Biden, Xi set to steal APEC spotlight with talks to steady ties

By Michael Martina and David Brunnstrom

WASHINGTON (Reuters) - U.S. President Joe Biden and Chinese President Xi Jinping are expected to hold summit talks in San Francisco next week as they seek to stabilize tense ties by meeting in-person for just the second time in nearly three years, but little bonhomie and no grand bargains appear in the offing.

The summit on the sidelines of the Asia-Pacific Economic Cooperation (APEC) forum follows a six-month U.S. push to engage its geopolitical rival, including through several unreciprocated cabinet-level visits, and recover from a diplomatic crisis over the U.S. downing of an alleged Chinese spy balloon in February.

"This is going to overshadow anything that happens at APEC," said Oriana Skylar Mastro, a Stanford University China expert.

While U.S. officials said there was "agreement in principle" for Xi and Biden to meet in San Francisco - a year after they last saw each other on the sidelines the G20 summit in Bali - Beijing has yet to confirm Xi will attend the Nov. 15 to 17 APEC gathering.

APEC is a group of 21-member economies that accounts for about 62% of global GDP and almost half of global trade, but it has increasingly become a stage for strategic competition between the U.S. and China.

While no big breakthroughs are expected and Biden administration officials say announcing a slate of meeting outcomes is an outdated way to measure progress in relations with China, experts have pointed to possible signals of improvement - such as increasing commercial flights between the countries - or steps toward cooperation on thornier issues, like stemming the flow of fentanyl precursor chemicals from China.

U.S. officials have expressed some optimism of improvement in largely severed military communications, but also have cautioned that restoring truly functional dialogue between the two militaries could take time. Some analysts believe China seeks ambiguity in defense relations to constrain what Beijing sees as U.S. military provocations in the region.

"It's going to be very business-like, very hard nosed - a lot on the agenda that they're both going to be trying to work through," said Victor Cha, an Asia expert at Washington's Center for Strategic and International Studies (CSIS). "But at the same time, I guess, talking is better than not talking."

HARD TO GET

China has played hard to get in response to an eagerness by Washington to secure a summit, with Beijing suggesting that Xi's attendance hinged on the U.S. showing "sufficient sincerity."

The Biden administration has faced criticism from Republicans for playing to Beijing's hand, but argues the stakes are so high that direct engagement, particularly at the leader level, is vital to managing tensions and preventing disputes between the superpowers over issues like Taiwan and the South China Sea from veering into open conflict.

Despite the difficulties nailing down the summit, China has been struggling with economic issues after years of strong growth and has signaled that it wants friendlier ties by agreeing to preparatory meetings, such as nuclear arms control discussions that Washington has sought for years.

Protesters are expected in San Francisco next week - some to support Beijing and others to demonstrate against China's human rights record.

Biden will welcome other APEC leaders - including from Vietnam, the Philippines, Canada and Mexico - and both he and Xi will be playing to the gallery.

Matthew Goodman, a trade expert who was White House coordinator for the last U.S.-hosted an APEC summit in 2011, said the U.S. will seek to sell itself as the most dynamic economic partner for Asia, in contrast with a slowing China.

"There are a lot of concerns about China's economic conditions and its policies in the region," Goodman said. "I don't think they're going to explicitly try and twist the knife as it were, but I think they will try to show by comparison that the U.S. is growing well."

TRADE

U.S. Treasury Secretary Janet Yellen - who will meet with Chinese Vice Premier He Lifeng in San Francisco this week - has said the U.S. would not ask APEC members to choose between Beijing and Washington. She also acknowledged that while the U.S. was decreasing its dependence on China, full de-coupling of the U.S. and Chinese economies was "simply not practical."

But Washington has made clear that it would help allies and partners confront what it describes as Beijing's economic "coercion" - the use of economic pressure to get states to conform to China's policies. China has accused the U.S. of the same thing in the past.

"Our door is open to any country or economy facing PRC (People's Republic of China) economic coercive threats," Melanie Hart, a senior China policy adviser at the State Department, said on Monday.

Biden will be buoyed by a Pew Research Center poll showing he is winning the battle for public opinion over Xi and with the U.S. still considered the world's leading economic power by most people in 24 countries surveyed.

The U.S. president will be eager to reinforce that image by showing progress in the U.S.-led Indo-Pacific Economic Framework for Prosperity, an initiative aimed at stepping up engagement in Asia to compete with China.

However, trade experts say Washington has so far failed to convince Asia it was more than a pale alternative to a fully fledged regional trade deal President Donald Trump quit in 2017.

Xi will be eager to court U.S. businesses after China recently recorded its first-ever quarterly deficit in foreign direct investment. Two sources familiar with plans said U.S. business groups and foreign policy think tanks aimed to jointly host Xi for dinner in San Francisco.

"We're going to see next week a series of high-level engagements between the Chinese and U.S. companies and investors, trying to send a signal that China is open for business," Jude Blanchette, a China expert at CSIS, told reporters.

That would include "companies flocking to meet with Xi Jinping and have dinner with him," he said.

(Reporting by Michael Martina, David Brunnstrom, and Trevor Hunnicutt in Washington, and Laurie Chen in Beijing; Editing by Michelle Nichols and Josie Kao)