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Issue Brief
January 22, 2024

L.E.A.D. Project Brief

US President Joe Biden (R) and Chinese President Xi Jinping walk together after a meeting during the Asia-Pacific Economic Cooperation (APEC) Leaders’ week in Woodside, California on November 15, 2023. [Photo by Brendan Smialowski / AFP via Getty Images]

Biden-Xi Woodside Summit and the Slow Rehabilitation of US-PRC Ties

ISSUE BRIEF BY:

Sourabh Gupta
Sourabh Gupta

Resident Senior Fellow

This article is extracted from Comparative Connections: A Triannual E-Journal of Bilateral Relations in the Indo-Pacific, Vol. 25, No. 3, January 2024. Preferred citation: Sourabh Gupta, “US-China Relations: Biden-Xi Woodside Summit and the Slow Rehabilitation of US-PRC Ties,” Comparative Connections, Vol. 25, No. 3, pp 29-41.

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Summary

The “guardrails” that President Biden and President Xi envisaged in Bali in November 2022 began to be emplaced at their November 2023 summit in Woodside, California. In-person, leader-led communication was deepened, reassurances exchanged, and practical—albeit modest—“deliverables” locked down on several fronts, including restarting mil-mil communications, cracking down on fentanyl precursors, addressing the national security harms of artificial intelligence (AI), and increased people-to-people exchanges. The establishment of numerous bilateral working groups will ensure an almost full plate of across-the-board consultations in 2024 as well as the means to troubleshoot irritants on short notice. As stabilizing as the Woodside summit was, it failed to deflect the US-PRC relationship from its larger overall trajectory of “selective decoupling” across a range of advanced technologies and frontier industries (microelectronics; quantum; AI; biomanufacturing; clean energy). Strategic trade controls and other competitive actions were doubled down upon. With a pivotal US presidential election looming in 2024, questions abound on the longer-term durability of a rehabilitating US-PRC relationship.

Starting in early September 2023, the signs were unmistakable—the US and Chinese governments were angling to set up an in-person meeting of their presidents on the sidelines of the Asia-Pacific Economic Cooperation (APEC) leaders’ meeting slated for mid-November in San Francisco. Though the two presidents had last met in-person on the sidelines of the G20 Leaders’ Summit in November 2022 in Bali, President Xi Jinping chose to forego the G20 Summit in New Delhi on Sept. 9-10. On Sept. 12, Xi replied to a letter from veterans of the World War II-vintage American Volunteers Group of the Chinese Air Force, better known as the Flying Tigers, extolling the virtues of people-to-people exchanges. It was his third instance of “letter diplomacy” within a month with friendly US citizens, the earlier letters being addressed to the grandson of Joseph Stilwell, the World War II-era US general, and to the Washington state-based US-China Youth and Student Exchange Association. The president and CEO of the Philadelphia Orchestra, the first American orchestra to perform on the mainland after the founding of the People’s Republic, was also the lucky recipient of a Xi-signed letter in November.  

On Sept. 16-17, US National Security Advisor Jake Sullivan met his counterpart CPC Central Foreign Affairs Commission director Wang Yi in Malta. The Sullivan-Wang channel, seen as a trusted one in Beijing, is credited with having restarted ties after the February balloon incident, following a meeting between the two in Vienna in May. A day later, on Sept. 18, Secretary of State Antony Blinken met PRC Vice President Han Zheng on the margins of the 78th UN General Assembly in New York City. Earlier this summer, Blinken traveled to Beijing as had the Treasury and Commerce secretaries as well as special climate envoy, John Kerry. On Oct. 9, a delegation of six US senators led by Majority Leader Charles Schumer held a detailed and “gratifying” 80-minute meeting with President Xi. The first congressional delegation in four years to pay a visit, its bipartisan composition had the added virtue of softening the political ground for Biden’s anticipated engagement of Xi in San Francisco. On Oct. 27, Foreign Minster Wang paid a return visit to Washington, meeting Secretary Blinken and NSA Sullivan as well as dropping by the White House to greet Biden. In the days prior to and after the Wang visit, a slew of working group meetings and consultations were conducted, either virtually or in Washington.

