Sometimes you just gotta pick up the phone.
Rarely has a brief chat held such significance as the call on Friday between U.S. President Joe Biden and Chinese President Xi Jinping.
This call is necessary because, essentially, China and the United States haven't been talking. Ministerial-level discussions are going nowhere and there's scant connection between the type of lower-level officials who keep issues such as trade percolating in the background.
It's the first time Xi and Biden have spoken in seven months, and only the second time at all since Biden took office. They last spoke on Feb. 10.
Both the Chinese official wire service and the White House put out statements about the call. Both say it was a "broad, strategic" conversation, with Biden's team saying the pair discussed "where our interests converge" as well as "where our interests, values and perspectives diverge."
China loves this kind of thing. It provides the opportunity to paint China and the United States as equals, two superpowers setting the whole world straight. The news agency, Xinhua, notes that it was Biden who called Xi first. Technically, the call happened Friday morning Beijing time and on Thursday night for Washington.
"China and the United States are the largest developing country and the largest developed country respectively," the Chinese report states. "Whether China and the United States can handle their relations well is at stake for the future and destiny of the world. It is the question of the century that the two countries must answer."
Xi started out by expressing condolences for the casualties and property loss caused by Hurricane Ida. Then he noted that the U.S. policy adopted on China "for some time has caused serious difficulties" in Sino-U.S. relations, something "not in the fundamental interests of the two peoples, and the common interests of all countries in the world."
The White House statement is terse, while there's an extensive Xinhua report. Biden communicated that he wants to "responsibly manage the competition" between China and the United States. This should lead to "peace, stability and prosperity in the Indo-Pacific and the world," with Xi and Biden stressing the mutual responsibility of both nations "to ensure competition does not veer into conflict."
Xi has made about 60 phone calls to world leaders since the pandemic began. That has been necessary because he has not stepped outside China's boundaries in that period. He has spent 600 days "at home," Bloomberg notes, which is 1 year, 7 months and 22 days... and counting.
Any diplomacy he has deployed has been digital. A day before his call with Biden, he participated by video link from Beijing to give an address to the 13th BRICS Summit.
Biden says he spent more time with Xi, some 24 to 25 hours in private, than any other world leader while both men were vice presidents of their respective nations, as Biden was fond to stress on the campaign trail.
Still, when Biden got elected president, Xi bided his time to call to congratulate him. He waited a full three weeks while the Trump smoke cleared, but eventually got around to it on Nov. 25.
Although the Obama administration saw the opportunity for China to move closer to the ideals of democratic nations as it opened up economically, that concept has been torpedoed during Xi's time in power. The Chinese Communist Party has gradually cracked down on political dissent, internal opposition, free speech and civil liberties. It has pummeled Hong Kong with an iron fist. It has gotten into spats of one sort or another with a seemingly endless list of nations and is now cracking down on a long line of industries at home, even talking about redistributing the wealth of its billionaire entrepreneurs.
As president, Biden is reading the political tea leaves in Washington well and sticking to a firm stance on China. Any Trump-era tariffs and trade restrictions remain in place. The pressure on Chinese companies listed in the United States has intensified. And Biden, using every ounce of his political nous, has wisely sought to use diplomatic power to reunite ally nations and corral China's expansionism. The Trump era sought to go it alone, with increased trade with China the ultimate goal, something that actually suggests closer ties with China; the Biden administration has taken a broader, multinational view.
China presses Taiwan's buttons
The mention of conflict by Biden is an interesting one. Here in Hong Kong, China hawks are itching for a confrontation in the South China Sea, which China claims almost in its entirety, or over Taiwan, an independent nation in practical terms that China insists is its own province. China has built up a formidable naval capability and reclaimed several small islands or sandbanks to turn them into marine forts.
While U.S., British and Australian ships have all made "freedom of navigation" missions through those waters, China has been increasingly confrontational in how close it sends the ships that are tailing those convoys. Chinese planes also have flown repeatedly into the corners of Taiwanese airspace, nuisance flights that make a point and cause Taiwan to scramble its fighter jets. Given the cost and wear and tear to its far-smaller air force, Taiwan has stopped doing that every single time.
There's always the potential for a misunderstanding to get out of hand when you've got materiel from two or more militaries moving around. Chinese troops have gotteninto deadly fistfights with Indian soldiers high in the Himalayas, where neither side carries guns to avoid exactly that kind of hot-headed mistake.
There was no mention of Taiwan in the U.S. statement. The Xinhua version, though, insists that "the U.S. has never intended to change the One-China policy," which maintains there's only one China. The mainland Communist nation is called the People's Republic of China, while Taiwan calls itself the Republic of China.
There are always areas that China and the United States could cooperate, such as on climate change and intellectual property theft, and in theory pandemic response, too. Biden's call to Xi may have been precipitated by the poor progress that climate envoy John Kerry made when visiting Tianjin at the start of this month. Instead of getting anywhere with his counterparts, Kerry heard by video link from Chinese Foreign Minister Wang Yi, who said deteriorating U.S.-China relations could undermine any climate-change cooperation. The two cannot be separated, Wang said.
Shortly after the first Xi-Biden call in February, Wang recommended that United States remove its "unreasonable tariffs on Chinese goods" and lift "unilateral sanctions on Chinese companies." Neither one has happened. We'll see what comes next out of today's call.
Quant traders suddenly find Beijing's bull's-eye on their backs. The chairman of China's version of the U.S. Securities and Exchange Commission, the China Securities Regulatory Commission, said on Monday that the rise of quantitative trading was presenting a challenge for Chinese exchanges.
In mature markets, quant and high-frequency trading has improved liquidity but also has worsened herd behavior, produced greater volatility and increased unfairness, he said.
Although retail investors still drive Chinese markets, quant trading has been booming. There was C¥1 trillion in assets in private quant funds as of the end of the second quarter, according to Citic Securities, almost 10 times the amount they held in 2017.