The Chinese Yuan’s roller coast plummet on Wednesday morning speaks to something. China happily presumed that Joe Biden would win an easy election and was shocked when American voters brought that prospect into serious question.
Top line: Beijing is very nervous on Wednesday, waiting and hoping for enough Biden votes to make their way into the running tallies.
Still, whatever happens in the U.S. presidential election, China has already suffered a significant blow in terms of Senate elections. With Republicans now looking likely to retain control of the upper chamber, Beijing can expect no significant respite to U.S. legislation that constrains its ambitions. Had Democrats secured a Senate majority, that might not have been the case. In the last few weeks of campaigning, it has become clear that Biden’s foreign policy team does not view China in the same adversarial lens as President Trump. Indeed, when questioned on his attitudes toward China and Russia, Biden notably referred to Russia as an “opponent,” but China only as a “serious competitor.” China expected that a Biden win plus a Democratic Senate would thus focus on increased economic activity between the United States and China. Interestingly, the Chinese Communist Party’s primary western focus propaganda outlet, the Global Times, hinted at this with a Wednesday editorial linking a just completed import exposition in Beijing to a call that the “Next US government needs to value trade relations with China.”
China will now have to restrain its most optimistic aspirations for the post-2021 U.S. landscape. A Republican Senate is not going to facilitate China’s need for greater U.S. technology transfers — which Xi has now declared the linchpin of China’s economic security policy. Beijing would have hoped that in return for boosted U.S. imports, a Democratic Senate would be more tolerant of its intellectual property theft. This is the centerpiece of China’s strategy toward Europe, for example. Instead, China can now expect no significant respite for firms such as Huawei, which are reliant on U.S. hardware and software. The result is that China will likely adopt a more openly hostile stance in the intellectual property theft domain.
The final question for Xi and his inner circle is whether Trump or Biden wins. Considering Trump’s tariff pressures, constraint of Chinese imperialism in the South China Sea, and pressure on U.S. allies to engage with these efforts, Xi will be watching returns from the last states very closely. And nervously.