On Oct. 23 and 25, the first meetings of the US Treasury Department and China’s Ministry of Finance-led Economic Working Group (EWG) and Financial Working Group (FWG) took place. On Oct. 30, the US Special Representative for North Korea Sung Kim and the Chinese Special Representatives on Korean Peninsula Affairs Liu Xiaoming exchanged views on the situation on the peninsula. On Nov. 3, Director-General of the foreign ministry’s Department of Boundary and Ocean Affairs Hong Liang and US State Department China Coordinator Mark Lambert met to discuss maritime issues. On Nov. 7, US Assistant Secretary of State Mallory Stewart met Ministry of Foreign Affairs Director-General of Arms Control Sun Xiaobo to discuss nuclear arms control. A proposal to exchange missile launch notifications was broached during the meeting. The proposal comes against the backdrop of the US’ forthcoming regional deployment of new ground-based launch system capable of firing intermediate range missiles as well as the People’s Republic’s faster-than-anticipated build-up of its nuclear arsenal. The Pentagon has sought a moratorium on fissile material production or, at a minimum, transparency in this regard from China. 

On Nov. 10, Vice Premier He Lifeng met US Treasury Secretary Janet Yellen to discuss bilateral as well as global financial and development challenges (the two sides co-chair the G20 Sustainable Finance Working Group). On Nov. 14, Chinese and US climate envoys Xie Zhenhua and John Kerry released a (rare) joint statement committing both countries to deeper cooperation on methane reductions, in time for the upcoming COP28 Summit in Dubai. It bears remembering that an earlier Obama-Xi joint announcement on climate change cooperation in November 2014 was a key lubricant to the adoption of the landmark Paris Agreement in December 2015. Earlier, on Oct. 25, the PRC’s National Development and Reform Commission and the State of California signed an MoU on strengthening cooperation on low-carbon development during Gov. Gavin Newsom’s trip to Beijing. Finally, on Nov. 16, a day after the Biden-Xi meeting, China’s Minister of Commerce Wang Wentao and US Commerce Secretary Gina Raimondo reviewed the progress made under their commercial issues working group established in August. 

For a relationship lacking basic communication—much less trust—at the senior officials’ level for much of the first two-and-a-half years of the Biden presidency, the past six months have been a veritable gabfest by comparison.

Advancing Cooperation, Emplacing “Guardrails,” Managing Competition

On Nov. 15, 2023, at the Filoli Estate, a grand country house and garden set on rolling green grounds in Woodside, California just north of the Stanford University campus, President Biden and President Xi held their second in-person and seventh meeting of the past three years. Per Biden, it was the most constructive of his seven meetings. The Chinese side was just as pleased, with Foreign Minister Wang characterizing the meeting as “very good, comprehensive and in-depth.” The meeting was notable on four counts. 

President Joe Biden hosts a lunch for President of the People’s Republic of China Xi Jinping, Wednesday, November 15, 2023, at the Filoli Estate in Woodside, California. (Official White House Photo by Adam Schultz)

First, the Woodside meeting consolidated the “guardrails”-building process that was initiated by the two leaders in Bali in November 2022. In Bali, the two sides re-established a baseline of in-person, leader-led communication and provided a measure of strategic reassurance that lowered their respective levels of mistrust. In Woodside, both sides reaffirmed their Bali assurances. President Biden reemphasized that the US does not seek a new Cold War; does not seek to change China’s system; the revitalization of its alliances is not directed at China; does not support Taiwan independence; and does not seek conflict with China. For his part, Xi reiterated that China does not seek hegemony with its growing strength or seek to change the existing international order; does not interfere in America’s internal affairs or export its ideology; and has no plans to surpass or unseat the US. However incredulous some of these assurances might appear, they offer a steadying framework for future-oriented ties.

Second, President Biden won a commitment from Xi that if “either one of us…pick[s] up the phone, [and] call[s] directly…we’d be heard immediately.” In the immediate aftermath of the balloon incident in February, Xi had refused to entertain a call from the US president. More to the point, the US and China lack high-level, civilian-led crisis management channels and there is little mutual familiarity among senior leadership on talking down and defusing a crisis. A direct presidential line of communication could be a precursor to a broader civilian-led US-PRC crisis management framework.

