China: Policy and investment implications under Biden
Michael Thawley
Political Economist
Chris Thomsen
Equity Portfolio Manager
  • The approach taken by Biden’s team may face challenges
  • A greater decoupling for the US and China economies is unlikely
  • China is focused on building its domestic supply chain, opening up possible investment opportunities

The first 100 days in power for any new presidential administration is never easy. With US-China relations at arguably their lowest point in 50 years, the administration of US President Joe Biden will have to make some difficult policy decisions that could affect the balance of the world’s two largest economies. How could the relationship evolve over the next four years?

We asked Capital Group political economist Michael Thawley and portfolio manager Chris Thomsen to share their perspectives on potential implications for trade policies and investments.

How much might policy change under the Biden administration?

Michael Thawley: The Biden administration is facing the same problems as the Trump administration, so I don’t expect much change from a geopolitical standpoint. China’s economy is currently the single greatest contributor to global growth and its leaders have grown more self-confident and are seeking a greater voice in world affairs.

I think the overall policy framework will carry over, with a few caveats. I anticipate the existing trade tariffs will remain in place for the foreseeable future. Biden’s team will probably maintain the investment and technology restrictions against China but try to define them more carefully and create more streamlined and predictable processes. This could help certain US technology companies and Wall Street banks that have investments and interests in China.

For example, some of America’s leading semiconductor companies count China among their largest markets for sales. If they are restricted in shipping more advanced chips to China, this could affect their longer-term revenue. Meanwhile, Wall Street banks and asset managers want to make a bigger push into China after Beijing loosened rules to operate in the country.

Elsewhere, coalition-building and mitigating climate change are part of Biden’s global agenda. This is a significant departure from the priorities of the past four years. Another shift might be more targeted sanctions when it comes to China’s policies towards Hong Kong and Taiwan. This is an ongoing risk.

The US has remained an IPO destination for Chinese companies1

IPOs of Chinese companies on Nasdaq and NYSE

What do you see as potential challenges to this approach?

Thawley: The Biden team will aim to rehabilitate alliances with allies and work more consistently with these other countries on China. While the previous administration was viewed as taking a unilateral approach, Biden will be challenged in forming an international coalition to influence China in hopes of reaching a new equilibrium.  

It won’t be easy to craft policy that allows for mutually beneficial economic cooperation while at the same time limiting the pressure China can put on the US and its allies.

South Korea, Japan and Australia are looking to the United States to help balance China’s power in the Western Pacific. It's complicated, because everyone has huge economic interests in their relationship with China. The US and its allies still want to do business with China and investors want to invest there.

The Biden administration could seek an arrangement with China that acknowledges its importance to the world economy. This could result in fairer economic practices and a level playing field. From my experience working in government, I’ve found that creating and sustaining coalitions behind such a set of common goals can be hard work.

1. Source: FactSet. As of 31 December 2020


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  • This material is not intended to provide investment advice or be considered a personal recommendation.
  • The value of investments and income from them can go down as well as up and you may lose some or all of your initial investment.
  • Past results are not a guide to future results.
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Michael Thawley is a political economist with 49 years of industry experience (as of 12/31/20). He holds a degree with honors in history from the Australian National University. 

Chris Thomsen  is an equity portfolio manager at Capital Group. He has 24 years of investment experience, all with Capital Group. Earlier in his career at Capital, as an equity investment analyst, he covered European and Asian media companies, Hong Kong-based utilities, property companies, conglomerates, and small-cap companies along with generalist coverage of other companies domiciled in Hong Kong and the Philippines. He holds an MBA from Columbia Business School and a bachelor’s degree in international economics from the School of Foreign Service at Georgetown University. Chris is based in London.

Past results are not a guarantee of future results. The value of investments and income from them can go down as well as up and you may lose some or all of your initial investment. This information is not intended to provide investment, tax or other advice, or to be a solicitation to buy or sell any securities.

Statements attributed to an individual represent the opinions of that individual as of the date published and do not necessarily reflect the opinions of Capital Group or its affiliates. All information is as at the date indicated unless otherwise stated. Some information may have been obtained from third parties, and as such the reliability of that information is not guaranteed.