Welcome to Foreign Policy’s China Brief.
The highlights this week: China and the United States take a break from mutual vitriol, Taiwan’s main opposition parties agree to field a joint candidate for the January presidential election, and a pioneering esports league crashes out due to issues with the Chinese market.
Chinese President Xi Jinping is back in Beijing after his brief visit to California last week, and the U.S.-China relationship is enjoying a moment of sunshine after years of storms. It’s not a honeymoon phase; it’s more like a temporary cessation of hostilities. The structural relations between the world’s two chief powers remain the same, as does the conviction of many Chinese and U.S. officials that the other side is not just a competitor but an enemy.
Yet the meeting between Xi and U.S. President Joe Biden on the sidelines of the Asia-Pacific Economic Cooperation summit proceeded amiably enough. The consensus seems to be that the event was a small victory for the United States, which scored a significant deal over the fentanyl trade—something that China has resisted for years—and gave up relatively little in return.
It is strange to count the partial resumption of military-to-military talks as a diplomatic win for the United States, since everyone has an interest in avoiding an accidental war between two nuclear powers. But since China was blocking them in the first place, it can go on Biden’s scoreboard. Xi’s nice words shouldn’t be taken at face value: In 2015, he promised then-U.S. President Barack Obama not to militarize the South China Sea. Then he militarized the South China Sea.
China hawks in Washington have expressed skepticism about the peaceful tone of the summit. Part of that is just partisanship, but there is a good-faith case to be made that this round of engagement is flawed—albeit one that I think is mistaken. That case, as I’ve heard in the last few days, is this: China’s long-term goal remains to replace the United States as the world’s predominant power, by weakening Washington’s strength and increasing its own.
However, China is also experiencing significant internal economic and political problems. According to the hawks, it is playing (relatively) nice to, in the famous words of former leader Deng Xiaoping, “hide our strength and bide our time.” Backing off confrontation gives Beijing the chance to recover and eventually return to an aggressive posture once it steadies its feet at home.
Even this overestimates the ability of the Chinese Communist Party (CCP) to plan in the long term. In China analysis, the erroneous belief that “China thinks in centuries” is strangely persistent and rooted in Orientalism. It’s true that the CCP often speaks in terms of future goals, whether it’s Made in China 2025 (a 2015 policy) or the Five-Year Plans that define state planning. But that’s a hangover of the communist model, not Chinese policy, and plenty of other countries and organizations use similar terms, including the United Nations.
Most importantly, China frequently misses or changes those goals. The Five-Year Plans tend to produce what the Soviets called the “storm period”—a rush to artificially inflate numbers to hit the goals as the date approaches. That usually followed years of ignoring the policy because the politics might change and instead conducting business as usual for officials’ own private benefit.
When it comes to the big questions for China, such as democratization or its relationship with the United States, both party opinion and public opinion can shift. Many of the CCP crackdowns in 2013 and 2014 came because Xi and other leaders felt they were losing the public and that even Chinese officials were getting too close to Washington. Xi’s approach differs from his predecessors not because of some long-term plan but because he’s a different leader: less competent, more authoritarian, and more insecure.
Today, Xi’s approach is changing again—in part because it failed. It’s true that China wants to be the world’s predominant power, and why wouldn’t it? But how it tries to reach that goal matters, and a pause in hostilities with the United States at least gives China’s leaders a chance to shift their thinking about Beijing’s next steps. A Chinese leadership that thinks it can outlast the United States economically and politically is better for a peaceful and prosperous world than one that believes it might need to strike first because Washington is actively planning a war.
For all the nice talk, there is no sign yet of the Biden administration backing off its toughest measures against the Chinese economy, from tariffs to chip restrictions. Although U.S. business leaders gave Xi a standing ovation at a private dinner in San Francisco, they also expressed skepticism about China creating a better environment for investment. After all, most of the foreign money invested in China this year has flooded back out.
