China's management of its economic downshift will be the most significant global economic risk in 2024. Meanwhile, US presidential politics threaten to upend foreign policy and domestic stability, with geopolitical consequences.
Relations between the US and China will likely enter a holding pattern in 2024 while they are preoccupied with domestic affairs. What might feel like a period of bilateral calm should not distract from the reality that flashpoints around Taiwan, Ukraine and trade remain.
In the US, the looming presidential election is being framed as a contest between liberal internationalism and national populism and likely a rematch between President Joe Biden and former President Donald Trump. Trump’s unprecedented criminal trials will consume domestic and global attention well into 2024, keeping US allies and adversaries alike scrambling to anticipate outcomes and impacts as campaigning gets underway.
Whatever the outcome of the election, the basic geopolitical question remains: what role will the US play in a more multipolar world? For Israel, Ukraine and European allies immediately dependent on the US security umbrella, this question is set against US military funding and munitions likely drying up in 2024. For the contested Indo-Pacific, a change in US administration could have a dramatic effect on efforts to build security, technology, and supply chain coalitions.
In China, policymaking has long assumed enduring, intense competition with the US, regardless of who leads in Washington. Beijing has doubled down on reducing the Chinese economy’s vulnerability to US-led pressure, refining and signalling its retaliatory capability. Revived US-China diplomacy has done nothing to change this.
Chinese President Xi Jinping will prioritise domestic challenges. While China’s economy will stabilise in 2024 relative to the volatility of 2020-23, a sustained rebound is unlikely. Structural growth problems pose severe dilemmas for Xi and his newly installed economic steering team.
Amid difficulties at home, Beijing will likely avoid escalating external confrontation. However, domestic preoccupations have not prevented occasional mini-crises in US-China relations in the past, and 2024 will begin with a potential trigger for more tensions: Taiwan’s January presidential election. A victory by the ruling and US-leaning Democratic Progressive Party candidate, Lai Ching-te, would see Beijing raise the pressure on Taipei.
War risk around Taiwan in 2024 is very low. More likely challenges involve limited scenarios around regulation and trade disruption. At the same time, meetings between US and Taiwan officials are scheduled for 2024 as the US moves to bolster Taiwan’s military capabilities. Accidents remain a possibility as both sides continue to ramp up military exercises.
Further trade or investment controls on China by the US could exacerbate tensions, but 2023 hinted at how China’s retaliation tools might be deployed in response to future US actions. The past year saw Chinese regulators rule US semiconductor and consumer electronics firms a security threat and Beijing use its Unreliable Entity List and its Export Control Law for the first time. Beijing’s legislative plan for the coming years suggests much legal and regulatory uncertainty ahead.
Huge uncertainty hangs over how US priorities might change and how China will steer its economy in 2024. Companies risk decision paralysis: is it best to wait and see, or roll the dice?