Third, in Woodside, neither side pulled their punches on matters of fundamental discord. From the get-go, Biden emphasized that the two nations were engaged in competition and that it was a bilateral responsibility to “prevent [competition] from veering into conflict, confrontation, or a new Cold War.” Xi was equally adamant in rejecting the negative overarching framing of the relationship, pointing out that the US side needed to develop the “right perception” and “carefully think about the fundamental question of whether [the two sides] are partners or rivals, and make the right historical choice.” Xi was just as pointed in his criticism of US export controls, investment screening and unilateral sanctions which he likened to “nothing but a move to contain China…and deprive the Chinese people of their right to development.” The US tariffs and discriminatory environment for Chinese businesses, rather than “de-risking” supply chains, had “ensu[ed] uncertainty … [and had itself] become the biggest risk.” Biden flatly rejected this characterization, noting that while the US does not seek to decouple from China or suppress its development, Beijing’s unfair economic practices, from non-market tools to barriers to access for foreign firms to coercive actions against US companies, had “disadvantage[ed] American businesses and workers.” Preventing advanced technologies from being used to undermine US national security was non-negotiable, too. On the Taiwan question, Biden stressed the world’s interest in the importance of peace and stability in the Taiwan Strait and respect for the self-governing island’s electoral processes while Xi retorted that while keeping the peace was “all well and good…at some point we need to move towards resolution [by supporting peaceful reunification] more generally.”  

Finally, the two sides seized the “window of opportunity” that had opened late-summer following the visits to Beijing by a number of Cabinet secretaries to lock down a couple of practical, albeit modest, outcomes on a number of fronts.

Restarting Mil-Mil Communications

In Woodside, China agreed to drop its suspension of high-level mil-mil contacts at the defense ministers’ level and across some of the institutionalized dialogue mechanisms. These include the Defense Policy Coordination Talks (DPCT), an annual deputy assistant secretary level policy dialogue and the Military Maritime Consultative Agreement (MMCA) talks, an operational safety dialogue between US INDOPACOM and PLA naval and air forces. Until the MMCA’s suspension by Beijing in August 2022 to protest Speaker Pelosi’s visit to Taipei, the two sides had met regularly since 1998. The fate of the Asia-Pacific Security Dialogue (APSD), an assistant secretary-level policy dialogue suspended since 2020, and the Crisis Communications Working Group (CCWG) meeting, a working-level policy dialogue established in 2020 to advance crisis prevention and management mechanisms, remain unclear. 

Trendlines on engagement are positive. In late-October, the China country director in the DoD undersecretary’s office attended the Xiangshan Forum in Beijing, followed by a meeting between Deputy Assistant Secretary of Defense for China Michael Chase and the Chinese defense attaché in Washington Liu Zhan. On Dec. 21, in the wake of the Biden-Xi summit, the Chairman of the Joint Chiefs of Staff Charles Q. Brown Jr. spoke over video call with his counterpart Gen. Liu Zhenli. It is only a matter of time before the two defense ministers speak now that Beijing has newly appointed a non-US sanctioned veteran, ex-Navy chief Adm. Dong Jun, as its new defense minister. The expectation is that the PLA’s risky and unsafe operational behavior against US and allied aircraft will also now be progressively reined in. These include lasing (i.e., the use of military-grade lasers against a target), reckless maneuvers (i.e., maritime bow crossings and barrel rolls and acrobatics close to aircraft), close approaches in the air or at sea, high rates of closure (i.e., rapid approaches), and discharging objects (i.e., chaff or flares) in front of or close to aircraft, etc. As per US Indo-Pacific Command head Adm. John Aquilino, the early signs on the unsafe encounters front are already promising.

