The increase in tension between the US and China has garnered significant attention in recent years. American attitudes toward China are negative. Anger is building over disruptions from the COVID-19 pandemic and Americans are losing jobs to China. Additional moral strain comes from human rights violations in Xinjiang, and the autonomy dispute between Beijing and Hong Kong. New regulations are also negatively affecting Chinese publicly traded companies on the US Stock Exchange.
Although there is animosity, the powers are also competing to maintain their status as a global leader in various industries. Given the right circumstances, this competitive spirit can lead to positive outcomes. The United States and China have a unique opportunity to one-up each other fiscally and advance climate change efforts.
Competition with Climate Change
China leads the world in coal utilization. It obtains roughly 60% obtains of its power from fossil fuels and is the world’s biggest source of greenhouse gas emissions. Falling right behind them, is the United States in second place. Both countries are largely guilty of contributing to the climate issues we face today. Given their history of competition, Beijing has pointed to historical US emissions as a reason to resist action for years. Now, both sides have identified the climate crisis as an area for joint action.1
“China and the US have differences on some issues. In the meantime, we share common interests in a range of areas such as climate change,” Chinese foreign ministry spokesperson Wang Wenbin said. Each side must “maintain dialogue and communication on the basis of mutual respect and carry out mutually beneficial cooperation”1 for the benefit of everyone.
Now, each country is making advances in solar power and other renewable energy sources.
China’s target is to generate 20% of the country’s total energy consumption from renewables by 2025, becoming carbon-neutral by 2060, and reducing total emissions starting in 2030. Although these plans include tapering off reliance on fossil fuels, they still plan to build more coal-fired power plants for interim needs.
The United States has set its sights on achieving a 50-52% reduction from 2005 levels of net greenhouse gas pollution by 2030. As a part of re-entering the Paris Agreement, the Biden administration launched the Nationally Determined Contribution (NDC) as a formal submission to the United Nations Framework Convention on Climate Change.2
Biden plans to double funding for developing countries’ attempts to reduce emissions. He pledged to increase US contributions to $11.4 billion, making the US the world leader in public climate finance. The announcement was well-received, but some critics say that the amount is still not enough.3
Beijing pledges to address the global need as well. They will boost forest coverage by around 6 billion cubic meters by 2030. China is also working to launch a national emissions trading scheme, which would force polluters to pay for environmental harm and thus incentivize them to reduce emissions. It would initially focus on coal and gas fired power plants. This has been delayed as they focus on immediate energy needs.4
The United States Security and Exchange Commission (SEC) has become more apprehensive of Chinese-listed companies.
Gary Gensler, chair of the SEC, has a warning for hundreds of Chinese companies that have raised billions of dollars in US markets: “submit to more scrutiny soon or get kicked out.” He pledged to strictly enforce a three-year deadline that requires Chinese firms to permit inspections of their financial audits. If businesses refuse, their shares could be delisted from the New York Stock Exchange and Nasdaq as soon as 2024.
In response China reacted: Shares of Chinese tech giants trading in the United States struggled to pare losses Friday amid intensifying concerns over China’s efforts to impose sweeping new regulations on its publicly traded companies over the next several years, yielding market value losses of more than $150 billion for the 10 largest US-listed Chinese stocks in September.5
It’s evident that the ongoing economic and political power struggle between the United States and China is intensifying. Even when the countries cooperate, for instance on climate change, their relationship is still relatively volatile. We recommend that you partner closely with the Global Risk team if your client has international exposure in China.
1 Associated Press. “China Warns Us Poor Relations Could Undermine Progress on Climate Change.” The Guardian, Guardian News and Media, 2 Sept. 2021, https://www.theguardian.com/world/2021/sep/02/china-warns-us-poor-relations-could-undermine-progress-on-climate-change.
2 Ponciano, Jonathan. “U.S.-Listed Chinese Stocks Have Lost Another $150 Billion in Market Value This Week as Beijing Targets ‘Excessive’ Wealth.” Forbes, Forbes Magazine, 20 Aug. 2021, https://www.forbes.com/sites/jonathanponciano/2021/08/20/us-listed-chinese-stocks-have-lost-another-150-billion-in-market-value-this-week-as-beijing-targets-excessive-wealth/?sh=50a1d46e44f7.
3 Dennis, Brady. “Biden Vows to Double Aid for Vulnerable Nations Dealing with Climate Change.” The Washington Post, WP Company, 22 Sept. 2021, https://www.washingtonpost.com/climate-environment/2021/09/21/biden-climate-finance/.
4 Maizland, Lindsay. “China’s Fight Against Climate Change and Environmental Degradation.” Council on Foreign Relations, 19 May 2021, https://www.cfr.org/backgrounder/china-climate-change-policies-environmental-degradation. Accessed 4 Oct. 2021.
5 Hass, Ryan. “The ‘New Normal’ in US-China Relations: Hardening Competition and Deep Interdependence.” Brookings, Brookings, 12 Aug. 2021, https://www.brookings.edu/blog/order-from-chaos/2021/08/12/the-new-normal-in-us-china-relations-hardening-competition-and-deep-interdependence/.