persuasion of Japan and the Netherlands to impose their own controls on selling chipmaking equipment to China. However, domestic political pressures may undermine these efforts.
Concerns have been raised about Japanese steelmaker Nippon Steel’s $14 billion deal to buy U.S. Steel on national security grounds. But Summers has previously criticized efforts to block the deal, stating that “Japan is a staunch ally.”
Trends and Predictions in U.S.-China Relations
Despite ongoing trade tensions, some positive trends have emerged in U.S.-China economic relations. Ben Harburg, managing partner of global investment firm MSA Capital, noted a reduction in criticism from Washington about U.S. business leaders doing business in China.
However, speakers at the Fortune Innovation Forum were cautious about predicting an improvement in U.S.-China relations anytime soon. Victor Fung, chairman of Fung Investments, predicted that “geopolitical repression” could drive a “total fragmentation” of supply chains to avoid direct trade between China and Western markets.
Harburg echoed this sentiment, suggesting that U.S. politics could again send relations with China spiraling downwards. He said, “The trade tensions are going nowhere and will continue to ratchet up over the years,” particularly as the U.S. enters another election cycle.
