Officials attending the first US-China summit under the new Biden administration in March 2021 exchanged undiplomatic words, highlighting the strained relationship between the world’s two largest economies, which are embroiled in a trade war.
Since then, relations between the United States and China have cooled further, especially after US House 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 were so low on the sidelines of the G20 summit.
But to the surprise of many, the meeting featured televised images of smiling officials, handshakes and a pledge to reopen lines of communication on pressing global issues. US Secretary of State Antony Blinken, who spoke with his Chinese counterpart at the 2021 Alaska summit, is expected to visit China next year.
Analysts said the meeting could lay the groundwork for stronger ties between the world’s major economic powers. Stock markets in mainland China and Hong Kong rose as a result, and tech giants such as Alibaba ( BABA ) and Tencent ( TCEHY ) rose on Tuesday.
Biden spoke after the three-hour meeting As an “open and honest” discussion, he said he intended to handle the China relationship “responsibly”.
“We’re going to compete hard, but I’m not looking for conflict,” Biden told reporters.
Xi said in a statement that the two countries should avoid “confrontation and conflict”. The two sides would continue discussions based on common agreements already in place and “try to reach an early agreement,” he added.
Neil Thomas, senior analyst for China and Northeast Asia at the Eurasia Group, said the purpose of the meeting was to “build a floor” on deteriorating 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 reading, President Biden said the United States and China must work together to address transnational challenges, including climate change and the world’s macroeconomic issues, including debt relief, health security and global food security.
“Both leaders agreed to empower senior officials to maintain communication and deepen constructive efforts on these and other issues,” he said.
Ken Cheung, chief foreign exchange strategist for Asia at Mizuho Bank, said the meeting was a positive sign that both sides were eager to find common ground.
“Despite the lack of tangible results, the resumption of direct dialogue between the top leaders of China and the U.S. signaled a cooling. [of] China and US tensions are good [for] China-US relationship after the Chinese Party Congress and the US mid-term elections,” he said.
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 seriously undermine China’s high-tech ambitions.
Although Biden said he and Xi had not come close to resolving a litany of contentious issues, there was no need to worry about a “new cold war.”
The message was welcomed by investors.
Hong Kong’s Hang Seng Index (HSI) rose nearly 4% on Tuesday, on track for a third straight day of gains. Index driven by China’s recent policy changes the gradual reopening of borders and a broad rescue package for the ailing goods sector, has since increased by 14%. last Thursday
Chinese tech stocks, hit by a regulatory crackdown at home and rising geopolitical tensions abroad, led markets higher on Tuesday. Alibaba shares rose 11% in Hong Kong, followed by Tencent, which rose 10%.
China’s Shanghai Composite Index also rose 1.6%, while the Shenzhen Component Index rose 2.1%.
The “unexpectedly constructive tone” of the Biden-Xi meeting served to boost markets, ING Group analysts 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’s opposition to Russia’s use of nuclear weapons..
The most surprising development was Blinken’s follow-up to China.
“This was much more progress than we, or most commentators, had expected, and it dominates what could otherwise have been a relatively unremarkable G20 summit,” ING analysts said.
– CNN’s Betsy Klein, Kevin Lipta and Jennifer Hansler contributed reporting.