Shock, but little awe

Donald Trump’s electoral triumph this week has embarrassed the political pundits, very few of whom expected the property mogul to win. A small group of Chinese investors was much better prepared for the change of America’s commander-in-chief.

After Barack Obama won office in 2008, a little known refrigerator maker called Acuma jumped more than 20% in the next week. Following his re-election four years later, the Qingdao-based company enjoyed another 5% spike in a single session. The reason: Acuma’s name in Chinese resembles the official transliteration of ‘Obama’.

As such, investors had been seeking out obscure firms whose names rendered them worth a punt on the latest race to the White House. As news of Donald Trump’s shock win rattled the financial markets in Asia on Wednesday, software maker Wisesoft bucked the broader trend, surging nearly 10%. The pleasant surprise was, again, due to its name, which sounds similar to “Trump wins big” in Chinese. Poor old Shenzhen-listed auto parts maker Xiyi Industrial got the rougher end of the deal, however. It sounds like “Auntie Xi”, a phonetic translation of Hillary Clinton’s first name, so it tumbled by the 10% daily limit.

Speculative bets in the stock market aside, political analysts are wondering what Trump’s unexpected victory means for China and its relationship with the US over the longer term. For instance, could the Chinese turn out to be the real winners of the American presidential election?

What was Beijing’s official response?

Donald Trump will become the first American president with no prior background of public office, which means that Chinese diplomats won’t have had any experience of dealing with him. That may explain Beijing’s cautious tone in congratulating Trump on his win. “I highly value the relations between China and the United States, and I am looking forward to working together with you to expand China-US cooperation in every field,” Chinese President Xi Jinping told him in his congratulatory message.

With their “differences controlled in a constructive manner”, Xi said he and Trump could improve China-US relations further from “a new starting point”.

The Chinese Foreign Ministry’s spokesperson Lu Kang was asked repeatedly for Beijing’s thoughts on Trump during a routine briefing on Wednesday. Lu stuck mostly to bland statements, such as “that the new US government can make joint efforts with China to present a steady and sound bilateral relationship to people from the two countries and beyond”.

But he was willing to expand a bit further on some of the economic issues in that relationship, especially Trump’s recurring jab that China is stealing American jobs.

“During the US presidential election campaign, there were some arguments saying China-US trade had affected employment of the American people. In fact, bilateral trade had brought benefits to the two peoples and increased employment in the United States,” Lu said, adding that trade volumes between the world’s two biggest economies had surged from about $2 billion in the 1970s to more than $500 billion last year, making China the largest trading partner of the United States.

How the Chinese press saw Trump’s triumph…

As the Chinese proverb goes, the bystanders’ view is always clearer than the participants. That was a key theme in the Chinese media, which seemed pleased that their American counterparts had got their predictions so wrong. (The New York Times, for instance, had only days earlier forecast that Trump only had a 5% chance of pulling off a victory.)

The circus surrounding the Trump campaign has offered a golden opportunity for China’s newspapers to trash the American political system – partly using Trump’s own claims that the American system is rigged in favour of moneyed elites and that democracy isn’t working for ordinary folks.

The media kept up the criticism all the way to polling day. China’s state broadcaster CCTV ran man-on-the-street interviews with American voters the day before the election in which they expressed disgust with the system and dissatisfaction with both candidates. “History will deem this election the most dark, chaotic and negative one in the past two centuries. It certainly will not be viewed as a victory for democracy,” an op-ed in the People’s Daily opined shortly before American voters cast their ballots.

As the results were announced, the mood changed little. The Americans “have picked their president but they have not found the answer,” Xinhua reported after Trump was confirmed as the 45th occupant of the White House. “The American political system is mired in deep trouble. There is no clear answer on when the worst will be over.”

Some of the state newspapers drew on history closer to home in their interpretations, claiming that the election was an American-style Cultural Revolution, and a political revolt against the elites. “The mainstream values of both the Democratic and Republican parties have lost touch with the times. The media violated the principle of remaining a neutral and objective voice. It misled the electorate with fraudulent polling practices. As a result, the divide between the classes is larger than ever,” the Global Times proclaimed.

And the reaction in social media?

According to the South China Morning Post, Chinese websites and news outlets had been told by the government not to provide live coverage of election day, and to avoid excessive reporting on the voting, in order to limit “possible influence from Western ideas and democracy”.

Nevertheless the state censor didn’t impose its presence too heavily in social media. According to Hong Kong’s TV operator TVB, the number of weibo comments on Trump had topped one billion only a few hours after his election win. Many netizens seemed unsure whether to take the new president too seriously. “The whole world is celebrating right now because America voted for this idiot,” one of the more popular comments on weibo suggested. Others opted for contemporary Chinese history to explain Trump’s success. “Once again Chairman Mao’s strategy of ‘encircling the cities with the countryside’ is the correct way to seize ultimate victory,” another wrote, pointing to the fact that Trump’s campaign had been so appealing to the more rural American working class.

Of course, Hillary Clinton has never been a particularly popular figure in China (see WiC277) and her failure to become the first female president wasn’t much lamented online. Another widely forwarded weibo comment read: “America, we have good news: it’s a boy!!!”

How about China’s political elites?

Peculiarly, the very same social divide that American political pundits are now citing as a key factor in Trump’s victory also seemed to be at work in China.

In general, while netizens mocked both Trump and Hillary remorselessly on social media, online celebrities from the business world and academia (i.e. the elites) tended to express concern at the unexpected outcome.

Jia Qingguo, the dean of the School of International Relations at China’s prestigious Peking University, for instance, called Trump “a symbol of uncertainty”.

