Global Courant
The recently announced establishment of two economic and financial working groups between China and the United States is expected to help promote a possible meeting between the two nations’ leaders in November.
The United States Department of the Treasury said on September 22, it will establish an economic working group with China’s Ministry of Finance and a financial working group with the People’s Bank of China (PBoC). It said the two groups will meet at regular intervals at the vice minister level and report to US Treasury Secretary Yellen and Chinese Vice Premier He Lifeng.
This came after the two economic officials Met in Beijing on July 8 and agreed to boost communication on economic matters.
A 2-inch gallium oxide wafer for R&D. Photo: New crystal
Beijing also showed friendly gestures to the US by issuing export permits to the China-based units of AXT, a California-based semiconductor manufacturing company, so they can export their products containing China’s gallium and germanium, Reuters reported.
The why
“Why did the two countries set up working groups? It’s simple: they felt the pain caused by their fight, and now they are trying to ease their pain,” said a columnist from Shanghai in an article published on Monday.
“After several years of conflict, both sides feel that they cannot win against each other in the short term, while facing enormous risks in their own economies,” he says. “If both sides insist on challenging each other, they will be seriously injured.”
He says that while some compromises may ease the pain, hostile Sino-American relations will not be easily changed. He says the US will continue to try to suppress China’s high-tech sectors, but China refuses to remain a low-production country forever.
In the short term, it is necessary to make compromises with each other, while “beating each other is an end goal,” he says.
It is not easy to change course
“Both China and the US hope to promote a meeting between their leaders during the APEC summit” to be held in San Francisco from November 12 to 18, said Wang Yong, a professor at the School of International Studies at Beijing University, Unpleasantld Chinareports, a state-owned media unit CICG Asia Pacific. “The establishment of the two working groups has increased expectations that the top leaders of both parties will meet again after the last meeting a year ago.”
“It is not easy to reverse the strategic competition between China and the US in the short term. But having dialogue is better than nothing as it can help both sides understand each other’s policy direction,” Wang said. “This also shows that rational and pragmatic voices are now at a higher level.”
“Since the outbreak of the US-China trade war in 2018, both sides have lagged behind in developing a mechanism to resolve issues,” said Zhou Mi, a senior research fellow at the Chinese Academy of International Trade and Economic Cooperation. Reducing the damage caused by US sanctions to the global economy “will be one of the economic working group’s most important tasks.”
Zhou also said it is necessary for both countries to discuss their macro and fiscal policies, which have been inconsistent for some time.
CHIPS Act guardrails final rule
Meanwhile, on September 22, the US Department of Commerce last rule implementing the national security “guardrails” of the bipartisan CHIPS and Science Act, which was passed by Congress last August.
The rule prohibits recipients of CHIPS funds from expanding material chip production capacity abroad – primarily China and Russia – for 10 years, and from engaging in certain forms of joint research or technology licensing efforts with foreign countries of concern entities.
In August last year, the US announced a $52.7 billion subsidy package to boost the chip sector. South Korean and Taiwanese companies can apply for the subsidies, but in return they would have to limit their expansion in China.
Xi-Biden meeting
Last November, Chinese President Xi Jinping and US President Joe Biden met on the sidelines of the G20 summit in Bali, Indonesia. The two countries agreed to improve their bilateral ties, but their political tensions increased in early 2023 after a Chinese spy balloon was spotted crossing North American airspace.
The chip war also escalated when the US unveiled new rules on August 9 this year to ban US funds and companies from investing in China’s high-tech sectors from 2024. Beijing also began requiring companies to apply for permits to export gallium and germanium, raw materials for high-end semiconductors, from August 1.
During a meeting in Malta on September 16 and 17, Chinese Foreign Minister Wang Yi and US National Security Advisor Jake Sullivan discussed including major issues in U.S.-China bilateral relations, global and regional security issues, Russia’s war against Ukraine, and cross-Strait issues.
Wang Yi and Jake Sullivan. Photo: CNN
The meeting was followed last Friday by the establishment of the two new China-US working groups.
American hawks
After a four-hour meeting between Raimondo and Chinese Commerce Minister Wang Wentao on August 28, the US and China agreed to set up working groups to handle their trade and investment disputes. It appears Beijing wanted to put the chip war aside and focus on resolving other economic issues with the US.
This came after the US compromised on several issues in August: unveiling softer-than-expected investment curbs on China’s high-tech sector; to agree that the Netherlands can continue to send high-quality DUV lithography to China until the end of this year; and removing 27 Chinese entities from the ‘unverified list’.
But Washington refused to make any more compromises, especially after sanctioned Huawei Technologies launched its flagship smartphone Mate60 Pro on August 29 to show off its chip-making prowess.
Rep. Michael McCaul, chairman of the House Foreign Affairs Committee, last Friday said that requiring American companies to notify the government of their investments in China’s high-tech sectors is not enough.
“I’m tired of seeing our technology being ripped off and weaponized,” McCaul told Bloomberg News in an interview, adding that sales of high-end chips, AI and quantum computing products from the US to China should be banned become.
Read: China puts chip war aside and moves on with US
Follow Jeff Pao on Twitter at @jeffpao3
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