This article is written exclusively for the East Asia Forum and part of an EAF special feature series on 2023 in review and the year ahead.
In recent years, the world has witnessed a complex tapestry of economic and technological dynamics between the United States and China, with 2023 marking a period of continued economic interdependence and techno-strategic rivalry. Despite a nominal dip in U.S. imports from China, the bilateral trade volumes remained substantial. According to the latest data from the U.S. Census Bureau, U.S. exports to China totaled $135.8 billion and imports stood at $393.1 billion for January-November 2023.
Trade represents only a facet of the economic bond between the U.S. and China. Policymakers, cognizant of the perils inherent in economic decoupling, have started to eschew such a course. High-level meetings and initiatives, like the U.S.–China economic and financial working groups established in September 2023 and the Biden-Xi meeting in November 2023, offered a glimpse of positive potential in bilateral relations, as highlighted by Chinese President Xi’s willingness to partner with the United States.
Contrastingly, the high-tech landscape in 2023 was tense. The U.S. reinforced its global stance against China’s ascendancy, supported across American political parties. In response to escalating external pressure, “struggle” and “fight” resurfaced in China’s strategic discourse. Key issues such as the ongoing tariff war and stringent export controls on critical technologies continued to underscore the intense rivalry between the world’s two superpowers.
Moving into 2024, U.S.-China economic and technological relations are poised to undergo a cautious shift, characterized by enhanced communication, selective cooperation, and balanced management of both interdependence and competition.
Firstly, there is a mutual understanding among senior officials of the potentially devastating repercussions associated with misunderstandings and miscalculations in the U.S.-China relationship. It is anticipated that this year will witness an increase in economic dialogues between Beijing and Washington. U.S. Treasury Secretary Yellen, speaking at the U.S.-China Business Council on December 14, 2023, expressed intentions to reinforce enduring communication channels, intending to build resilience in dialogue to avert escalation from disagreements and unforeseen events. Similarly, Chinese commerce officials are preparing for an inaugural vice-ministerial meeting in early 2024 to better comprehend U.S. strategies and concerns while also conveying China’s commitment to maintaining robust bilateral economic ties.
Secondly, the focal points of U.S.-China commercial cooperation will likely pivot towards climate finance and financial markets. Joint endeavors in climate finance have the potential to elevate both countries as frontrunners in mitigating climate-related risks. Additionally, cooperation in financial markets could bolster economic stability for both countries. China is expected to further open its market to attract U.S. businesses and investment amidst global economic uncertainties, thereby alleviating trade tensions and promoting a more cooperative economic milieu. In 2024, Chinese local governments will likely continue improving the treatment toward foreign firms, including American companies, particularly in the realms of government procurement, bidding processes, and the establishment of industry standards.
Thirdly, the year 2024 is set to witness intensified great power technological competition. Amidst this, national security concerns will continue to drive fierce competition between the two superpowers. The U.S. government is likely to escalate its pressure on China, especially in the high-tech sector.
The 2024 U.S. presidential election will bring China policy into sharp focus for both political parties. A tougher stance to counter China’s growing strategic high-tech industry is expected to be a significant part of the political narrative, reflecting the strategic importance and sensitivities surrounding this area. Moreover, it is possible that more voices in the U.S. to call for revoking the Permanent Normal Trade Relations with China, hoping to reverse the decline of U.S. manufacturing.
On the Chinese side, industrial policy is poised to gain momentum in the broad context of a strategic tug-of-war, where an increasing number of countries including the U.S. are strengthening state intervention and vying for global technological competitiveness. Domestically, Chinese policymakers plan to leverage industrial policies to ascend the value chain and sustain economic growth. Beijing will adopt an active fiscal policy in 2024, increasing government expenditure and focusing resources on major initiatives. So far this year, more than a dozen provinces and cities have announced ambitious plans to issue special bonds to support massive investment in new-generation information technology, biopharmaceuticals, and artificial intelligence.
It is also worth noting that although U.S.-China economic interdependence is highly likely to persist in 2024, to mitigate potential economic frictions with the United States and buttress China’s exports, Chinese policymakers will further strategize in Southeast Asia, the Middle East, Latin America, and Africa, strengthening and expanding commercial exchanges with countries involved in the Belt and Road Initiative, thus transitioning from a “reactive” to a “proactive” global approach.
The year 2024 is destined to be another eventful year for both China and the United States, shaped by a multitude of domestic and systemic factors. The trajectory of U.S.-China economic and technological relations will have consequential impacts on the internal economies and political landscapes of both superpowers, with far-reaching implications for other countries worldwide.