US-China relationship bleeds by a thousand cuts

Chinese officials love enumeration: the "Three Represents" outlines the responsibilities of the Chinese Communist Party; the "Five Confidences" codify socialism with Chinese characteristics. The latest "Eight Suspends" may well become shorthand for the final stage of the disintegrating relationship between Washington and the People's Republic.

On Friday Beijing ended bilateral cooperation on drugs, climate, military dialogue and crime after House of Representatives Speaker Nancy Pelosi visited Taiwan, an independently governed island over which China claims sovereignty. In the near-term little will change because actual collaboration in those areas was at best minimal in the first place.

Some American negotiators may even be relieved. Over the weekend, China's navy has turned the Taiwan Strait into an enormous missile testing ground, but that is preferable to a full-scale blockade or invasion. Beijing has also banned a swathe of Taiwanese exports, mostly food. Yet it has so far refrained from more serious economic retaliation, such as rallying nationalists against American products and companies, a tactic that officials have deployed against Japanese and South Korean brands during diplomatic spats in the past.

At the present weak economic moment, mainland regulators have cause to be wary of scaring China's largest financial partner away, not least because economic decoupling is a specific goal of China hawks in Washington. read more Official data showed US foreign direct investment stock in China stood at $124 billion in 2020. Americans also held nearly $1.2 trillion in Chinese securities at the end of 2020, per Rhodium Group estimates.

That does not mean companies like Starbucks or Ford will be left completely alone. The bureaucracy under President Xi Jinping has other levers to pull in order to drive up the cost of business for US companies at the margins. These include mundane but disruptive tactics at the grassroots level, such as trouble getting work visas, holdups at customs, visits from quality inspectors, defeats in local courts and even executive detentions.

Moreover, China never met its trade deal commitment to purchase more American goods, and is even less likely to try to alleviate unbalanced trade now – bad news for US agriculture, among others. The decline in commercial relations may be slow, but it will probably be permanent.