This bipartisan sentiment makes it a challenge for those trying to argue for a more cautious, less aggressive approach to the world’s second-largest economy, such as former US Treasury Secretary Larry Summers, who was instrumental in helping China upon accession to the World Trade Organization. (China formally joined the international organization in December 2001). “I am an admirer and a friend of China in many ways,” Summers said in a virtual conversation with Clay Chandler. Fortune‘s editor-in-chief for Asia, Thursday at the Fortune Innovation Forum in Hong Kong.
The US and China ‘really have no other alternative than to find a solution way of life for cooperation if either of them wants to succeed,” he said. “It’s very difficult for me to imagine scenarios where the US is very successful while China fails, or where China is very successful while the US fails.”
Summers compared the US and China to “two guys who don’t like each other very much, don’t know each other very well, and find themselves in a lifeboat that needs two oars, in a very turbulent sea, far away from the shore.”
Still, Summers said some of Beijing’s actions do not make it easy for those more moderate toward China to make their case for improving relations.
“I have to say that sometimes China seems to go out of its way to make it difficult to be less confrontational or restrictive in policy debates in the West,” he said. “What comes out of China makes things much more difficult for those of us who want to emphasize negotiations and cooperation.”
US-China relations have been in a downward spiral since former US President Donald Trump imposed heavy tariffs on imports from China. The Biden administration has largely chosen to maintain Trump’s tariffs.
In recent years, Washington has blocked sales of advanced chips and chip-making equipment to Chinese companies, and banned US investments in Chinese companies involved in sectors such as quantum computing, AI and semiconductors. The US is also encouraging companies to “de-risk” their supply chains from China and move their operations to other countries, including those that are friendlier to the US.
Chinese officials have attacked these policies as violations of global trade rules, even filing lawsuits at the WTO.
Summers predicted that these claims will fall on deaf ears, given China’s own reliance on industrial policies, protectionist measures and subsidies. “I don’t think China is in a strong position to complain about industrial subsidies…[and] nationalistic economic policies.” he said Thursday.
Working with allies
The Biden administration, unlike its predecessor, says it is more open to working with allies to contain China. For example, the US has convinced Japan and the Netherlands to impose their own controls on sales of chip-making equipment to China.
But domestic political pressure could undermine these efforts. US politicians, including President Biden, have attacked Japanese steelmaker Nippon Steel’s $14 billion deal to buy US Steel on national security grounds.
Nippon Steel, in turn, has tried to defend the takeover by claiming it would create a steel giant that could compete with China.
Summers has previously criticized attempts to block the deal. “There is no plausible national security reason to question the Nippon-US Steel transaction. Japan is a loyal ally.” he told Bloomberg TV in January.
The economist again hinted Thursday at the idea of keeping US Steel in domestic hands. “In the U.S., more than 60 times as many people work in industries that use steel as do the steel industry,” he noted.
“When we do things that raise the price of steel with different types of economic constraints, we have to think very carefully about whether we are net-helping or harming American workers,” he continued.
Where are US-China relations headed?
Other speakers at the Fortune Innovation Forum noted that even amid trade tensions, there were still some positive trends in U.S.-China economic relations. On Wednesday, Chinese President Xi Jinping met with American CEOs in the wake of the China Development Forum, the Beijing summit for Chinese officials and leaders from abroad.
“There was also less criticism from Washington this year against American business leaders doing business in China,” Ben Harburg, managing partner of global investment firm MSA Capital, said at the Fortune Innovation Forum on Wednesday. “These kinds of stories that it was treacherous to do business in China have been brought down a little bit, and that gave people a little more confidence to bare their feathers.”
Washington and Beijing have worked to repair ties in recent months, including a summit between Xi and Biden last November.
Graham outside FORTUNE
But speakers at the Fortune Innovation Forum were hesitant to predict that U.S.-China relations would improve any time soon.
“The geopolitical situation will not really improve. I think I will be very happy if it does not deteriorate further,” Victor Fung, chairman of Fung Investments, said on Wednesday. Fung, who led supply chain management firm Li & Fung, predicted that “geopolitical repression” could cause “total fragmentation” of the supply chain to avoid direct trade between China and Western markets.
Harburg predicted that American policies could once again send relations with China downhill. “Trade tensions are going nowhere and will continue to increase over the years,” he said, “especially as we go through an election cycle where everyone is competing to see who is tougher on China.”