China Ink

The new Trump trade

After Xi summit in Florida Trump backs away from key currency claim – as North Korea becomes his negotiating priority


Manipulators no more?

Foreign press: “They’re not currency manipulators” the American president told The Wall Street Journal last week, acknowledging that the Chinese hadn’t been getting an unfair advantage by driving down the yuan, and the US Treasury Department came to the same conclusion in its semi-annual report on global currency practices soon afterwards. In giving ground Donald Trump was breaking one of his key campaign promises, the New York Times said. Even this month he was claiming that the Chinese were “world champions” at currency manipulation and that previous presidents “haven’t had a clue” about how to deal with it.

Chinese press: “After seeking truth from facts, the Americans have chosen a direction that will benefit the two economies and the world at large,” applauded Xinhua. The US Treasury uses three measures to decide if a currency is being manipulated: a sizeable trade surplus with the US; a current account surplus exceeding 3% of GDP, and expenditure of more than 2% annually on buying foreign assets to suppress the value of the domestic currency. China only meets the first criteria, Xinhua says, because it runs a trade surplus of more than $20 billion with the US.

Reason rather than rhetoric

This was a sensible recognition of the realities, the Financial Times believed, because Beijing has spent billions of dollars propping the renminbi up, not pushing it down. The two presidents have also agreed to spend the next 100 days on a plan to reduce the US trade deficit, although there was nothing specific from the summit on how American exports to China would be increased. But was it another example of Trump talking tough and then backing down, the FT wondered? In February he warned that he might drop Washington’s commitment to the One China doctrine, only to tell Xi a few days later that he would honour the policy after all.

The China Daily linked the climb-down to Xi Jinping’s trip to Florida, which it said had laid the basis for a “constructive relationship”, which “may sound surreal to those preoccupied with an ‘inescapable’ conflict scenario between what they see as rising and incumbent powers”. But Xinhua soon turned to the potential for conflict in North Korea, warning that American policy could easily backfire as “swords are drawn and bows bent” in the region.

Pyongyang: the new priority

Trump admits that he is taking a transactional attitude towards relations with Beijing. “And I told them, ‘You want to make a great deal?’ Solve the problem in North Korea. That’s worth having deficits. And that’s worth having not as good a trade deal as I would normally be able to make,” he told the Journal.

Trump may also be prepared to be patient, after Xi gave him a history lesson on China’s challenges in dealing with North Korea. “After listening for 10 minutes I realised that it’s not so easy,” he told the Journal.

Beijing is reported to have issued new directives telling traders to return North Korean coal and the Global Times argued that China should support fuller UN sanctions if another nuclear test is conducted. But Chinese diplomats are more concerned about dialling down the tension in the region. “The situation now is similar to the time before a storm, and this kind of dangerous situation is worthy of our attention and we must be alert,” warned foreign minister Wang Yi. “No matter who the nation is, if it continues to provoke wars in the Peninsula, it has to bear this historical responsibility and pay its price.”

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