Officials attending the first US-China summit under the new Biden administration in March 2021 exchanged undiplomatic words, highlighting a tense relationship between the world’s two largest economies grappling with a simmering trade war.
Since then, ties between the United States and China have chilled further, particularly after the US House of Representatives Speaker Nancy Pelosi visited Taiwan in August. That helps explain why expectations for Monday’s meeting between President Joe Biden and Chinese leader Xi Jinping on the sidelines of the G20 summit were set so low.
But to the surprise of many, the meeting featured televised images of smiling officials, handshakes, and a commitment to reopening lines of communication on urgent global issues. US Secretary of State Antony Blinken, who had sparred with his Chinese counterparts at the 2021 summit in Alaska, is now expected to visit China next year.
Analysts said the meeting could lay the groundwork for stronger ties between the world’s top economic powerhouses. Stock markets in mainland China and Hong Kong were buoyed as a result, with technology giants such as Alibaba
(BABA) and Tencent
(TCEHY) soaring on Tuesday.
Speaking after the three-hour meeting, Biden described it as an “open and candid” discussion, saying he planned to manage the China relationship “responsibly.”
“We’re going to compete vigorously, but I’m not looking for conflict,” Biden told reporters.
Xi said in a statement the two countries should prevent “confrontation and conflict.” Both sides would continue discussions on the basis of common understandings already in place and “strive for early agreement,” he added.
Neil Thomas, senior analyst for China and Northeast Asia at Eurasia Group, said the goal of the meeting was to “build a floor” under declining relations between Beijing and Washington.
“The meeting met or exceeded the low expectations set by the Biden administration and was a mild positive for global stability,” he said.
In an official readout, President Biden said the United States and China must work together to address transnational challenges including climate change and global macroeconomic issues including debt relief, health security, and global food security.
“The two leaders agreed to empower key senior officials to maintain communication and deepen constructive efforts on these and other issues,” it said.
Ken Cheung, chief Asian foreign exchange strategist at Mizuho Bank, said the meeting was a positive sign that the two sides were keen to find common ground.
“Despite no tangible outcomes, the resumption of China-US top leaders’ direct dialogue signaled the cooling [of] China-US tensions, boding well [for] the China-US relationship after the China Party Congress and US midterm elections,” he said.
The relationship is at its lowest point in decades, with friction over trade, human rights, and Taiwan fueling fears of a cold war between the two world powers. Last month, the Biden administration imposed unprecedented export controls on China’s chip industry, threatening to severely undermine China’s high-tech ambitions.
Although Biden said he and Xi came nowhere near resolving the litany of contentious issues, there was no need for concern about “a new cold war.”
The message was welcomed by investors.
Hong Kong’s Hang Seng
(HSI) Index rallied nearly 4% on Tuesday, on track to record a third straight day of gains. The index, boosted by China’s latest policy shift towards a gradual reopening of borders and a sweeping rescue package for the ailing property sector, has soared 14% since last Thursday.
Chinese technology shares, which had been hammered by a regulatory crackdown at home and rising geopolitical tension abroad, led markets higher on Tuesday. Alibaba shares shot up by 11% in Hong Kong, followed by Tencent, which was up 10%.
China’s Shanghai Composite Index also rose 1.6%, while the tech-heavy Shenzhen Component Index added 2.1%.
The “unexpectedly constructive tone” of the Biden-Xi meeting has served to boost markets, analysts from the ING Group said in a research report.
Biden’s reiteration of the US position on Taiwan and its “One China” policy was helpful, they said, as was Xi speaking out against the use of nuclear weapons by Russia.
The most surprising development was the planned follow up visit by Blinken to China.
“This was far more progress than we, or indeed most commentators had expected, and dominates what may otherwise turn out to have been a fairly irrelevant G20 summit,” the ING analysts said.
— CNN’s Betsy Klein, Kevin Liptak, and Jennifer Hansler contributed to reporting.