China and the World, Talking Point

Exit the disrupter-in-chief

As Trump’s presidency ends, his impact on Sino-US relations will be lasting

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After four chaotic years of souring ties, is Xi Jinping going to miss ‘the Donald’ (and his barrage of tweets)?

Losing contestants on The Apprentice, the reality series that helped to catapult Donald Trump into the race for the White House, were booted off the show straight after being fired. As outgoing president, Trump has lingered longer, protesting for a couple of months against the decision to show him the door.

On Wednesday he finally departed, following a pre-recorded closing video address to the American people. On his list of achievements he cited an uncompromising stance towards Beijing and how he had “rallied the nations of the world to stand up to China like never before”. Certainly there was a whirlwind of activity last year, with more than 200 public actions related to China across at least 10 US government departments, in what was described as a “whole of government” approach.

Undeniably Trump has had a huge impact on Washington’s relationship with Beijing, although not always in the way that he intended. He departed from the White House this week – with CNN repeatedly describing him as “disgraced” and the “worst US president in history” – but taking a step back, what has the former reality TV star actually achieved vis-à-vis China?

Tariffs and trade war: no victory in sight

As a presidential candidate, Donald Trump promised to pulverise China’s huge trade surplus with the United States and on taking office he seemed to relish the confrontation ahead, describing himself as “Tariff Man” and tweeting that “trade wars are good, and easy to win”.

Critics saw these words as evidence that the New York real estate developer’s understanding of international trade was rudimentary. But even in the simplest of scorekeepings, Trump’s dream of an easy victory was soon dashed.

Tariffs were levied on billions of dollars of Chinese goods and there was a small shrinking of the American trade deficit in 2019. But China’s trade surplus with the US was soon rising again, reaching $317 billion last year, the second highest on record.

Nor was there much sign of American companies moving their manufacturing back onto home soil, despite another tweet from the president two years ago in which he instructed them to “immediately start looking for an alternative to China”.

Nonetheless, there were still celebrations in Washington a year ago this week, with the signing of a ‘Phase One’ trade deal in which Beijing agreed to increase purchases of American products and services by at least $200 billion over the following two years (see WiC366).

The disappointment since then is that the Chinese haven’t met the targets, buying about half of the committed amount, although some of that can be blamed on the pandemic, which has disrupted supply and demand for American goods. China’s exports then picked up when its economy sparked back into life in the second half of 2020, helped by a surge in sales of virus-related medical supplies to markets like the US.

That meant despite his trade deal, Trump was no closer to narrowing the trade deficit with China.

Bans on tech sales and restrictions on American investment

Claims that Trump was winning the trade war with China were tenuous but he can boast more of an impact in his efforts to curtail the rise of Chinese tech firms, especially the freeze on exports of American-owned technology to blacklisted customers from China.

Here his campaign wasn’t as toothless, particularly an embargo on sales of American tech components to Chinese companies said to pose a threat to US national security.

The order took time to have an impact but the ratcheting up of the restrictions slowly suffocated the supply of key components to Chinese national champions like Huawei (see WiC519), putting tremendous pressure on its business. Other targets followed, such as the blacklisting of Chinese chipmaker SMIC in October (see WiC513).

The targeting was sustained into Trump’s final days in office: licences were revoked for a number of American suppliers previously permitted to do business with Huawei. Intel was one of the affected companies, it was reported this week, joining the likes of Google, formerly a provider of Android software for Huawei’s smartphones, and TSMC, a Taiwanese manufacturer of much-needed semiconductor chips.

In another confrontational strategy, the Trump administration ordered a broader block on business with companies said to have direct links with China’s military. The measures, which started last June, were stiffened as the year progressed, including stipulations late last year that banned American investors from new investment in the shares of the targeted firms (smartphone maker Xiaomi was one of the more high profile firms to make this blacklist).

The news triggered confusion across the capital markets (see WiC523) after a Trump executive order declared all American shareholdings in the blacklisted companies should be divested. Index compilers and fund managers quickly dropped some of the affected stocks, although opposition from Wall Street has reportedly helped Alibaba and Tencent stay off the restricted list – with the US Treasury blocking the Pentagon’s request to include them on the grounds that it would create financial instability in US markets.

The breadth of Trump’s targets has still been staggering, Bloomberg observed, with punitive action cumulatively taken against China’s three biggest telecoms carriers, its biggest fintech brands, its top two smartphone manufacturers, its leading deepwater energy explorer, its main aerospace contractor (in the military sector), its largest drone manufacturer, and its primary commercial plane maker.

Paradoxically efforts like these have allowed the Chinese government to champion its efforts at opening up its own financial system to outsiders at a time when Washington is closing off its own capital markets.

Yet talk about how the Trump administration is curtailing capital flows to China doesn’t give the full picture. American investment in China probably exceeds $1 trillion if indirect flows through channels like the Cayman Islands are included in the assessment, a study from the American Enterprise Institute pointed out in December. Most of that has arrived over the last six years, coinciding with much of Trump’s time at the White House.

