President Joe Biden and President Xi Jinping’s meeting in November gave us our first opportunity to take the temperature of the two countries’ relationship since the October 7th ban. While the media applauded the “candid” tone of the conversation between the two presidents, the actual dialogue revealed a more sobering reality. There are distinct differences in both leaders’ viewpoints, which will take time to resolve, but thankfully the lines of communication remain open, as further discussion is planned for 2023.
Agree to Disagree
During the three-hour meeting, the presidents discussed an array of topics, some of which lie at the crux of the ongoing tech war. These fundamental issues are of the utmost importance to the semiconductor industry, as the supply chain has already been hampered by tariffs leveled from both sides.
One of the most important topics discussed was China’s reclamation efforts around Taiwan, and the United States disapproval of China’s practices. Coming to an understanding on this topic is proving to be a challenge, as Xi clearly stated that “cross-Strait peace and stability and ‘Taiwan independence’ are as irreconcilable as water and fire.”
However, President Biden was unwavering in his conviction that the U.S. opposes the “coercive and increasingly aggressive actions towards Taiwan.” That said, President Biden stated that the U.S. “has no intention to use Taiwan as a tool to seek advantages in competition with China or to contain China,” which provides hope for both sides that further tariffs may not come into play as long as both sides commit to continued peaceful negotiations.
This meeting showed that the two countries have yet to find common ground, outside of the fact that neither side wants to see tensions escalate or result in additional aggression. The conversations were encouraging in how they reenforced open lines of communication, but the only solid resolution is that both countries committed to continuing talks in the new year when Secretary of State Anthony Blinken visits China.
The Waiting Game Continues
If no progress is made, the current trends of tariffs will likely continue. As it stands, China cannot endure these sanctions in the long term. If conversations fail, China will almost certainly issue a significant trade rebuttal, presumably aimed at its semiconductor industry. This could lead to additional, and potentially worse, disruptions for the chip industry.
China must free itself from under the weight of these sanctions. We have already outlined some of their points of leverage on the US in our past article, all of which remain relevant. China may also look to its chipmaking champions, such as Huawei, SMIC and Yangtze Memory, to drum up revenue and fuel the flame for their technological revolution that is now almost entirely reliant on domestic support.
One way or another, China must respond.
The nature of President Biden and President Xi Jinping’s meeting was not to initiate negotiation. Rather, it was to shed light on where each party stands on important issues, which will inform each country’s respective game plan moving forward. As talks between senior officials continue, the semiconductor industry awaits what will hopefully be a step toward de-escalation.
For more information and updates, see Fusion Worldwide’s The Semiconductor Industry and U.S. – China Tech War: Where We Are Now and Timeline of US-China Conflict.