The other major positive story came, amazingly enough, out of San Francisco.

The Golden City isn't known for as many uplifting stories - or Golden scenes - as it once was but it made an exception this week when President Biden met President and General Secretary Xi Jinping at the sidelines of an APEC conference.

​The talks went long (4 hours) and also seemingly went very well. President Biden even found the occasion to remind Xi Jinping about his wife's birthday.​

Among the other highlights was an agreement on the Chinese production of fentanyl, a development that will be a major relief for San Francisco among other American metropolises, big and small, that suffer the ravages of the opioid epidemic.

The big news though is that the US and China will resume high level military communication. This is critical to avoid mishaps or crossed signals that could easily spiral into becoming a real conflict.

The two most powerful militaries should be able to assure each other about their actions and intentions. We need to avoid, at all cost, the sort of fog of uncertainty and mistrust that has often led to rivals misreading signs believing and the worst a situation where a hot war rapidly becomes a self fulfilling prophecy.

All of this is less likely to occur after this week.

​Here is what Xi Jinping said after his meeting with President Biden:​

“For two large countries like China and the United States, turning their back on each other is not an option … planet earth is big enough for the two countries to succeed and one country’s success is an opportunity for the other."

​For his part, here is what President Biden said afterwards:​

“We’re back to direct, open, clear communications.”

This is great news. Here is hoping it lasts.

Even if is just rhetoric and both sides are going to go right back to undermining each other it is far better that the world's two major power are "jawing, jawing" than "warring, warring" to paraphrase Winston Churchill.​

The reason this is important is that the world is in a precarious geopolitical place right now.

It isn't just the terrible conflicts in Ukraine and Israel and Gaza and the West Bank. Those are bad enough but it is the potential for a global "hot war" that is really concerning. As we have mentioned before, we don't know what the odds are precisely but there is little question that the chance of a serious conflict are rising and already far too high for comfort.

There are a few challengers for the role of catalyst but the fact that Iranian proxy militias keep attacking the US military in the Middle East is up there.

This isn't getting a lot of attention right now with everything else going on but you better belief the US military is taking it seriously.

Each one of these incidents below threatens an escalation that develops into a major Middle Eastern war with extremely uncertain consequences.

Removing one of the world's other major tensions points is thus very welcome.

Is this a real reset in relations?

No, this may not change the essentials of the US/China dynamic but it is nonetheless a welcome improvement.

The two powers are most certainly still engaged in a serious rivalry. Very quickly this feel good moment will be replaced by the cold hard reality of sanctions, tough rhetoric and destabilizing actions.

First and foremost, we will almost certainly see the slow but steady increase in competition in places like the South China Sea and strategically important industries like electric vehicles, semiconductor chips and rare earth minerals.

​Even this week witnessed Australia accusing a Chinese warship of using sonar to harm its divers which were clearly fishing nets near Japan (and so nowhere near China).

For now, it will be telling to see if the Chinese have any follow through on their promises and, if so, to what degree. We won't be holding our breathe there either.

But, this week's talks still matters.

Besides the fact that the temperature of the rivalry has come down there is also the fact that both sides have acknowledged they need each other - at least a little bit.

For instance, the US needs China's assistance to help combat its serious fentanyl crisis and, just as important, China has realized just how far their reputation has fallen is in the West.

Both parties need a properly functioning system of global trade. That system is hanging increasingly by a thread these days and we can hope that "doux commerce" in Montesqieu's famous phrase will keep things at least slightly agreeable.

What are the financial implications?

The simple conclusion from this is that this change is good for the US, less so for China. This most certainly includes US companies.

Why?

The US and its largest companies benefit from a stable and well functioning global system of trade and governance. What they fear is either the loss of global markets or, especially the splintering of the globe into two distinct zones of influence and commerce.

Meanwhile, most of China's serious issues at present are domestic in nature. Many of them are very tough on the country's companies and economic vitality. The slow moving property catastrophe, sky high local debt, slowing economic growth and, perhaps above all, the challenge of navigating President Xi's "common prosperity" mantra that means far more capricious state involvement in the economy the situation in China is dire.

It is simply a very tough time to be a Chinese entrepreneur or a Chinese business leader and none of that has changed this week.

This lack of a shift is true abroad as well. These talks, constructive as they may be, are unlikely to lead to a surge in US investment in China. Nor will they lead to a meaningful relaxing of the economic sanctions or tariffs on certain sectors.

Finally, China won't slow its base building in the South China Sea or its industrial espionage or, most importantly, its efforts to set up its own set of standards, alliances and relationships around the globe.

So, while positive right now, we should be careful about reading too much into the idea that "Planet Earth is big enough for the two countries to succeed."

It may be big enough but that won't stop the competition between the two rivals and it is the latter quality, not the size of the earth, that will determine the outcomes.

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