“Investment anywhere near this magnitude undermines the view that the US is confronting China economically,” Derek Scissors, the report’s author, warned, highlighting how American investment in China is much larger than the amounts at stake in the trade row with Beijing. Much of this is portfolio capital and has been invested in listed Chinese companies, including state-owned enterprises. “A great deal of that may be working against US policy and principle,” Scissors pointed out. “There is little point, for example, in ‘countering China by supporting our companies’ or the like, if US capital then supports Chinese companies in equal or larger amounts.”

US policy in flux

Trump’s unpredictable approach did wrong-foot the Chinese during his initial months in office, delivering some unexpected situations – a good example being his unconventional face-to-face meetings with Kim Jong-un (see WiC413). Those summits forced a change of approach from China’s leadership in engaging with the North Korean leader – having earlier refused to meet him as a sign of its disapproval over his missile-testing programme.

Much more significant from Beijing’s perspective was Trump’s disavowal of long-established orthodoxies in American policy towards Taiwan. Their consternation reached a crescendo last week, following the explicit rejection by Mike Pompeo, the US Secretary of State, of diplomatic norms that have limited official interaction between Washington and Taipei under the One-China Policy (see WiC524).

Of all the Trump administration’s clashes with Beijing over the last four years, the issue of Taiwan has provoked the fiercest responses, with the Global Times castigating Pompeo once again this weekend as a “lunatic” and “savage destroyer” of the traditions of US foreign policy.

Earlier this month Pompeo had ordered America’s ambassador to the UN to visit Taiwan – a move he clearly intended to signal greater US diplomatic recognition for the island. Furious calls from Beijing followed and with only days till the Biden administration took office, the State Department conducted a volte-face. It cancelled Ambassador Kelly Craft’s Taipei trip – announcing that the unusual move was part of a broader halt on overseas visits by US diplomats ahead of this week’s inauguration.

The bad blood with Pompeo seems, if anything, worse than any ire that Beijing feels for his former boss, Trump. Indeed, one of China’s first acts after Biden was sworn in was to announce sanctions against Pompeo, preventing him from visiting Hong Kong, Macau or mainland China. The Chinese foreign ministry described Pompeo (and the 27 other US officials it sanctioned) as “anti-China politicians” whose “crazy moves” had undermined Sino-US relations and impinged on China’s internal affairs.

Indeed, in a fairly unusual press conference this week, foreign ministry spokesperson Hua Chun-ying seemed to stoke an anti-Pompeo alliance in her interactions with CNN (the channel has not been a fan of the Trump administration). The American broadcaster was permitted to ask five questions. In answer to its first about Pompeo she let fly, calling him a “notorious liar and cheater who is making himself a doomed clown and a joke of the century with his show of lies and madness just before the curtain falls”.

And in its final question – which also brought an end to the lively press event – CNN’s correspondent asked of the outgoing diplomat: “Do you think you are going to miss him [Pompeo] after he steps down, as he’s such an easy target?” To this she replied: “Of course. He’s such a good laughing stock. It’s like a new drama every day. But I think he has done irreparable damage to the US national image and reputation. It’s such a tragedy for the American people. Will you miss him at CNN?”

This is not the sort of language usually associated with the once-staid Chinese diplomatic corps, but it’s a measure perhaps of how much the Trump administration has changed the landscape.

Less thorny relations ahead?

It is widely thought that Beijing will look to Biden to reset relations. Foreign Minister Wang Yi indicated as much this week when he told Xinhua that the new administration offered “a new window of hope”.

The starting point will be reestablishing the status quo on Taiwan policy, with recognition by both Biden and Xi that this is a prerequisite for a broader improvement in bilateral relations.

But Biden won’t want to come off as weak. Indeed, bigger picture he likely grasps the paradox that Trump’s foreign policy agenda has often benefited the Chinese, allowing them more strategic room for manoeuvre overseas.

Gal Luft, a director at the Washington-based Institute for Analysis of Global Security, thinks that Trump has had more impact on Sino-US ties than any American president since Richard Nixon, whose 1972 visit to Beijing helped to reintroduce China to the global stage after years of self-imposed isolation. Yet his take is also that Trump’s term has been disastrous, geopolitically. “Trump is Nixon in reverse,” Luft told the South China Morning Post this week. “Nixon went to Beijing to stick a wedge between China and the Soviet Union. Trump did the exact opposite: he brought Beijing and Moscow to-gether in a united front against the US. This is a strategic blunder of epic proportions.”

In other own-goals, Trump pulled out of preparations for the TPP, a trade pact previously promoted by the Obama administration, giving the Chinese a chance to entrench their own trade ties across the region. Southeast Asian nations then took over as China’s top trading partner last year and Beijing was more than willing to extend its reach in the region by signing up to RCEP, a new trade treaty between Asia-Pacific nations (see WiC519).