Taking a break from mutual vitriol doesn’t mean everything is going to get better when it comes to U.S.-China relations. Xi still needs a foreign scapegoat for his self-made problems, China still backs Russia in its war in Ukraine, and there are still risks of clashes in the South China Sea. But it’s better for everyone to have Beijing concentrating on the homefront instead of drawing battle lines.
Taiwan election deal. Taiwan’s two main opposition parties, the Kuomintang (KMT) and the relatively new Taiwan People’s Party (TPP), will run a joint candidacy for the presidential election in January, hoping to topple the ruling Democratic Progressive Party (DPP). Both parties are less hostile toward China than the DPP, particularly the KMT—which, despite retreating to Taiwan after the Chinese Civil War, grew increasingly close to Beijing in the 2000s.
That said, the opposition parties also follow the Taiwanese public mood, which is increasingly distrustful of Beijing. Although the KMT has tried to cast voting for the DPP as a march to war with China, Beijing’s open backing of the opposition parties may discredit them with the public. Before the joint candidacy was announced, DPP candidate Lai Ching-te was leading in the polls, but a combined opposition could outmatch his share of the vote.
But the opposition parties can’t yet agree on who should be their presidential candidate, meaning hopes of a unified ticket could be short-lived. An agreement to choose between the KMT’s Hou Yu-ih and the TPP’s Ko Wen-je based on who led the polls fell apart when the parties couldn’t decide on a statistical method. The outsider candidate, billionaire Terry Gou, has close links with China through his Foxconn factories there and remains a possible spoiler.
Fentanyl fears. It remains uncertain just how successful the Chinese crackdown on fentanyl precursor production pledged during the Xi-Biden meeting will be. Even if the pledge is politically sincere, Chinese law enforcement measures on specific crimes tend to be very intense for a few months—and then rapidly lose focus as underpaid and unhappy police officers get pulled into political enforcement instead.
One other China-connected drug class to watch may be benzodiazepines, which have major legitimate purposes but are increasingly popular for recreational use among young Americans, leading to increasing death rates, especially in conjunction with opioid use. Although Chinese factories produce plenty of legitimate pharmaceuticals, they have also produced bulk powders that are shipped to Europe and the United States for illegal refinement.
Esports league crashes. The collapse of a pioneering esports league is a sign of just how much the Chinese market can matter in the video game industry, especially for multiplayer online games. The Overwatch League, based on the highly popular team shooter game Overwatch, was founded with grand ambitions in 2017, with professional teams investing between $20 million and $60 million in franchise rights.
The Overwatch League had genuine enthusiasm among fans, but in 2022 its parent company, Blizzard, failed to negotiate a renewal of its deal with Chinese counterpart NetEase (in part because of CCP hostility toward both foreign cultural products and video games), which resulted in Overwatch and other Blizzard games becoming inaccessible in China, undermining the four Chinese teams in the league. Now, the whole league is shutting down.
To be sure, Overwatch had plenty of other problems, and Blizzard has become infamous for a broken corporate culture. The Overwatch League was intended to take esports from the domain of online streaming to being a live spectator sport, but the COVID-19 pandemic upended that plan; Overwatch 2 was a flop. Ironically, the CCP’s attitude toward foreign video games has thawed—but it’s too late for Blizzard.
Crypto connection. Changpeng Zhao, the founder and CEO of cryptocurrency exchange Binance, has just agreed to step down, plead guilty to wrongdoing, and for the firm to pay a $4.3 billion fine as settlement of a money laundering case bought by the U.S. Securities and Exchange Commission. Binance is one of the survivors of the revelations of fraud in the crypto industry last year.
Zhao’s exit may not be the end of the firm’s problems. Zhao, who was born in China, claimed for years that Binance pulled out of the country altogether in 2017 after initially relying heavily on Chinese consumers; that was untrue. Cryptocurrency, especially bitcoin, remains a major component of Chinese money laundering despite government efforts to stop capital flight.
