U.S. President-elect Donald Trump isn’t an emperor, or Jack Ma a lowly tributary. But in paying tribute to the incoming leader of the reigning superpower, Ma hopes to avoid the wrath of Trump Nation.
There’s no other way to describe Asian billionaires like Alibaba’s Ma — and SoftBank’s Masayoshi Son before him — greasing the palms of an economy that could make life very difficult for overseas subjects. Ma’s pledge to create 1 million new U.S. jobs is all about currying Trump’s favor as his White House mulls a Chinese trade war.
In an underappreciated way, though, Ma is offering President Xi Jinping a blueprint for how the mainland might combat Trump’s anti-China worldview.
We can disagree with Trump’s blustery language and the bluntness of his remedies, but not the culpability of Beijing’s policies. Xi’s government must own the extent to which anti-globalization fervor bears Chinese fingerprints. It’s not all China’s fault. The growing number of apps on our smartphones is doing plenty of disrupting, too. Yet the fallout from China’s low wages, negligible environmental protections and predatory trade practices have much to do with the populism upending Europe, Asia and the United States. When Trump voters scream things are “rigged,” they’re as angry at the post-December 2001 world order as anything.
That’s when China joined the World Trade Organization, a step economists thought would Westernize the most populous nation. Instead, China bent the WTO to its own purposes. With an undervalued currency, giant subsidies for industries like coal and steel, barriers to entry, epic overcapacity and lax labor standards, China pulled millions out of poverty at the expense of richer economies. That’s how development works, of course. But Beijing forgot the part about economic reciprocity. It hasn’t sufficiently opened up to trading partners. In fact, Beijing is erecting new roadblocks and red tape for foreign companies.
Such maneuvers inform Trump’s views, even if conditions are rapidly changing on the ground in China. Threats to label Beijing a currency “manipulator” ignore the possibility that the yuan is overvalued amid surging debt and sliding growth.
China isn’t “raping” U.S. workers these days so much as rising wages are forcing multinationals to leave it. Still, Trump supporters want him to fight back against China, which arguably benefited the most from globalization. He’s even threatening 45 percent tariffs.
Xi should follow Ma’s lead and convince Trump that China is prepared to play a stakeholder role in global prosperity. Recent threats in state-run media to undermine U.S. brands in China, including Starbucks, will only provoke Trump’s team. A better strategy is Xi making good on “opening up” promises with fewer trade barriers, scrapping restrictions on overseas investments, leveling the playing field for corporate America and fighting cybertheft by mainland players.
Why not call Trump’s bluff and suggest a China-U.S. trade summit within the next 30 days? If Trump declines and slaps big import taxes on China Inc. and shames the yuan before then, his administration might lose trust globally. And trust, let’s face it, is the key to any commercial pact, one that works both ways. The onus is on China, too, to convince trade partners that any deal with Beijing is mutually beneficial, not some Faustian bargain they’ll regret.
China’s sordid track record does Xi no favors. Ask leaders in Latin America and Africa whether Beijing’s pledges to revive local economies were realized. China is skilled at winning resources and influence in far-off lands, less so at enriching their workers. Xi would be wise to change the narrative from China the job killer to China the prosperity creator. A more open, reciprocal China would silence leaders from Trump to Germany’s Chancellor Angela Merkel to Prime Minister Shinzo Abe.
Ma isn’t the only Asian titan paying tribute to Trump Nation. Days after Trump slammed Toyota in a tweet, Japan’s premier company said it would lavish $10 billion on U.S. investments over the next five years. After the Trump meeting, Ma’s team tweeted that Alibaba “wants to create U.S. jobs by helping U.S. small businesses and farmers sell to China’s 300 million-strong middle class.” But Alibaba can’t help businesses export more to China — to get truly transactional, in the Trump sense — unless Xi lifts trade bans.
Rather than dig in his heels, Xi should address reasons why China is at the center of anti-globalization anger. By reducing overcapacity, removing investment barriers, boosting innovation to make China less reliant on exports and proposing ways to cut trade surpluses, China could slow the rising tide of protectionism. Not only would it head off a trade war, but also lead to a more vibrant and balanced China. With a bit of courage and foresight, Xi could change the China narrative from a zero-sum game to win-win.
Based in Tokyo, William Pesek is executive editor of Barron’s Asia and writes on Asian economics, markets and politics. www.barronsasia.com
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