US- CHINA

• The meeting had several significant outcomes, with the most crucial being the decision to reinstate military-to-military communications between the United States and China.
• This restoration is deemed essential to avert potentially disastrous miscalculations between the two nuclear-armed nations.
• The decision entails the resumption of regular information exchange under the Military Maritime Consultative Agreement, initiated in 1998.
• These communication channels had been closed following a controversial visit to Taiwan by Nancy Pelosi, the then Speaker of the U.S. House of Representatives, in August 2022.
• This visit marked the first by a Speaker in 25 years and led to heightened tensions, particularly given Taiwan's disputed status.
• Taiwan, a self-ruled island, remains a contentious issue between China and the United States.
• China aims for the reunification of Taiwan with the mainland, while the U.S., adhering to the "one-China" policy, acknowledges Beijing as the sole legitimate government but stops short of endorsing Taiwan as part of China.
• The U.S. provides concrete security guarantees under the Taiwan Relations Act, and President Biden has reiterated the commitment to intervene if China were to attack Taiwan.
• The visit by Nancy Pelosi drew strong condemnation from Beijing, which viewed it as a serious violation of the existing status quo.
• President Xi Jinping, emphasizing his determination to reunify Taiwan with the mainland, warned the U.S. that it was "playing with fire."
• In response, China demonstrated its displeasure by launching ballistic missiles off the Taiwan coast and conducting military drills as a deterrent.
• Despite these tensions, the meeting succeeded in reopening channels of military communication, a critical step in preventing misunderstandings and potential conflicts between the two powerful nations.

3. Trade Dispute Dynamics

• Amid heightened political tensions between the United States and China, businesses from the world's two largest economies grapple with a volatile economic and trade policy landscape.
• President Biden, shortly after assuming office in June 2021, issued an executive order blacklisting 59 defence and surveillance companies associated with the "Chinese military-industrial complex."
• This move, coupled with the Trump administration's 2019 blacklisting of Chinese Artificial Intelligence (AI) startups over alleged human rights abuses in Xinjiang, set the tone for an increasingly contentious trade environment.

4. Strategic Economic Maneuvers

• Washington and Beijing strategically deploy their respective strengths to inflict maximum damage on each other.
• Notably, the Biden administration, in October 2022 and subsequently extended in October 2023, imposed sweeping controls on exports of advanced computer chips crucial for semiconductor manufacturing.
• These controls prohibit U.S. and non-U.S. firms with American technology in their products from supplying hardware and software to specific Chinese companies.
• American citizens and firms are also restricted from collaborating with Chinese chip makers without special permission.
• The rationale behind these export bans is to undermine Beijing's advancements in AI and supercomputing, which are perceived as threats to U.S. security interests.
• The Biden administration further reinforced its stance with an August executive order prohibiting U.S. investments in the high-tech sector.

5. China's Response and Counteractions

• China retaliated with reciprocal measures, imposing a ban in July on the export of gallium and germanium, essential raw materials for microchips and weapons system production.
• These materials are crucially listed in the U.S. inventory of items critical for economic and national security.
• Additionally, in October, China implemented restrictions on the export of various types of graphite, a vital mineral for electric vehicle battery production where China holds a dominant position in the global supply chain.
• The Chinese government further tightened control through anti-espionage and data protection laws, citing national security concerns.
• This led to the imposition of requirements on firms to designate digital tools specifically for China, establish China-specific email IDs, and segregate country-exclusive servers.
• The tit-for-tat measures underscore the complexity and intensity of the ongoing trade dispute between the two economic giants.