Donald Trump doesn’t enter the White House until Jan. 20, but China’s leaders are already dancing in their Beijing offices.
That’s not the official line. On the surface, Chinese President Xi Jinping’s government is aghast at the protectionist U-turn in Washington, Trump’s fiery China-bashing and pledges to shock international trade dynamics. Below it, Xi’s Communist Party has big plans for making China great again these next four years — with the unwitting help of America’s next leader.
Trump’s haste to pull out of the 2015 Paris Agreement on climate change is a preview of how it will work. When Xie Zhenhua, China’s veteran climate chief, says, “I believe a wise political leader should take policy stances that conform with global trends,” he trolled Trump on three levels. One, his grasp of basic science (Trump says climate change is a hoax created by China). Two, his role as global spoiler. Three, the irony of a businessman missing the biggest business opportunity of our day: replacing fossil fuels.
Beijing’s poke also demonstrates how Trump is ceding the mantle of environmental leadership to the world’s worst polluter. As it takes the moral high ground and looks downright magnanimous, Beijing shows how it plans to run circles around Trump. Here are three other ways in which China is anxious to profit from the Trump White House.
Antiquated economic views. Trump has ample latitude to disrupt China Inc. should he follow through with threats of 45 percent tariffs and currency wars. With 6.5 percent growth becoming harder and harder to maintain, China needs U.S. consumers to buy its goods and corporate America’s investment and know-how to move up market.
Amid daunting overcapacity and mounting debt, Trump’s policies would cause considerable pain in the short run. But Trump aims to battle a Chinese model that no longer exists. The days of cheap China labor “stealing” millions of U.S. jobs have already given way to designs on inventing smartphones, semiconductors and self-driving cars, and letting India and the Philippines have the factories on which Trump obsesses.
China is already focused on a post- Wal-Mart era of innovation and apps. Trump understands hardware China but doesn’t seem to grasp its software aspirations to out-Apple Apple and Silicon Valley. There’s a reason China’s state media took Russian President Vladimir Putin’s lead and endorsed Trump: as Trump fights the economic wars of the past, Beijing will have space to devise a winning formula for the future.
Political cover to play favorites. With his America-first rhetoric and anti-globalization mindset, the Trump years will play right into Xi’s emphasis on lavishing subsidies on national companies and giving blank checks to local government or entrepreneurs looking to be/or produce the next Jack Ma of Alibaba fame.
Last year, Premier Li Keqiang unveiled a 10-year endeavor called “Made in China 2025” that aims to improve technological and industrial innovation, promote Chinese brands, becoming a leader in green manufacturing techniques that can be sold globally and morph the mainland into the epicenter of robotics, medical devices and high-term transportation.
But it also aims to keep out foreign influence and involvement, something that’s become increasingly controversial in recent years. A year ago, the talk was about how companies from Qualcomm to Chrysler to GlaxoSmithKline to Johnson & Johnson to Samsung were being hit with massive fines by Chinese regulators for arbitrary reasons. Now, it’s about Trump doing the same in the U.S. — and China having carte blanche to steepen its playing field against corporate America.
Asia trade blind spot. I have never been kind to U.S. President Barack Obama’s Trans-Pacific Partnership, an opaque 12-nation mess of a deal written by corporate lobbyists and stacked against the common man. But by offering nothing in its place, Trump is ceding influence to an economy he pledged to contain. On Sunday, Pakistan accepted the first massive shipment of Chinese goods via the renovated Gwadar port, a sign that links between China, Asia and beyond are about to reshape global trade in Xi’s direction. As Washington bickers about old enemies from Tehran to Moscow and risks making new ones, China is making its economy great again by seeing to it that all roads lead back to Beijing.
“Is it time,” asks Carl Weinberg of High Frequency Economics, “to make a good deal so both the U.S. and China can prosper from trade together?” The odds are low. Trump’s most ardent supporters, the ones chanting “build the wall” would rebel. It also would get in the way of Xi’s plan to outsmart Trump at every turn and to remind his 1.3 billion people democratic elections aren’t all they’re cracked up to be. China’s leaders, as Trump liked to say, are smarter than America’s. Don’t the Chinese know it!
William Pesek is executive editor of Barron’s Asia. www.barronsasia.com
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