Chinese negotiators this week surprised their counterparts in the European Union with important market access concessions – after long months of intransigence – that could allow the two parties to reach an agreement on a historic investment deal by the end of the year.
Although EU officials have not yet released the details, a senior EU diplomat said the deal goes beyond anything Beijing has so far offered a foreign partner, both in terms of market access and legal and other guarantees.
EU officials are not naive about the historical timing or political significance of the agreement. It would come shortly after Joe Biden was elected by the Americans in early November, after he pledged to rally allies in Europe and Asia to join forces against the unfair practices of China’s authoritarian capitalist system.
In Brussels, Beijing’s rush to conclude the investment agreement follows the European Commission’s December 2 proposal to President-elect Biden for a “new transatlantic agenda for global change” that seeks nothing less than to bring Europe and the US together USA as a global alliance based on shared values and history.
EU officials I reached out to on Friday said they were torn between the opportunity to get one of the best investment deals with China ever offered and a desire to capitalize on the early days of the Biden administration dramatically improve transatlantic relations. Should the EU make the deal with China, they will likely argue to the Biden team that the concessions they received from Beijing could also apply to future US deals with China.
However, the message from President Xi to President-elect Biden, paraphrasing the 1974 Rolling Stones hit single, is “Time is waiting for no one”.
Xi is unwilling to hit the pause button to give President Biden the time and space to assemble his China team, reach out to allies, and determine his strategy. He will not do this in trade and investment, or in his efforts to address political differences at home. He is moving fast to achieve greater self-sufficiency in the development of key technologies, especially semiconductors. And he will avert any efforts that would hinder his efforts to unite Taiwan with the mainland during his leadership.
It is clear that President Xi sees 2021, the 100th anniversary of the Chinese Communist Party, as perhaps the most important year since he came to power in 2013. He sees the next decade as crucial.
Nothing could have made President Xi’s personal ambitions clearer than the Fifth Plenum of the Central China Committee, which concluded on October 29, just five days before the US elections.
“Judging by the outcome of the plenary session, Xi’s political ambition to remain in power for the next 15 years seems increasingly secure,” said Kevin Rudd, former Australian Prime Minister, in a speech he will give as President of the Asia Society Policy Institute must read. Rudd sees the 2020s as the “make-or-break decade for the future of Chinese and American power”.
President Xi Jinping’s rush to finalize the EU investment deal is just one of many elements of his evolving, preventive approach to the United States in general and President-elect Joe Biden in particular, from trade initiatives around the world to Escalating actions against pro-democracy activists in Hong Kong and real or perceived dissidents at home.
President Xi hopes to persuade the Biden government to cooperatively negotiate similar deals with Beijing. Before the deterioration of relations during the Trump administration, it had been a long-awaited Chinese goal to reach a so-called BIT – or bilateral investment treaty – with the United States, similar to what is being negotiated with the EU.
Less generously, Xi boxed in the Biden administration long before his inauguration on Jan. 20, including his closest democratic allies in investment and trade deals in which Washington is not party. On human rights issues – including the arrest of a Bloomberg journalist this week and the detention of newspaper founder Jimmy Lai and other democracy activists in Hong Kong – it signals that today’s China will resist President-elect Biden’s anticipated efforts to highlight human rights issues.
President Xi not only takes advantage of the longstanding commercial attractions of his country’s nearly 1.4 billion consumers. It also benefits from China’s significant achievement in controlling COVID-19. This, in turn, will allow China to be the only major economy in the world to grow around 1.5-2% this year, with double-digit growth next year.
The news from Brussels follows last month’s announcement that 15 member countries of the Association of Southeast Asian Nations and regional partners – including China but not the United States – have signed the Regional Comprehensive Economic Partnership (RCEP), one of the largest free trade agreements in history. It is the first time that China has come together with US allies South Korea and Japan in such an agreement.
In addition, President Xi has expressed an interest in joining the comprehensive and progressive agreement on the Trans-Pacific Partnership. The deal was negotiated with the United States during the Obama administration, but President Trump withdrew from the talks long before it was successfully concluded in 2018 as one of his first acts as US President.
Despite his determination to revive relations with allies, President-elect Biden has stated that trade deals will not be a priority. There remains an inadequate constituency for them among Republican or Democratic legislators.
As always, it would be wrong to underestimate China’s challenges, and there are many.
Among them are doubts about the Chinese economic model, particularly as President Xi tightened his control over the private sector, including the recent blockade of ANT’s IPO. China’s return to growth this year has been largely state-driven.
There is growing evidence that President Xi’s most ambitious international effort, the Belt and Road Initiative, is getting into trouble. Chinese officials tacitly rule their ambitions – and they are under pressure to postpone or cancel the debts of the country’s poorer partners.
It is also not clear whether national self-sufficiency efforts will fill the remaining technological gaps, particularly in semiconductors. The Trump administration tightened tensions this week, putting China’s largest chipmaker and drone maker on an export blacklist. US companies had to obtain licenses to sell to them.
Whatever problems President Xi may have, he will emerge more strongly than expected from 2020 when the coronavirus broke out in Wuhan late last year. In the inaugural year of President-elect Biden, President Xi’s actions may be the most spectacular.
Frederick Kempe is a best-selling author, award-winning journalist, and President and CEO of the Atlantic Council, one of the United States’ most influential think tanks on global affairs. He worked for the Wall Street Journal for more than 25 years as a foreign correspondent, assistant editor-in-chief and senior editor for the European edition of the newspaper. His latest book – “Berlin 1961: Kennedy, Khrushchev, and the Most Dangerous Place on Earth” – was a New York Times best seller and has been published in more than a dozen languages. Follow him on Twitter @FredKempe and subscribe here to Inflection Points, his view every Saturday of the top stories and trends of the past week.
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