AILSA CHANG, HOST:
If you were to describe the relationship between the U.S. and China, you might say it's complicated. The two countries are intertwined on trade, national security and overall economic health, even as diplomacy in the last few years has been rocky. Now, as President Biden and Chinese leader Xi Jinping attempt a reset in San Francisco, China's economy is struggling.
ARI SHAPIRO, HOST:
The country is dealing with high youth unemployment, a real estate debt crisis, wary international investors and a slow rebound after COVID lockdowns. So does that give the U.S. more leverage in these discussions? Well, we're joined by Robert Daly of the Wilson Center, who directs the Kissinger Institute on China and the U.S. Thanks for being here.
ROBERT DALY: Good to be with you.
SHAPIRO: How big an economic funk is China in right now? Is this a country in decline or just growing less quickly than it used to be?
DALY: I think the latter. It's growing less quickly. It is in the midst of its biggest economic crisis since it began opening up in 1978, but I think that many in the West have been too quick and too triumphalist to declare that this is peak China and that China is done. There's - you know, they face structural difficulties, but they still have a lot of strengths.
SHAPIRO: Does that present opportunities for the United States in this moment?
DALY: Well, the question right now is, how much is Xi's worry about his weakness at home a driver of his willingness to come to San Francisco and his willingness to perhaps offer some sweeteners to the United States to stabilize the relationship? Xi, when he speaks to the Chinese people, always emphasizes confidence. You should be confident that our form of development is correct, that we have the right form of government. You should be confident in China's culture.
But he's made a lot of public misjudgments over the past several years, beginning with backing Putin on the eve of the invasion, his handling of COVID at the outset and especially his handling of COVID at the very end, when he put cities like Shanghai under lockdown for months and then suddenly dropped the lockdown and millions died. Now the economy is slowing, youth unemployment is well over 20%, and this is all happening publicly. So he may be feeling less confident when he comes to see Biden.
SHAPIRO: And so can you play out how that might be useful to the Biden administration right now?
DALY: Well, the Biden administration already feels that it is in a position of strength vis a vis China, at least in the security realm. It has greatly strengthened its alliances throughout Europe and with our allies in the Pacific, as well as in the Americas. It has brought Korea and Japan back together. It has concluded the AUKUS agreement with Australia and the U.K. to build nuclear submarines for Australia and to work on hypersonic weapon systems. That's all aimed at China. It has strengthened what's called the quad - Europe, Japan, Australia and the United States - also aimed at China. It's got more bases opened in the Philippines, and now NATO has a China or Asia-facing mission.
SHAPIRO: So with all of that positioning...
DALY: So the Biden administration's confident.
SHAPIRO: Yeah.
DALY: Yeah.
SHAPIRO: Where does that put the Biden administration vis a vis China's economic weakness right now?
DALY: Well, I think that the Biden administration knows it's too soon to make a call. This could be a few bad quarters or one or two bad years. This crisis in China is certainly nowhere nearly as bad as our financial crisis in 2008 yet, and we weren't done then. So I think that the Biden administration is not looking to take short-term advantage of China's economic weakness, nor is it clear that Xi's confidence is really dented. As far as we know, he still believes that the East is rising and that the West is declining.
SHAPIRO: And so if this is going to change anything, what might it change?
DALY: It gives us a chance to stabilize the relationship, which is the word that both sides are using. You mentioned that - a reset at the beginning. I don't think that's quite right. The trajectory and nature of the relationship, which is not only complicated but rivalrous, is likely to remain in place. But both sides would like to reduce the chances of conflict even as they compete vigorously. And this kind of dialogue between leaders - and in the lead up, the dialogues between secretarial-level people - can do that. It can bring some stability but not change the nature of a relationship that probably hasn't found bottom yet.
SHAPIRO: The U.S. has been steadily increasing its economic controls on China under the Trump and Biden administrations. Do you think that's likely to continue, or could you envision some of these restrictions being lifted and the U.S. letting up a bit?
DALY: I don't think that the export controls that are designed to hamper China's development of advanced node semiconductors and to limit its ability to get leading AI - that's not going to change because the security rationale for that has been loudly declared, and it's, by its nature, absolutist and expansionist. We've told China we're not going to give it any technologies that it could use in weapons that target us, and once you start down that road, you really can't walk that back.
SHAPIRO: That's Robert Daly, director of the Wilson Center's Kissinger Institute on China and the United States. Thank you very much.
DALY: Thank you. Transcript provided by NPR, Copyright NPR.
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