U.S.–China Week: Obama and Xi’s mixed signals, South China Sea tangles, Anbang bids and balks (2016.04.04)

Welcome to issue 46 of U.S.–China Week. This edition focuses on the meeting between the top leaders of the United States and China, with a few other matters addressed in brief.

As always: Please encourage friends and colleagues to subscribe to U.S.–China Week. Here is the web version of this issue, ideal for sharing on social media. And please send your comments, quibbles, and suggestions to [email protected].

OBAMA–XI MEETING
Obama and Xi meet in Washington, revealing little new progress but also little rancor

President Barack Obama and President Xi Jinping held a bilateral meeting (flankedby numerous aides) on the sidelines of the Nuclear Security Summit in Washington. Before the meeting, top White House Asia adviser Dan Kritenbrink said they would discuss North Korea, human rights, cyberspace, and maritime issues. He also said the two are likely to meet again in September at the G20 in Hangzhou. Xi was the only leader Obama met in a bilateral format alongside the summit, but Obama also held a trilateral meeting with President Park Geun-hye of South Korea and Prime Minister Abe Shinzo of Japan. The United States and China released a joint presidential statement on climate change, declaring that, over the past three years, the issue “has become a pillar of the U.S.–China bilateral relationship.” The two governments also released a joint statement on nuclear security cooperation, reiterating a number of agreements and confirming that a new annual bilateral consultation took place as planned. Before the summit, Under Secretary of State for Arms Control and International Security Rose Gottemoeller, speaking about North Korea, said “now we have to ensure strong implementation of the (UN Security Council resolution), and thus far our cooperation with China on this has been very, very good.”

Not all signals from the Obama–Xi meeting were so positive. China’s government reportedly missed a deadline of the end of March to produce a new “negative list” offer in the ongoing negotiations toward a U.S.–China bilateral investment treaty (BIT). Deputy Secretary of State Antony Blinken expressed hope that the United States and China could talk about the potential deployment of the THAAD missile defense system in South Korea, but Vice Foreign Minister Zheng Zeguang said China was “firmly opposed.” In their statements before the meeting, Obama called “cyber” an area of difference, while Xi listed “cybersecurity” as an area for possible cooperation. There was no sign of emergent agreement on cyberspace issues or the South China Sea (see next item). In general, Chinese official coverageput a more positive spin on the meeting than U.S. press or official statements. Bonnie Glaser’s summary is a good and representative early analysis.

ANALYSIS: As a bilateral meeting, not a dedicated summit or state visit, the expectations for this meeting were generally moderate. Still, a joint document on nuclear security was almost a gimme alongside the Nuclear Security Summit, and the joint announcement that both governments would sign the Paris climate agreement on the first day possible showed only relatively predictable continued cooperation. Before the meeting, there had been stirrings about possible progress on BIT negotiations, but that amounted to a failure to make even the moderate expected progress. I had speculated that there might be some signaling to build on the joint cyberspace language from September, but no sign of progress emerged. At this point it might be time to start thinking of Obama–Xi interactions as stewardship of the relative stability the two governments have established, as Blinken put it, “defying a downward spiral of rivalry.” With China’s domestic political conditions uncertain and the U.S. conditions certainly unwell, continuing to prevent a downward spiral may be all that can be asked for.

SOUTH CHINA SEA
Signs of greater complexity, but few solutions, in U.S.–China disagreement over maritime territory

As Obama and Xi both generally avoided the topic of the South China Sea, the two governments and other regional actors proceeded to thicken the plot. Before the leaders met, Deputy Secretary of Defense Robert Work said the United States would not recognize an air defense identification zone (ADIZ) if China were to declare one in the South China Sea. “We don’t believe they have a basis in international law,” Work reportedly said, though the context leaves open the question of whether Work’s “international law” remark referred to an ADIZ or the “military alert zones” Chinese forces warn aircraft away from. A Chinese Defense Ministry spokesperson said of declaring an ADIZ: “Whether and when to do it depends on whether and to what extent China faces air security threat.” Also before the leaders met, a deputy assistant secretary of state told reporters China’s runways in the South China Sea are “designed to accommodate strategic bombers, not cargo planes for humanitarian assistance and disaster relief.” After the leaders met, Reuters reported that U.S. sources anticipate another military transit in the South China Sea, though timing was unclear. / Meanwhile, a Japanese submarine made a port call in the Philippines for the first time in 15 years. U.S. and Philippine forces held a joint exercise. And a New York Times reporter was along to report from a U.S. Navy ship in the South China Sea just before the Obama-Xi meeting. The story is a lively account of U.S.–China interactions there. It also reported “the Chinese are building and equipping outposts” at Scarborough Shoal, but this appears to have been a phrasing mistake and no other reports have suggested that is the case. Amidst speculation that China might build there, Yale Law School’s Robert Klipper explains why Chinese strategists might like to do so.