Counternarcotics Cooperation

In Woodside, the US agreed to delist the Chinese Ministry of Public Security’s Institute of Forensic Science (IFS) from its Entity List, as part of an arrangement to establish a counternarcotics working group and effectuate concrete actions to stem the flow of fentanyl precursor chemicals into the US. In June, Secretary Blinken had been given an earful in Beijing on his demand for action against Chinese suppliers of fentanyl precursors. This, his hosts claimed, amounted to “forcing others to take medicine for one’s own illness,” given that China was the first country in the world to class schedule fentanyl in May 2019 while the US has yet to do so despite being the largest consumer of the opioid. For now, both sides appear to be keeping to their obligations. On Nov. 16, in the rarest-of-rare case of an adversary state entity being delisted without any change in the underlying reasons for its blacklisting, the US Commerce Department removed the IFS from the Entity List (IFS was blacklisted in 2020 for DNA dataset-based mass surveillance and social control campaigns against Uyghur and other ethnic minorities). For its part, China has taken concrete action against synthetic drug and chemical precursor suppliers, as per the Commerce Department’s Assistant Secretary for Export Enforcement Matthew Axelrod. For the first time in nearly three years, Beijing is also reporting incidents to the International Narcotics Control Board database, used by law enforcement authorities to track down and intercept shipments. Separately, in early October, the US Justice Department and the US Treasury Department’s Office of Foreign Asset Control (OFAC) had announced measures against China-based networks of illicit drug producers.

President Joe Biden hosts a bilateral meeting with President of the People’s Republic of China Xi Jinping, Wednesday, November 15, 2023, at the Filoli Estate in Woodside, California. (Official White House Photo by Adam Schultz)

Cooperative Rulemaking on AI

Biden and Xi agreed to convene a US-China working group to address the risks of advanced AI systems to national security. The working group’s aim is to establish certain rules-of-the-road to ensure that unsupervised AI is not allowed to dictate command-and-control of critical weapon systems, particularly those related to the use of a nuclear weapon. Regulating the use of AI in fully autonomous weaponry is another proposed focus area. The cooperative effort coincides with the activist effort by both governments to control the potential national security, economic security, and public health dangers of AI. On Oct. 30, the administration issued an extensive executive order which, both tasks the Defense Department to flesh out the role of—and harms from—AI for US national security as well as compels businesses developing AI models that pose security risks to notify the government when training these systems and to share their safety test results. The PRC government too has proposed stringent rules to control the technology, starting with a December 2021 Position Paper on Regulating Military Applications of AI. Both countries were among a handful of countries attending the AI Safety Summit convened by the UK government Nov. 1-2 in Bletchley Park (the top-secret home of allied World War II codebreakers) to confront the technology’s existential risks. 

Expanded People-to-People Exchanges

Both countries committed to work toward a doubling of scheduled passenger flights in early 2024. In April 2023, the number of direct flights per week between the US and China stood at a mere 12; on Oct. 29, it doubled to 24, and currently is 70—a far cry from the 345 direct flights per week pre-COVID, three-and-a-half years ago. No US carrier flies from the East Coast directly to Beijing yet. The key stumbling block to doubling the number of direct flights is the US Department of Transportation’s proviso that any increase in Chinese passenger flights must abide by reciprocity and level playing field considerations—meaning that Chinese carriers’ flight paths, like their US counterparts, must avoid overflying Russian airspace. On a separate note, President Xi pledged to invite 50,000 young Americans to China on exchange and study programs over the next five years during a dinner speech in San Francisco. The promise of gifting a panda, that furry envoy of friendship, was also implicitly dangled to the San Diego Zoo.

Measures and Countermeasures Strew the Pathway to “Selective Decoupling”

The Biden-Xi meeting in Woodside, two dozen-or-so miles southeast of San Francisco, was the dominating headline of US-PRC relations in 2023. It failed to deflect the relationship from its dominant underlying strain—the steady selective decoupling of the two economies across a range of advanced technologies and frontier industries (microelectronics; quantum; AI; biomanufacturing; clean energy). Both sides enforced strategic trade controls during the final trimester of 2023, with Beijing—having digested tidal wave upon tidal wave of US technology denial measures—imposing countermeasures at a rapid clip, too.   