The Americans were then conspicuous by their absence, just as they were a few months later when the Chinese agreed a long-negotiated investment treaty with the European Union. Xi is said to have pushed personally for that deal to be done before Biden had the chance to talk to the Europeans about a new approach to China (see WiC523).

America’s image: the Donald’s legacy

Just as significant is how Trump’s broader policy choices have helped the Chinese to cast themselves in the role of the ‘sensible’ alternative in international affairs – as champions of globalisation or willing signatories to treaties in areas like climate change, for example.

Trump’s temperamental style has also eroded much of the mystique surrounding the presidency, reshaping the perceptions of many Chinese about the US and knocking the erstwhile inviolate image of its political system.

Undoubtedly, America’s reputation has been tarnished by some of the rancor he has created, while his failures in office have been held up as evidence of US decline. The confused response to the Covid-19 crisis was soon contrasted with China’s more effective efforts to control the pandemic, for instance, while the disturbing spectacle of the Capitol Hill ‘insurrection’ this month – in which Trump zealots rampaged through America’s legislative branch, threatening to “hang” Vice-President Mike Pence and capture Congressional leaders – was seized upon gleefully by the Chinese media too.

“We hope that the American people can enjoy peace, stability and security as soon as possible,” deadpanned (once again) foreign ministry spokeswoman Hua in another thinly veiled rebuke of the Trump era.

While Trump’s administration has talked extensively about the need to confront China’s Communist Party (CPC), the tribulations of his presidency have bolstered the Chinese government, encouraging a more combative mood. No wonder, perhaps, that Hu Xijin, the editor of the nationalistic Global Times, tweeted a message to Trump last May that the Chinese wanted his reelection “because you make America eccentric and thus hateful for the world”. Hu added “You help promote unity in China”, something that we mentioned in WiC508 in an opinion piece about how Trump’s new nickname in China credited him with “building our nation”.

That more combative mood was evident again last week in urgings from Xi to ministerial-level officials that they should “not only to dare to fight, but also be good at fighting” in achieving China’s goals. “The world is undergoing profound changes unseen in a century, but time and the momentum are in our favour,” he added, in a confident message that contrasted markedly with the bleaker outlook delivered at the same gathering in January last year.

The final legacy: an end to ‘engagement’?

Joe Biden now picks up the presidential baton, promising a return to a more recognisable governing style. His early attention will focus on fighting the pandemic and reinvigorating the US economy. But when he does get to China policy, the consensus view is that he will leave Trump’s trade deal in place and continue with the tariffs on Chinese goods as leverage for a future negotiation.

Nor is he likely to row back quickly on Trump’s restrictions on sales of tech components to blacklisted Chinese firms – embargoes which have received bipartisan support in Congress.

Biden might look for ways to improve the mood music, perhaps by loosening restrictions on visa issuance for Chinese students or by proposing the reopening of the Chinese consulate in Houston, which Trump closed last year on allegations of spying. But he will need time for a fuller review of the relationship with Beijing, as well as the opportunity to talk to Washington’s traditional allies about a more united approach to dealing with China.

What’s striking as Biden takes over is that there isn’t much clamour on Capitol Hill for a reversal of Trump’s policies towards China. Indeed, many of Biden’s picks for his administration have expressed broad support for the same goals, despite disdaining Trump’s performance as president. Janet Yellen, Biden’s nominee for Treasury Secretary, told her confirmation hearing that she was “prepared to use the full array of tools” to address areas of disagreement with the Chinese. Antony Blinken, the pick for Secretary of State, is on record as agreeing with the Trump administration’s designation of the crackdown on Uighurs and other minorities in the Xinjiang region as ‘genocide’.

(In the same afore-mentioned press conference, foreign ministry spokesperson Hua called these accusations of genocide a “completely false allegation” and added: “It has never happened, is not happening and will never happen in China!”. At the same event she invited CNN reporters and other foreign journalists “to see Xinjiang with their own eyes”, claiming that 200 million domestic and foreign visitors went to the controversial region in 2019.)

Biden’s administration must also move forward in a context in which the policy of ‘engaging’ positively with Beijing – on the old (but now unfashionable) theory that a wealthier China will eventually bend towards Washington’s political and economic priorities – has lost much of its former appeal. Support for engagement was waning before Trump took charge but his term has accelerated its decline, drawing further on a rising tide of anti-Chinese sentiment in the wake of the Covid-19 pandemic.

Biden – who as Obama’s Vice-President spent considerable periods of time with Xi (both at dinners and one-on-ones) – has a better grasp of China than his predecessor in the Oval Office. Indeed, unlike Trump the Delaware politician’s well-known empathy allows him to appreciate the colossal challenges that Chinese leaders face in running a complex country of 1.4 billion people (he briefly raised this point during a debate in 2019 during the Democrat primaries).

But even though a more considered tone may make Biden’s relations with China less fractious on a day-to-day basis, the country’s designation as a long-term strategic rival looks set to stay. Indeed, when the history books are written in the decades ahead, Trump’s main foreign policy legacy may be the ‘new cold war’ that his administration ignited with Beijing.


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