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Opinion
A New Deal on the Cards?
Economic cooperation between China and the U.S. is of paramount importance
By Rick Dunham | NO. 14 APRIL 6, 2017
Chinese railcar manufacturer CRRC Sifang America breaks ground in Chicago on March 17 for a $100-million plant that will build cars for the city’s transit authority (XINHUA)

As a candidate for president of the United States, Donald Trump's criticism of China was frequent and often incendiary. The then real estate mogul and reality television host

accused the world's second-largest economy of "cheating" American businesses and "raping" the U.S. economy with unfair trade practices and currency manipulation—charges dismissed as false by Chinese officials. Undeterred, Trump threatened to slap a 45 percent retaliatory tariff on Chinese goods entering the U.S.

But Trump's actions as president—thus far—reflect a different approach, and provide evidence that the economic ties between the world's two largest economies may be more enduring than the spicy campaign rhetoric. On a two-day visit to Beijing in mid-March, U.S. Secretary of State Rex Tillerson echoed his Chinese hosts' calls for bilateral economic progress. At a joint press conference with Chinese Foreign Minister Wang Yi on March 18, Tillerson, the former chief executive officer of the multinational energy giant ExxonMobil, called for a "result-orientated" relationship with China. The U.S.-China economic engagement of the past two decades, Tillerson said "has been a very positive relationship built on non-confrontation, no conflict, mutual respect, and always searching for win-win solutions," using words almost identical to President Xi Jinping's comments during a 2014 meeting with then President Barack Obama.

Despite Trump's campaign rhetoric, Chinese officials publicly say they expect no change in the direction of the two sides' economic relationship under a Trump presidency. "Both he and I believe that we need to make joint efforts to advance China-U.S.

cooperation and we believe that we can make sure the relationship will move ahead in a constructive fashion in the new era," President Xi said after meeting with Tillerson in Beijing on March 19.

Trade matters

Economic statistics reflect the fruits of bilateral engagement. Two-way trade between the nations has grown from $7.7 billion in 1985 to about $600 billion. The United States is China's leading export market, and China is the third largest destination for U.S. goods, after neighbors Canada and Mexico. American exports to China have increased six-fold since China joined the World Trade Organization in 2001, and Chinese exports to the U.S. have increased five-fold. American brands such as Starbucks, McDonald's, KFC and Walmart are ubiquitous in China. While Chinese foreign direct investment (FDI) in the U.S. has increased more than 13-fold since 2005, and covers a wide range of sectors including energy, food and agriculture, and commercial real estate. This FDI has created more than 90,000 American jobs, according to a 2016 report by the National Committee on U.S.-China Relations and the Rhodium Group. And China has helped the U.S. fund its deficit spending for government operations, from its social safety net to military spending, by holding more than $1 trillion in U.S. Treasury debt as of December 2016.

For both nations, the economic stakes of conflict are high, and the rewards of cooperation are palpable. "In the China-U.S. economic and trade relationship, cooperation brings about benefits and confrontation brings about damage," Sun Jiwen, a spokesman for China's Ministry of Commerce, said at a press briefing in January. After a meeting between Tillerson and Chinese State Councilor Yang Jiechi on March 18, acting U.S. State Department spokesman Mark Toner looked at the bright side, saying the two men "discussed the importance of improving and maintaining a mutually beneficial economic relationship between the two largest economies in the world."

While the public tone of the diplomats remained positive, both nations would like to see certain economic complaints addressed. America's $347 billion trade deficit with China has prompted top U.S. officials to seek greater market access and lower tariffs on a wide range of American goods and services. Trump promised last year to "cut a better deal with China that helps American businesses and workers compete."

China, meanwhile, has suggested that the U.S. has begun a "pivot to Asia" policy designed to contain China's economic influence. Chinese officials complained about U.S. resistance to allied nations joining China in launching the Asian Infrastructure Investment Bank. China says the U.S. has unfairly limited Chinese investment in the U.S. on the grounds of national security, and has blocked the export of some hi-tech products from the U.S. and EU to China on the grounds that these technological deals could be used for military and intelligence purposes.

The two sides believe there is room for progress on bilateral investment treaty negotiations, macroeconomic policy coordination and intellectual property talks. Beijing would also like to continue cooperation with the U.S. on global climate change action, despite the fact that on March 28 Trump signed an executive order rescinding Obama-era rules which sought to tackle climate change.

Uncertainties remain

China and the U.S. face global economic uncertainties as well. Trump has promised "America First" policies and has spurned negotiations for trade pacts with both Asian and European allies. President Xi, in a speech in Davos, Switzerland, said China is committed to championing international trade, but sputtering growth in Europe and economic stagnation among East Asian neighbors have reduced the potential for expansion through international commerce.

Amid these uncertainties, Premier Li Keqiang said on March 15 that China does not desire heightened economic tensions with Washington. "We do not want to see any trade war breaking out between the two countries. That would not make our trade fairer," Li said at his annual news conference. "Our hope on the Chinese side is that no matter what bumps this relationship hits, we hope it will continue to move forward in a positive direction."

But the direction of the bilateral relationship may be up to Trump, a mercurial boss with a habit of making public policy through 140 character bursts on Twitter. While Tillerson was trying to hold sensitive meetings in East Asia over nuclear weapons on the Korean Peninsula, Trump complicated matters with a provocative post on social media. "North Korea is behaving very badly. They have been 'playing' the United States for years. China has done little to help!" he tweeted. A number of Congressmen suggested "secondary sanctions" on Chinese banks and other businesses that had deals with Pyongyang.

It wasn't the first time Trump complicated his chief diplomat's outreach efforts. On February 23, Tillerson was dispatched to Mexico as part of a high-level delegation assigned to smooth over strained relations with a historical U.S. ally after Trump took steps to begin construction of what he called a "Great, Great Wall" along the border between the two nations to keep out "rapists" and other "bad hombres." Tillerson sought to reassure wary Mexicans that the U.S. did not harbor any animus, but back in Washington, Trump was less diplomatic, telling reporters, "We're going to have a good relationship with Mexico. And if we don't, we don't."

Some in China remain wary that Tillerson's diplomatic outreach could be rendered ineffective by impulsive, aggressive presidential talk or action. After all, Trump broke from decades of American policy by taking a telephone call from a top Taiwan official. Following an outcry from Beijing, he confirmed in a telephone conversation with the Chinese president that he would honor the one-China policy that has been in place since the 1970s. The two leaders are expected to get to know one another in person in the coming months after their meeting at the American president's palatial Florida resort in early April.

Orville H. Schell III, Director of the Center on U.S.-China Relations at the Asia Society in New York, told The Guardian that "it (Xi and Trump's meeting) actually has the potential to be quite a game-changing moment."

 

The author is co-director of Tsinghua University’s Global Business Journalism Program

Copyedited by Dominic James Madar

Comments to liuyunyun@bjreview.com

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