China will be the biggest geopolitical challenge for Biden this year, Dan Yergin says

Taking office during the worsening coronavirus pandemic, a global economic downturn and a deeply divided America, soon-to-be President Joe Biden has his work cut out for him in 2021. 

But the biggest wildcard on the world stage will be the U.S.’s relationship with China, says Dan Yergin, veteran energy industry expert and vice chairman of analytics firm IHS Markit. The world’s two largest economies clash along lines of ideology, military activity and power — but their economic interdependence and impact on the rest of the world make the stakes particularly high. 

“The number one geopolitical issue is the relationship between the U.S. and China,” Yergin told CNBC’s Hadley Gamble during the Atlantic Council’s virtual Global Energy Forum on Tuesday.

“Is this a new cold war? It’s not like the Soviet-American cold war, because these economies are so interdependent,” Yergin, who has written several books on geopolitics, said. “You’re going to find other countries are concerned about having to be on one side or the other.” He described leaders in Southeast Asia, the Middle East and Latin America expressing their concern and stressing their opposition to being caught in the middle of spats between the two world players.

“So I think it’s going to be a very complicated process because everything is so intertwined. It’s not like (the) Soviet Union where you can just slam the door.”

And Biden administration appointees, currently in the process of being confirmed by Congress, have so far pulled no punches in talking tough about China. 

Biden’s pick for Secretary of State Antony Blinken, during his Senate confirmation hearing Tuesday, said that “President Trump was right in taking a tougher approach to China,” while adding he disagreed with Trump’s methods. But he stressed that China poses the most significant challenge to the U.S.

Trump’s policies toward China, including launching a trade war that hit global growth and impacted businesses and industries all over the world, pushed the two countries’ relations to what many experts described as their lowest level since the Cold War. His administration also barred several Chinese companies from doing business in the U.S., citing security risks.

Biden has stressed his intention to hold China accountable for its role in the spread of the coronavirus. But unlike Trump, the former vice president believes in a multilateral coalition of like-minded allies to counter what it sees as Chinese threats and unfair practices. 

During the presidential campaign, Biden and Trump traded barbs in political ads, each accusing the other of being soft on China. But while Biden is expected to maintain a hard line on the Chinese Communist Party, the methods between the two administrations are likely to have significant differences.

Whatever those differences will prove to be, the consequences will remain high — not least because of the build-up of military hardware in the South China Sea, which is also home to one-third of the world’s maritime shipping. 

“The risk around the South China Sea” is crucial, Yergin said. 

“As much oil passes every day through the South China Sea as passes through the Strait of Hormuz. So what happens there is very important,” he stressed. “That’s the place where the U.S. and China have the most direct military contact. So if you’re looking at where something could go wrong, it’s there, and it’s very important to understand the nature of what this conflict is about and what the differences are about. So keep your eye on that.”