On Sept. 6, the US Commerce Department’s Bureau of Industry and Security (BIS) added 42 Chinese companies to its Entity List for supplying US-origin integrated circuits, including  those used in precision guidance systems for missiles and drones to Russian intermediaries for use in Ukraine. Placement of an “adversary” country party on the Entity List subjects that party, more-or-less, to a (license) presumption of denial for purchases of US origin or US-content items or equipment. On Oct. 17, key Chinese AI companies, including fabless chip design company Biren Technology and GPU-maker Biren Threads were added to the Entity List for aiding the AI capabilities of China’s military and high-tech surveillance sector. Also on Oct. 17, BIS updated and strengthened its already-expansive Oct. 2022 Advanced Computing and Semiconductor Manufacturing Items Rule to include additional types of semiconductor manufacturing equipment within the controls, introduce new technical parameters to prevent workarounds from prior chip performance-related thresholds, and widen the scope of destination controls. The Oct. 2022 rule had targeted semiconductor fabrication technologies beyond the cutting edge as well as radically expanded controls over US content embedded in foreign-produced equipment destined for China, such as in lithography equipment. The updated and strengthened October 2023 Advanced Computing Rule came with a sting in the tail: it was to take effect immediately. Typically, BIS export control orders come with a 30-day grace period, enabling rush deliveries of certain prized items from previously placed orders.

On Dec. 8, three Chinese companies were added to the Uyghur Forced Labor Prevention Act (UFLPA) Entity List for recruitment and labor transfers of persecuted minorities from Xinjiang (an updated Xinjiang supply chain business advisory and scathing Uyghur human rights report were issued too). And on Dec. 19, a dozen Chinese companies were added to the Unverified List (UVL), which catalogues entities where BIS has been unable to conduct end-use checks and verify that an exported US technology or good is being put to its legitimate use. Looking ahead, it is anticipated that tariffs will be imposed on legacy chips imported from China in 2024, now that the Commerce Department has announced the launch of an industrial base survey of the US semiconductor supply chain. The aim is to preempt China’s overproduction and supply dominance of the lower reaches of the US semiconductor market. The industrial base survey follows an initial survey of the capabilities and challenges faced by the domestic industry. 

An RP2040 microcontroller held with a tweezer above a printed circuit board.
(Credit: UnSplash, CC4.0)

China did not sit still during this period either. On Oct.10, China’s Ministry of Commerce announced restrictions on the export of several categories of high-purity natural and synthetic graphite materials vital to the clean tech and electric vehicle (EV) industries, starting Dec. 1. In late-December, a ban was issued on the export of technologies used in rare earth extraction and separation too. The restrictions on graphite have past form. In 2020, Beijing stopped approving export licenses for synthetic graphite to Swedish companies, making it difficult for them to build up graphite anode production needed for the local battery supply chain. To fill the ensuing vacuum, a Chinese battery-materials supplier, Putailai New Energy Technology, announced plans in May 2023 to build Europe’s largest anode factory in Sweden. Beijing’s strategy in this era of supply chain resilience and selective decoupling appears to be two-fold: leverage its market power to incentive/coerce (via the export controls route) local production of high value-added elements on Chinese soil; or failing which, greenlight the production overseas of goods embodying these technologies on condition that production is carried out by Chinese subsidiaries that retain effective control over these technologies. The omission of several manufacturing technologies for solar cells from the latest Catalogue of Technologies Prohibited and Restricted from Export so as not to preclude the planned capacity expansions overseas by a number of Chinese solar firms, falls within the latter typology. 

Turning to the PRC’s Anti-Foreign Sanctions Law, Beijing sanctioned a data analytics firm, Kharon, and two researchers in late-December for providing “so-called evidence” for America’s [Xinjiang-based Uyghur minorities-related] sanctions. Under the sanctions, all assets in China are to be frozen, entry banned, and organizations and individuals in China forbidden to transact with these banned entities or persons. The Anti-Foreign Sanctions Law of June 2021 has increasingly become the workhorse of the PRC’s sanctions policy, utilized to express (mostly hollow) displeasure with US-based entities or individuals ranging from the Hudson Institute and the Reagan Presidential Library to Congresspersons Nancy Pelosi and Michael McCaul to ex-administration appointees Michael Pompeo and Steve Bannon to the researchers, now, at Kharon. And earlier this September, the Standing Committee of the National People’s Congress, the permanent body of China’s national legislature, adopted a new Foreign Sovereign Immunity Law that does away with absolute state immunity from local jurisdiction in favor of a more limited version in certain instances (while engaging in business activities; obtaining labor services; or contributing to personal injury, death or property loss on Chinese soil).  

That said, it was not all downhill on the export controls and tech denials front. Both, the US and China bowed to the market mechanism during their respective economic rulemaking, even as they tried to nudge its workings via the discretionary hand of the state.    