“Beijing tends to prefer incumbent party successors with consistent policy lines. Trump’s lack of a governance track record and his unorthodox take on long-held Republican priorities could prove a headache for Chinese officials,” Reuters also reckoned.

After talking to half a dozen officials or sources with insight into the thinking of top Chinese policymakers, Foreign Affairs magazine reached the conclusion that many in Beijing’s political setup might have preferred Clinton in the White House. “While China’s elites scrupulously avoid taking public positions on internal affairs of other countries — especially US politics — their incessant concern for stability, international as well as domestic, moves many to believe that Clinton, not Trump, would be better for China,” a source told the magazine.

On the other hand, if Trump’s political impact turns more widely disruptive, the Chinese might enjoy taking on the role of the wiser, more stable party. When markets first went into meltdown as the results started coming in, the Wall Street Journal noted that China’s currency rallied against the dollar in trading in Hong Kong, putting it in the league of other haven currencies such as the yen and the euro. “That is an important signal that could embolden China to think of itself in a more pre-eminent position versus the US as it competes for economic influence in Asia and beyond,” the newspaper suggested.

A recap on Trump’s election pledges on China…

China featured big in Trump’s seven-point plan to rebuild the US economy and these ideas make for grim reading – in China – if he follows through with them.

The risk of a currency war will increase, given that Trump pledged to instruct his Treasury Secretary to label China as a currency manipulator. And so will the risk of trade conflict if Trump slaps the 45% tariffs on Chinese imports that he promised for his first day in office.

“They come in, they take our jobs, they make a fortune. We are living through the greatest jobs theft in the history of the world,” he fumed on the campaign trail.

While some of Trump’s protectionist barbs promise turbulence in Sino-US economic relations, many of his foreign policy instincts may be more palatable to the Chinese. The ‘Asia pivot’ policy was a priority in Obama’s administration, with Clinton a chief architect of the strategy. However, Trump’s “America first” ethos puts Washington’s Asian commitment heavily in doubt. Commentators generally expect him to cut back America’s overseas presence and focus on building industrial capability at home. The Trans-Pacific Partnership (TPP) trade deal, another initiative to wrest the commercial initiative away from the Chinese in Asia, also looks certain to be scrapped.

Writing in the Global Times, scholar Mei Xinyu saw strategic advantage in a Trump victory: “From a comprehensive view, it would make it easier for China to cope if Trump is elected. This is because under the policy line advocated by Obama and Clinton, the political and military frictions between China and the US will be more frequent.”

On balance, James Palmer, the Asia editor at Foreign Policy magazine, also believes that a Trump White House is a “ geopolitical victory” for the Chinese leadership. “China no longer faces the prospect of Hillary Clinton, a tough, experienced opponent with a record of standing up to bullies. Instead, it faces a know-nothing reality TV star who barely seems aware that China has nuclear weapons,” he writes.

“Trump is also exactly the kind of businessman who is most easily taken in by China – credulous, focused on the externalities of wealth, and massively susceptible to flattery. A single trip, with the Chinese laying on the charm, could leave him as fond of China’s strongmen as he is of Russia’s Putin,” Palmer added.

Others expect Trump’s personal impact to be limited in diplomatic terms. The Diplomat, another foreign affairs magazine, says that he is likely to be more reliant than previous presidents on his advisers because he has no foreign policy experience, although appointments to key posts such as Secretary of State may offer hints in evaluating his broader instincts on China policy.

Of course, the Chinese could emerge as a major beneficiary if Washington reduces its commitments in Asia, pushing countries into dealing more closely with Beijing. Alternatively, American withdrawal might stir the kind of tensions in the region that its leading economies would prefer to avoid. Certainly, China’s north Asian neighbours have been spooked by Trump’s unexpected win. The South Koreans have already called an emergency meeting of their national security council (see page 14), while the Japanese are rushing to send an envoy to the US in the next few days. “For Japan, the biggest concern is how Trump will deal with the US commitment,” Japan Times notes. “For example, it is unclear if Trump will really ask Japan to pay more and withdraw US military forces if it does not.”

So is Trump good news for China?

Much depends on whether Trump behaves in office as he did when he was a candidate. It’s not just the Chinese wondering whether this is likely, although it was the main question asked in one of China Daily’s editorials on Thursday.

“His many statements and partisan affiliation have offered few clues as to what his policies will be when he takes office,” the newspaper said, “although his assertion that ‘Americanism, not globalism, will be our credo’ is likely to shape them.”

Yet despite Trump’s apparently isolationist and protectionist instincts, it simply won’t be possible to retreat into an American stockade because too many of the country’s leading industries depend on access to a more integrated global economy.

The Wall Street Journal gives the example of Apple, America’s largest company by market capitalisation, which makes nearly all of its products in China, and for whom China is its largest market outside the US. Boeing is the preferred aircraft brand in China, the newspaper also points out, while the Chinese have been turning to Hollywood for production know-how, by investing in studios and inking distribution deals for US content.

The Global Times, meanwhile, makes the point that China-US relations aren’t going to be determined by Trump’s character alone as China will insist on safeguarding its interests. “China is strong enough to cope with Trump’s victory,” was the newspaper’s verdict. “If Trump wants to target bilateral trade, he should first weigh the consequences of China’s countermeasures.” Of course, the rest of the world is only just beginning to absorb the enormity of Trump’s triumph. But at the very least WiC looks forward to Xi Jinping’s next visit to Washington, following Trump’s earlier promise that the Chinese leader would get nothing more than a McDonald’s hamburger at that state dinner…

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