Tonight: The Xi-Biden meeting happened, and no one stormed out of the room, so we'll call that a win. Plus: The US Postal Service's financial problems run deep. Let's get into it. By Allison Morrow |
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| | Last updated November 15 at 6:59 PM ET | |
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The consumer goods trade between China and the US hit a record high in 2022. (Justin Sullivan/Getty Images) |
The closely watched meeting between President Joe Biden and China's Xi Jinping was, as we wrote here yesterday, not expected to fix the two nations' rather prickly relationship. But according to Biden, there was some progress. "I value the conversation I had today with President Xi because I think it's paramount that we understand each other clearly, leader to leader ... There are critical global challenges that demand our joint leadership. And today, we made real progress." Finding ways to "get back on a normal course" — in the words of Biden — matters hugely to the global economy, my colleague Michelle Toh writes. "If they don't get along, the global economy will fragment into a bunch of smaller pieces that will lead to slower growth and greater inequality," said Scott Kennedy, trustee chair in Chinese business and economics at the Center for Strategic and International Studies. But what, exactly, are the two countries squabbling about? In short: trade, tech, and money. 'De-Risking' - The US is treading carefully as it tries to reduce its reliance on Chinese markets and suppliers, without cutting ties entirely. AKA a "de-risk" strategy, rather than a "decoupling."
- China had been the US's largest trading partner. This year, it fell to No. 3.
- The two economies are still extremely codependent. But the mood on the ground is changing. Businesses are taking their cues from Washington and Beijing, and they're moving their money out.
- Some American companies, such as asset management giant Vanguard, are leaving China altogether.
- Foreign companies operating in China are on edge as authorities there are increasingly raiding offices and detaining executives.
- But, underscoring just how complex the US-China relationship is, US Commerce Secretary Gina Raimondo is still encouraging US firms to expand in China.
The Chip War It's a lot of fuss over verrrrry tiny bits of tech called advanced semiconductors, or, colloquially, chips (and the materials needed to create them). - Washington has reduced the types of chips that American companies can sell to China, because, well, we don't want the Chinese military to have them.
- Beijing, no fan of those restrictions, says the US is "weaponizing trade and tech."
- That means giant US chip makers like Nvidia lose some access to China, by far the world's largest market for semiconductors.
- China, meanwhile, has imposed its own curbs on gallium and germanium, two elements essential to making semiconductors. It also plans to curb exports of graphite, a mineral required to make batteries for electric vehicles.
- Now other countries are getting involved, too. Japan and the Netherlands joined the US in limiting exports to China.
Money money money The US doesn't want American dollars underwriting Chinese military efforts, so Wall Street is getting reined in, too. - In August, the Biden administration said that it would limit investments by US venture capital and private equity firms in China — specifically investments in advanced technology like AI, quantum computing and semiconductors.
- Analysts say the constraints will exacerbate a slump in dealmaking between the two economies, which was already drying up. (VC deals in China involving a US investor totaled about $300 million last quarter, compared with $2 billion the same period the previous year, according to PitchBook.)
- Some companies have made the drastic move of splitting up their US and China operations, citing the complexities of running a centralized global business.
- Publicly traded American companies like Apple and Tesla may face higher scrutiny, too. On Tuesday, a congressional advisory body said lawmakers should consider mandating that public companies to provide more detailed disclosures of their exposure to China.
For now, the wider US-China relationship continues to face so many challenges that "the bar is not really that high" in terms of expectations for the Biden-Xi meeting, said Zongyuan Zoe Liu, a fellow for China studies at the Council on Foreign Relations. "As long as nobody walks out of the meeting … I think that's a good sign." RELATED |
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Unemployment across the US is historically low. But one state is really crushing it. Maryland, home of Baltimore and blue crabs, had an unemployment rate of 1.6% in September — less than half the national unemployment rate of 3.8% that month. That's the lowest seasonally adjusted unemployment rate of any state on records going back to 1976, according to a CNN analysis. |
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This was supposed to be the year the US Postal Service turned its finances around. The goal was to break even, and start turning a profit in 2024. It lost $6.5 billion instead. What happened? Postmaster General Louis DeJoy blamed the loss on inflation, which raised the cost of operations. Mail volume is down, in part because it became more expensive for marketers to print junk mail. The loss is particularly disappointing because the USPS got a big bump in revenue earlier this year from shippers moving away from rival UPS amid the threat of a strike (which ultimately never materialized, thanks to a historic contract for some 340,000 unionized drivers and package handlers). "We are not happy with this result," Postmaster General Louis DeJoy said Tuesday. The agency's efforts to increase revenue and reduce labor and transportation costs "were simply not enough to overcome our costs to stabilize our organization" and the "historical inflationary environment we encountered." Still, DeJoy said that the service is making progress on its transformation, a decade-long project he unveiled in 2021. But there may be other reasons mail volume is down, according to the nonprofit advocacy Keep US Posted. An unprecedented series of postage rate increases under DeJoy's plan are "clearly only triggering a dramatic loss in mail volume," saidformer Congressman Kevin Yoder, the group's executive director. "Twice-annual, above-inflation postage hikes are worsening the USPS' financial woes and trapping it in quicksand, as even more mail is driven out of the system." My colleague Chris Isidore has more. |
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Last updated November 15 at 4:00 PM ET | |
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