Efforts to stablise US-China relations will be limited

Significance

Relations between the United States and China are at a critical juncture. The Biden administration remains under domestic pressure to take a tough line with Beijing but the drivers to repair a relationship that has been under increasing strain remain compelling, including a record USD700bn in bilateral trade last year.

Impacts

• Congressional scrutiny and heightened public interest mean that Biden’s China policy is likely to be a campaign issue next year.
• Despite bipartisan consensus on standing up to China, Republican control of both the White House and Congress could see a tougher approach.
• Beyond sector-specific measures, businesses in both countries may benefit from a stablising of economic relations.
• US investors will continue to leave China as weak economic metrics coincide with high political and reputational risk.