In a win for trade, the US and China are teaming up.

The flurry of diplomatic activity between the U.S. and China suggests that far from breaking ties, the world’s two largest economies are actively seeking ways to restore their strained economic relationship. Let’s call it regrouping, a process that delights the business community in both countries and frustrates those who hold strong positions advocating for stronger action.

Renewed US-China diplomatic progress reached Zurich last week as Treasury Secretary Janet Yellen sat down with outgoing Vice Minister Liu He. Diplomacy is all about substance in the atmosphere. Compared to the atmosphere of the March 2021 meeting in Alaska, which descended into a shouting match between the two delegates, the Zurich meeting was a love fest.

An official read from the Treasury said the meeting was “transparent, substantive and constructive”, with both sides agreeing that furthering engagement on macroeconomic and financial issues was essential to the “functioning of the global economy”. On a positive note, Liu He is also eager to convey the message that “China is back” which he announced in Davos the same week. Any improvement in China’s economic performance from the low levels of Covid restrictions in 2021 and 2022 is positive. The Yellen-Liu meeting followed the Biden-Xi meeting in Bali last November and a phone conversation in the New Year between US Secretary of State Anthony Blinken and China’s new Foreign Minister Qin Gang, before stepping down from his former DC role as ambassador.

The main question is what does the reset mean in economic relations? Does this mean that the negative rhetoric and tariffs imposed by the US over the past few years are about to be reversed? It is naïve to hope or believe that this will happen. Instead, what we see is a narrow path to reconciliation where the US and China remain fierce competitors in most areas (the US has banned the latter’s passive technology in areas such as semiconductors), and both sides recognize that the $640 billion trade relationship is too big to fail.

The diplomatic overreach has played a major role, as U.S. companies, which have a large and growing interest in China, are reluctant to give up the opportunity to sell products and services to more than 1.4 billion consumers. This is a calculation made by Germany and France, two of China’s main trading partners.

In this context, talk of a “new” Cold War is always futile. In a recent speech in New Delhi, Singapore’s former top diplomat, Bilhari Kausikan, bluntly asserted that “regardless of their differences,” the US and China are “vital, irreplaceable” parts of a global system, interconnected and interconnected by supply chains of unprecedented scale and density. Web. If the fear of secession from both countries is severe, the price will be very high for both countries and the world economy.

For the anti-China lobby in DC, which wants to take a hard line on China, former Treasury Secretary Larry Summers said in Davos last week: “It’s a huge and incredible mistake for the United States to make this decision.” His policy was to stifle China’s economic growth in the name of our national security. It should be noted that unofficial Chinese views on this controversial topic are lacking, as the country’s leader, Xi Jinping, has pushed hard on the private sector and the academic community. Chinese big tech companies such as Alibaba and Tencent, which were significant players on the world stage before the 2020 eclipse, may embrace the norm.

Strictly speaking, reunification does not mean a complete restoration of economic ties. A critical plank of US national security policy – denying China access to advanced technologies – remains intact. Relinking in practice means that outside of these contentious and sensitive areas, businesses can operate and transact more predictably in the two markets. This alone should bring some cheer to the global economy in 2023.