BIDS AND BALKS
China’s Anbang raises then drops bid to acquire Starwood Hotels amidst questions about its corporate structure

Anbang Insurance Group, which famously bought the Waldorf Astoria Hotel in New York last year, had been in a bidding battle against Marriott International to acquire Starwood Hotels. A week ago, Anbang upped its offer to $14 billion. The same day,The Wall Street Journal published a story examining its complicated ownership structure. NYT followed with a further examination of its political ties. The day after that, Anbang dropped its bid, and the Financial Times reported that Chinese regulators had “clipped the wings” of Anbang’s chairman, an outcome seen as possible at least a week earlier in a Caixin report. That article suggested the deal could run afoul of China Insurance Regulatory Commission rules “banning insurers from investing more than 15 percent of their assets abroad.”

ANALYSIS: This story is remarkable in its high-value twists and turns, but it also shows that regulatory risk for Chinese outbound investment is more complicated than the much-discussed national security review process in the United States. This would have been an excellent case to test U.S. receptiveness, however. Would the Committee on Foreign Investment in the United States (CFIUS) have blocked a Chinese acquisition of a company that holds extensive travel records and numerous properties in the United States? For now, we don’t know.

#USChinaWeek1966 <— follow this hashtag on Twitter for more
Johnson administration proposals for ‘exchanges of newsmen and scholars’ rejected by Chinese government

Seymour Topping reported in The New York Times on March 29, 1966: “Communist China accused the Johnson Administration today of feigning a desire for better relations while preparing for war. The Peking leadership rejected proposals by the United States for exchanges of newsmen and scholars and other contacts between the Chinese and American peoples.” A few days later, Topping reported that the rejection came with the assertion that “Washington intended to persuade the younger Chinese generation to accept the theory of peaceful evolution.”

That second story, which ran under the headline “Maoism Is Likely to Survive Mao,” included speculations on Chinese geopolitical objectives after Mao’s eventual death: “In terms of basic objectives, which include attainment of preeminence in Asia, expulsion of the United States presence from the region—particularly from Taiwan and Southeast Asia—and seizure of leadership of the Communist bloc in competition with the Soviet Union, no major policy changes are expected.

(Source: The New York Times. This entry is part of a new feature of U.S.–China Week, following U.S.–China relations as they developed in another era of change and uncertainty, 50 years ago.)

ABOUT U.S.–CHINA WEEK

U.S.–China Week is a weekly news and analysis brief that covers important developments in U.S.–China relations and features especially insightful or influential new policy analysis.

Graham Webster is a senior research scholar, lecturer, and senior fellow of the Paul Tsai China Center at Yale Law School, where he specializes in U.S.–China diplomatic, security, and economic relations through research and Track II dialogues. His website is gwbstr.com.

Disclaimer: Opinions expressed here are my own (and I reserve the right to change my mind).

Subscription to U.S.–China Week by clicking here or e-mailing me is free and open to all, and an archive of past editions appears at my long-running website on East Asia and the United States, Transpacifica.

Contact: Follow me on Twitter at @gwbstr. Send e-mail to [email protected].

1 thought on “U.S.–China Week: Obama and Xi’s mixed signals, South China Sea tangles, Anbang bids and balks (2016.04.04)

  1. Pingback: U.S.–China Week: Vietnam arms, ‘unsafe’ fighter encounter, BIT prospects, new reviews of U.S. tech in China (2016.05.23) – Transpacifica

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