A new cold war the world is getting used to

According to Shawn Donnan of Bloomberg, the relationship between the United States and China is the most important and arguably most fraught in the world today. The meeting between Joe Biden and Xi Jinping near San Francisco was unequivocally the most important event in the global economy this week.

The summit did what was intended by both sides. It put a floor under the relationship and re-established lines of communication. The danger of tensions spiraling out of control seems less today than they did a week ago.

It was hard to be in San Francisco digesting the geopolitical theater and not come to the conclusion that this is what a 21st century Cold War looks like.

Jude Blanchette, a longtime China watcher based in Washington, was prescient when he said ahead of this week’s meeting that managing a geopolitical rivalry isn’t sexy. It’s full of small but important steps that never really resolve the fundamental differences. And that’s what we got.

The two leaders agreed to resume communications between their militaries and to work together to stem the flow from China to the US of precursors and pill presses that are fueling America’s fentanyl crisis. There were agreements before and during the summit to work together to address the climate crisis and mull the consequences of artificial intelligence.

The fundamental differences between the two nations won’t go away. One is a democracy, the other a single-party Communist state. One has a market economy, the other an increasingly state-directed one. They are both in a competition that many on either side see as existential.

Xi deployed a smile rarely seen at home and sought to charm US business leaders who gave him a standing ovation. He pledged to send pandas that China had recalled just weeks before.

Biden rolled out a picture of a young Xi in front of the Golden Gate Bridge and sought to make him comfortable. But he also couldn’t resist doubling down and calling Xi a dictator again after he had left, laying it out as a plain factual label rather than a potential slight.

How this all plays out in 2024 with presidential elections coming in Taiwan in January and the US in November isn’t yet scripted.

Economics matter if it is power you want. Biden went into the meeting with the wind at his back as one US official put it thanks to an economy that has recovered better than its peers from the pandemic shock. And Xi was clearly on a charm offensive given the foreign investment he needs to turn around a slowing Chinese economy.

That could change in the months to come. There are signs the US economy is slowing. Consumers are still grumpy about inflation and more recently the higher interest rates deployed to rein it in.

Both sides have their own weaknesses, in other words. Xi has an economy undergoing a structural slowdown based in large part on demographics. Biden has an economy which many Americans still aren’t convinced works for them.

Historians will get to decide in the years to come whether this week’s meeting marked a turning point. But, regardless of whether they decide history turned or not, they very likely will agree we are living through a cold war that we’re all just getting used to.