Recent American attempts to establish more productive U.S.-China relations hit a new impasse because Washington insisted on discussing Beijing’s well-known – and repeated ad nauseam -- red lines without bringing any new ideas that would be of interest to China.

That’s what the world witnessed during a blistering on-camera confrontation during the meeting of top U.S. and China diplomats in Anchorage, Alaska on March 18-19, 2021.

China has no interest in American objections to its human rights issues, maritime borders, Hong Kong and Tibet administrations, and strained Taiwan relations.

For Beijing, all those questions are entirely domestic issues and part of the country’s sovereignty and territorial integrity, based on provisions enshrined in the United Nations Charter. That’s what China considers the only fundamental law of international relations.

All the rest are, in China’s view, American self-serving contraptions and obvious vectors to disrupt China’s socio-political order and smear its reputation on the world stage.

China’s President Xi Jinping said pretty much the same thing to speechless Europeans during an online summit with EU leaders (Charles Michel, President of the EU Council, Ursula von der Leyen, President of the EU Commission and German Chancellor Angela Merkel, chairing the rotating EU presidency) on December 30, 2020 to celebrate the conclusion of a Sino-European investment agreement. Xi emphatically repeated that China would brook no foreign meddling in its internal affairs.

Diplomacy should open doors

With all those warnings repeated for the nth time last December, it is puzzling why the U.S. diplomacy sought to reset China relations with non-starters that caused anger and consternation of the top Chinese diplomat – Yang Jiechi – the man who has China president’s ear, and who is, arguably, the most knowledgeable Chinese expert on American affairs. 

Some people may dismiss all that as an insignificant episode of settling the scores. That may be a fair point, but we now have a deadlocked political and security dialog with China. More ominously, the Pentagon cannot get through to China’s military to manage crisis situations.

The latest such incident occurred last Thursday (May 20), when the guided-missile destroyer USS Curtis Wilbur sailed through international waterways China considers its sovereign territory. In response, the Chinese unleashed their air and naval assets, claiming that they “expelled” the U.S. Navy ship. Washington denied that saying that the ship was sailing in international sea lanes.        

Pentagon called similar past encounters as “incendiary” manoeuvers where communication channels were necessary to prevent “accidents and miscalculations.” China, however, does not take those events as innocent accidents. In Beijing’s view, those are reckless provocations to test China’s responses to an obvious casus belli created by violations of its territorial integrity.

And here is a question: How do you reset China relations where Beijing is forced to accept maritime borders defined by a United Nations arbitration that China considers “null and void?”

But let’s leave that powder keg aside to see how the U.S. could try to reset its China policy by focusing on problems of mutual interest.

Trade is an obvious issue in U.S.-China relations where Beijing will cooperate, because China leaders know it’s in their interest to correct hugely and systematically unbalanced bilateral trade accounts.

Ask for a fourfold increase of U.S. exports

Indeed, China pocketed $79 billion in net merchandise trade income – and technology transfers that go with that – on its U.S. trades during the first three months of this year. That was nearly 50% above the same period of last year, and accounted for one-third of America’s total trade gap.

For Washington, those are devastating trade numbers. But they allow the U.S. to totally dismiss China’s mantra of a “win-win cooperation” as a foreign policy principle that is guiding Beijing’s militant advocacy of multilateralism, peaceful coexistence and non-interference in internal affairs.

For the U.S., that sort of China’s “cooperation” would be a very costly proposition: A 1 percentage point of U.S. economic growth during the first quarter of this year went to the rest of the world.

Washington’s huge hongbao to China was part of that – only the traditional red envelope was missing.

And that’s just for starters. By the end of this year, America’s accelerating domestic demand will lead to China’s sharply increasing surpluses on its U.S. trade transactions.

That offers a no-brainer for American diplomacy – an argument for digging deeper, to Washington’s advantage, into the U.S.-China relationship, much beyond the oxymoronic “transactional cooperation.”

The U.S. should forcefully insist on a fair and free trade and -- above all – on a prompt squaring of trade accounts by quadrupling the amount of America’s pitiful current exports to China.

That should be Washington’s conditio sine qua non for any improvement of U.S.-China ties.

It is a good bet that China would show flexibility in the interest of juicy business opportunities and access to free technology transfers offered by vast and open American markets.

By using a hard-headed and equitable business as a point of entry, Washington would be knocking on an open door to China. Such an approach would give substance and real meaning to China’s cooperation talk. And while it’s not clear how much balanced business interests would move China’s red lines, it is possible that more productive U.S.-China relations could turn back a relentlessly ticking doomsday clock.

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*Dr. Michael Ivanovitch is an independent analyst focusing on world economy, geopolitics and investment strategy. He served as a senior economist at the OECD in Paris, international economist at the Federal Reserve Bank of New York and taught economics at Columbia Business School.