China’s refusal to engage with US overtures to resume dialogue may be about to change. There are good reasons for both sides to mend their fences, although the long-term forces pulling them apart remain as strong as ever.

At the G7 meeting last week, President Biden predicted an imminent thaw in relations, even as China huffed about being left out. US-China high-level communication had broken down after the spy balloon incident, discomfiting Washington while granting Beijing the upper hand at present.

But make no mistake, any improvement is at best a minor pause in the intensifying all-out confrontation between the existing and the aspiring hegemon.

Beijing expects the US to make concessions that the White House will find domestically difficult to offer, with the US presidential election looming large in November next year. The US government, discountenanced by Xi Jinping’s unwillingness to talk, is pulling in different directions. Revealing eagerness to resume high-level communication carries the risk of looking weak.

A day after Biden’s comments, China questioned the “sincerity” of the US. “The US side asks for communication on the one side, yet on the other, suppresses and contains China by every possible means,” a foreign ministry spokesman said. Foreign minister Qin Gang delivered a similar message to US ambassador Nicholas Burns  during their first meeting some days earlier.

The Biden administration has been steadfast, effective and aggressive in its efforts to frustrate China’s technological advance, working with allies to restrict its access to advanced semiconductors.

The US is moving closer to imposing further restrictions on US companies planning to invest in China, and is rallying allies to follow suit.

This is one card Biden could play to bring China to the table. He could promise a lighter version of the investment restrictions that have been in preparation for some time. Washington can afford to buy time, while fine-tuning its approach to the regulation of capital flows. Removing some import tariffs would be another gesture. It is beneficial for the US economy, although it will be exploited politically by the Republicans.

While Beijing does not see Washington pulling back from this intense competition in any meaningful way, at present it could use any external support to its ailing economy.

A cyclical boost to its export sector, and any delay in Western ‘friend-shoring’ and the exodus of capital, would be welcome for its over-leveraged economy. Beijing is clearly struggling to keep growth momentum on track as consumers and private businesses remain cautious. Local governments are struggling with a mountain of hidden debt amid dwindling revenues.

At this stage, Beijing can present any resumption of high-level dialogue as a win to its audience at home, as well as across the Global South which Xi Jinping has been wooing.

Despite the obvious tensions, US and Chinese officials are talking. US National Security Advisor Jake Sullivan held ten hours of talks with his Chinese counterpart Wang Yi in Vienna. China’s Commerce Minister Wang Wentao visited the US in late May for meetings with Commerce Secretary Gina Raimondo and US Trade Representative Katherine Tai.

Both Tai and US Treasury secretary Janet Yellen have made speeches calling for some co-operation with China. Meanwhile, the military/security communities are laser-focused on countering the danger Communist China poses to the US-led global system. Though no details were revealed about the Sullivan-Yi meeting, the Washington Post’s David Ignatius reported that the unscripted discussion covered the most sensitive issues in the bilateral relationship, including Taiwan and the Ukraine conflict.

Conclusion

Reading US-China relations is proving increasingly difficult in the face of conflicting messages. Current US behaviour may be driven by the belief that within the Chinese Party-state there are forces which oppose Xi Jinping’s hard line. But while there may well be individuals and groups who feel this way, there is nothing to suggest that these come close to organised opposition.

Our view is that Xi will permit only limited bilateral dialogue in niche areas of vital significance to Beijing, while rejecting meaningful engagement on issues of importance to Washington.

More worryingly, Beijing may well be misreading the apparent uncertainty and lack of coherence of the US’s China strategy, while overestimating its own capabilities and believing that the US will ultimately back down in the face of Chinese intransigence.

Any development that helps firm up China’s view that the US is in terminal decline and leads to underestimating US resolve to keep its global role unchanged is bad news for global stability.