The US-China financial working group in Shanghai meets for the fifth time and tacitly agrees to work more closely in times of financial stress. But will it still be around next year at this time? 

Geopolitics can be a very awkward term. Coined at the turn of the 20th century by a Swedish political scientist, it is the great-grandfather of business jargon of the «low-hanging fruit» kind.

In short, like the even more infuriating «boil the ocean», the definition of all three is uniquely vague, even oblique, and usually depends on who you are talking to. 

Amped Up

But at least for now, the stately noun, which according to Merriam-Webster is plural in form but singular in construction, has come to essentially symbolize the development of the power relationship between the US and China in recent years.

During the Trump era and the early days of the Biden administration, its use was amped up to ear-shattering levels probably best encapsulated by the furor around the then Speaker of the House Nancy Pelosi’s visit to Taiwan and the shooting down of a Chinese high-altitude weather balloon.

Taking a Backseat

But that was all very late 2022 and early 2023 – and we are now well past the halfway mark of 2024. With all the problems the world appears to be facing, including outright violent conflict between Russia and Ukraine, and in Gaza, geopolitics seems to be taking a backseat to the other worries staring the world right in the face.

Overnight Readout

Given that, it seemed like the fifth meeting of the US-China financial working group that took place in Shanghai last Thursday and Friday was an exercise in tiptoeing around matters quietly in an attempt to keep tempers from boiling over.

As finews.asia has commented on previously, both countries seem to be ratcheting it all down a notch, at least in the financial sphere, with the main result from the overnight readout on the American side indicating a tacit agreement with the People’s Bank of China to coordinate issues better in times of financial stress.

Reducing Uncertainty

Concretely, they exchanged letters of support aimed at strengthening information sharing while also reducing any uncertainties related to crisis management, and recovery and resolution frameworks.

The People’s Bank of China (PBOC) also made a statement yesterday that mirrored much the same, calling the meeting «professional, pragmatic, candid and constructive». 

Disagreement or Concern?

The standard boilerplate language was used for areas of contention, with the PBOC raising «areas of concern» that the US, in turn, called «areas of disagreement» - wording that is essentially identical while also reflecting individual linguistic and cultural sensitivities.

They also tacked on each other’s pet projects for the ride. For China, that is the potential reform of AML regulation, something more than likely to prompt a great deal of headaches with banks, bankers, and financial crime officers across the region and elsewhere over the next few years. The US Treasury, for its part, managed to put in a word about new beneficial ownership disclosure requirements, making the meeting a small part of its large-scale, whirlwind domestic campaign on the matter.

Quiet Before the Storm

For the financial industry, keeping things on a more balanced footing is giving much-needed space for many to breathe slightly easier.

Still, no one should start feeling too comfortable, as this lull may simply be because the US elections are coming up and the working group as it currently stands may not even exist when summer 2025 rolls around, or at least not in the same form or composition.

No Kneejerk Reaction

By the same token, let’s all hope that the letters of support had been in the planning for some time and were related to a long-term effort to improve the situation between the two countries in straightened circumstances – and not simply a knee-jerk reaction to the flash crash in the equity markets a couple of weeks back.