On Dec. 1, the US Energy Department released its proposed “foreign entity of concern” guidance regarding critical minerals and battery components, as part of rulemaking for the Inflation Reduction Act’s EV subsidy provisions. The interpretation was curiously lax. As per the proposed rule, a US company will be able to enter into a contractual relationship, including an IP licensing relationship, with a “foreign entity of concern” (read: Chinese entity) so long as the “foreign entity of concern” does not exert “effective control” over the US licensee or principal’s production of particular critical minerals, battery components, or battery materials. The provision is a bow to the reality of China’s dominant position within EV critical minerals and battery components supply chains. As written, Ford Motors should handily be able to contractually license Chinese battery giant CATL’s technology for its EV plant in Michigan (an arrangement that has drawn anger on Capitol Hill) and maintain access to the IRA subsidy money pot. 

On Sept. 22, two-and-a-half months earlier by contrast, the Commerce Department issued its final rule to prevent the improper use of CHIPS Act funding that could directly or indirectly benefit adversary countries as well as foreign entities of concern. As per the rule’s guardrails, US and foreign (Japanese, Korean, and Taiwanese) chip companies that receive CHIPS Act subsidies are prohibited from engaging in “significant transactions” involving the “material expansion” of their semiconductor facilities in “foreign countries of concern” (China) for 10 years as well as are prohibited from entering any meaningful joint research or technology licensing arrangements with “foreign entities of concern” (Chinese entities). Reflecting the US’ overwhelming upstream dominance within semiconductor supply chains, the bar for “significant transactions” (valued at $100,000) and “material expansion” (by anything more than 5% for advanced chips and 10% for legacy chips) was deliberately kept low, and meaningful technology licensing barred altogether. 

China was just as attentive too, to considerations of leverage and market power, lifting some of the curbs that it had imposed earlier this summer on the export of gallium and germanium, minerals key to the production of semiconductors, following the lack of significant movement in the prices of these minerals. In the afterglow of the Biden-Xi summit, its anti-trust regulator, the State Administration for Market Regulation (SAMR), greenlighted US tech giant Broadcom’s acquisition of cloud software company VMware, subject to standard mitigation requirements. It bears remembering that just this August, when US-PRC relations were unhappier, SAMR had let the clock expire on Intel’s bid to acquire the Israeli chip manufacturer, Tower Semiconductor. 

Looming Shadow of the US Presidential Contest

The consensus that was forged in Bali and the progress consolidated in Woodside may yet come to be seen as an inflection point in US-China relations. Should Biden secure re-election in 2024, the consolidation of ties could serve as a useful jumping-off point to construct a durable architecture of candid but constructive coexistence in the mid-2020s in this “new normal” era of US-PRC strategic competition. At minimum, the establishment of the numerous working groups, including the Economic Working Group, the Financial Working Group, the Commerce Working Group, the Counternarcotics Working Group, the Working Group on AI as well as the restart of the institutionalized defense dialogue mechanisms, should ensure an almost full plate of across-the-board consultations in 2024 (the lack of engagement on the tit-for-tat tariff hikes is the glaring exception). These lines of communication could come in handy to troubleshoot irritants that will likely crop up in what is expected to be a raucous US election year. Both sides are also due to commence negotiations on their bilateral Science and Technology Cooperation Agreement (STA) in early-2024. Last renewed in 2018 and temporarily extended for six months in August 2023, there are no illusions that the STA can be modernized and renewed prior to its end-February 2024 deadline. There are reasons to believe though that the agreement will be temporarily extended for six-month intervals through 2024 while negotiations continue. Even in this age of decoupling, Beijing and Washington are each other’s top scientific partners, and collaborative research between Chinese and US nationals remains a standout feature among the most-cited academic papers.

Looming over the rehabilitation of US-PRC ties is the US presidential election. China policy remains that rare issue area which commands bipartisan consensus within the Beltway and beyond (although there are differences in nuance between the parties). The test of the “guardrails” that Biden and Xi have assiduously emplaced over the past six months is whether they will survive bruising contact with US election-year polemics in 2024.

— Chronology of US - China Relations —

September – December 2023

This chronology was prepared by Jessica Martin, ICAS Research Associate, and Amanda Jin, ICAS Part-Time Research Assistant.