In the below update, we examine the key outcomes from what the Chinese government billed as President Trump’s “state visit-plus” last week, particularly with regard to bilateral economic relations and tensions on the Korean peninsula.
A big win for Beijing
Without any of the hitches that often occur during the highest level Sino-U.S. exchanges, Trump’s state visit went as smoothly as Beijing could have hoped for and was widely touted in the Chinese media as setting a “new blueprint” for Sino-U.S. relations. The U.S. president was effusive in his praise for President Xi Jinping, who recently cemented his status as China’s most powerful leader in decades at the 19th Party Congress, calling him “a very special man.” Xi described bilateral relations between the world’s two largest economies as standing at a “new historic starting point” – a designation that fits neatly within his administration’s freshly unveiled narrative of a “new era” for China.
Trump as the junior partner?
As mentioned in our earlier update about what to expect from Trump’s visit, the relative standing of the two presidents has shifted considerably following their first meeting in Florida in April. While Xi’s stature within the Party-state apparatus has soared ever higher, Trump’s own political fortunes seem to have spiraled downward as he has become increasingly embattled on the home front just nine months into his presidency.
Last month, the Economist even described Xi as “The world’s most powerful man” for its cover story, a title typically reserved for the occupant of the White House. When asked by reporters what he thought about his Chinese counterpart’s impressive political status, Trump was quick to highlight his own track record, pointing to the “highest stock market in history, lowest unemployment in 17 years, a military that’s rapidly rebuilding…We are coming off some of the strongest numbers we’ve ever had. He [Xi] respects that, and he’s a friend of mine.” Trump appears to have a very good personal rapport with Xi – but that does not mean that he is ready to be identified as a junior partner in the relationship.
U.S. and China unveil US$250 billion worth of business deals
As the most striking outcome of Trump’s visit, nearly 40 major deals were signed by U.S. and Chinese companies. The two sides estimated that the slew of business pacts had a staggering total value of US$250 billion. China’s Ministry of Commerce heralded the deals as “a miracle,” while U.S. Commerce Secretary Wilbur Ross said that the quarter-trillion-dollar haul “can provide a solid foundation for a stronger relationship that is more free, fair, and reciprocal between the U.S. and China.” Several of the sectors with the biggest recorded agreements included energy, agriculture, technology, aviation, and financial services.
The art of the deal pump?
The enormous bundle of commercial agreements was indisputably a positive and encouraging step forward in the bilateral economic relationship. However, the package’s headline figure of US$250 billion was greeted with more than a little skepticism from those questioning its actual value. For example, many of the deals were non-binding and could years to materialize, if ever. Moreover, a number of the agreements included existing partnerships or had already been in the pipeline long before Trump’s visit, making it unclear how many were simply repackaged for political purposes.
Most contentious trade issues kept on the backburner
Most importantly, the raft of business deals appears to have deflected the Trump administration’s attention from securing major policy wins on some of the pressing commercial issues that have strained economic relations. Little progress appears to have been made in terms of cajoling Beijing to open the doors of the Chinese economy much more fully to U.S. trade and investment and moderate what Washington and the U.S. business community view as unfair trading practices. Trump’s US$250 billion haul provided him with an impressive figure to show the American public, particularly his electoral base, how he is working to create opportunities for U.S. businesses and generate employment at home. But they are not expected to amount to more than a drop in the bucket in terms of narrowing America’s US$347 billion trade deficit with China.
Trump blames past U.S. administrations for trade imbalances
Referring to the existing trade imbalances, Trump faulted preceding U.S. administrations by stating that, “I don’t blame China. After all, who can blame a country for being able to take advantage of another country for the benefit of its citizens? I give China great credit. But in actuality I do blame past [U.S.] administrations for allowing this out of control trade deficit to take place and grow.” This was a startling about-face for an administration that has repeatedly pointed the finger at China for what it has termed unfair trading practices. It remains to be seen whether this was just a momentary blip on Trump’s stance towards reorienting the economic relationship or if he will continue on with a more amiable approach that holds his predecessors more accountable than Beijing for structural imbalances.
Modest concessions on financial services liberalization
However, Trump did not walk away from his visit completely empty-handed other than his huge basket of business deals. The day after the U.S. president called for greater market access in his meetings with Xi, the Chinese government announced that it will ease and ultimately eliminate foreign investment restrictions in the financial services sector. Following the drafting of related rules, the changes will include lifting the limit on foreign ownership in joint-venture firms involved in the futures, securities, and funds markets to 51% from the current 49%. Foreign financial services firms have long been kept on the periphery of China’s financial industry, and the long-awaited step to loosen ownership caps is a small but promising step that will help boost their competitiveness. But, as always in China, the actual impact of the new policy will depend on its implementation in the coming years.
No breakthroughs on North Korea
Beyond economic issues, North Korea was the other major item on Trump’s agenda. In comparison to some of his past rhetoric reproaching Beijing for not doing enough to rein in its neighbor, the U.S. president adopted a much more conciliatory approach towards dealing with the Xi administration on addressing tensions on the peninsula, saying that, “I am calling on China and your great President to hopefully work on it very hard. I know one about your President, if he works on it hard, he will make it happen.” Xi reiterated China’s commitment to achieving the denuclearization of the peninsula while emphasizing that solutions should be found “through peaceful communication and consultation.” No major breakthroughs were announced in terms of Beijing dramatically upping its economic pressure on Pyongyang but none had been expected.
It was reassuring to see how smoothly Trump’s state visit went off, with both sides declaring it a huge success. The massive slate of business agreements was also heartening and will probably help bolster the U.S. president’s hand at pitching himself as a master dealmaker to his domestic audiences. However, whether the deal package fully lives up to its US$250 billion price tag remains to be seen.
Trump’s success in making major progress on the trade issues that have complicated economic relations or persuading Beijing to significantly ramp up its pressure on Pyongyang remains elusive. The “state visit-plus” has almost certainly put Sino-U.S. ties on surer footing in the near term, but businesses will have to wait and see whether Trump’s first outing to China will later be seen as the peak of amicable relations before a downward slide into acrimony.
Photo credit: Xinhua News Agency