Posted On 2016/12/20 By In Business, Economics, News, Government With 209 Views

On China, Trump could be most influential President since Nixon

From panda bears to people-to-people exchanges, America has been infatuated with the People’s Republic of China for years. China has been courted by successive presidents, beginning with Richard Nixon and blossoming under Barack Obama. The last two Chinese presidents have conducted an all-out charm offensive designed to shore up commercial and cultural ties between the two world powers.

Foreign policy experts agree that the U.S.-China relationship is the single most important challenge for today’s president. According to a Pew study, nearly half of all Americans say Asia is more important to U.S. interests than any other region, including Europe. Forty-seven percent say China is the world’s leading economic power, and 58 percent believe it is very important for the U.S. to build a stronger relationship with China.

A new China?

Today, the Sino-America bond is at the same time strong and strained. Much of that is owing to mainland China’s progress — or liberalization — in economic, cultural and trade affairs.

But the new China is not the same country Presidents Nixon, Carter, Reagan, George H.W. Bush, Clinton or George W. Bush encountered.

It is a much bigger behemoth that wields world-changing economic power — a land of boundless aspiration and energy, as evidenced by the 2008 Beijing Olympics, where showmanship was eclipsed by scale.But those descriptions only go so far.

While there are many words apt for the new China, “democratic” is not one of them.

“One China” policy

Conventional wisdom says the president must pursue and preserve a “one China” policy. This means formal recognition of the mainland, and “unofficial” contact with Taiwan as provided in the Taiwan Relations Act of 1979.

But balancing two Chinas is no small feat of policy or diplomacy, and it will become more, not less, challenging in the future, especially for the iconoclastic President-elect Donald Trump, who sees no reason why we cannot have it both ways.

Against this backdrop, Taiwan — officially the Republic of China — has received remarkably little attention. Yet America has not had a more reliable or stable economic partner in Asia since 1949.

From its inception, Taiwan has been an unwavering bastion of Western-style democracy. As such, it presents an enigmatic policy decision for Trump, as it has for each of his predecessors, and is a key component of the U.S.-China relationship.

In a joint statement from 2011, both the U.S. and China have “underscored the importance of the Taiwan issue.” China pointed out that “the Taiwan issue concerns China’s sovereignty and territorial integrity, and expressed hope that the U.S. will honor its relevant commitments.”

The U.S. has perennially confirmed its support for a one-China policy and encouraged the two Chinas to continue their dialogue.

Comparing two Chinas

The two Chinas could not be more different. With a youthful population exceeding 1.35 billion people, and the world’s largest army, the People’s Republic of China cannot be ignored.

Because its citizens yearn for long-denied Western accoutrements, it is the mother lode of markets for American products. Money is being made, consumerism is entrenched, and there is a future for any company that can crack the Confucian code and navigate Chinese customs.

But that is easier said than done. Although humongous, the Chinese economy has sputtered and capital is seeping out to all corners of the earth, especially the U.S.

On the other hand, Taiwan, the Republic of China, is a small nation of 23 million people. A model of multiparty democracy and free-market capitalism, Taiwan’s rapid economic growth in the decades after World War II transformed it into a developed industrialized country and one of the four Asian Tigers.

Its economic rise has been hailed as the “Taiwan Miracle,” and the International Monetary Fund (IMF) and World Bank categorize it as an advanced, high-end economy. Through its sophisticated technology sector, led by consumer electronics, Taiwan plays a major role in today’s global economy.

It ranks 14th on the Heritage Foundation’s “Index of Economic Freedom,” above Germany, Belgium, Japan and South Korea, as compared with China’s much lower ranking of 144.

Differing world views

In Taiwan, a free press and free elections thrive. In China, there are no elections and government censorship reigns supreme, both online and offline.

According to the International Federation of Journalists, media coverage of such issues as domestic politics; public health; corruption; internet freedom; and developments in Korea, Vietnam and the Philippines require a government review or are restricted altogether. China has been quick to crack down on any semblance of protest or popular uprising, including those coming via popular social media.

China considers Taiwan to be a breakaway province subject to its sovereign jurisdiction. Taiwan sees itself as a free and independent nation. This divergence has led the Chinese to rattle their sabers and to throw shade on the U.S. for any favorable glance toward Taiwan.

In response, the Taiwanese spend billions on advanced U.S. weaponry for self-defense.

American engagement

The U.S. and China admit there are differences over human rights, but agree to continue a dialogue on the issue. They have agreed to establish military-to-military talks, and to cooperate on space exploration, law enforcement, the rule of law, science and technology, climate control, and the exchange of 100,000 American and Chinese students.

With plans to institutionalize exchanges between the National People’s Congress of China and the U.S. Congress; to cooperate on global issues involving nuclear weapons, North Korea, the future of Sudan and intellectual property rights; and to expedite the pace and frequency of more dialogue, Sino-American relations have become even more intertwined.

But the relationship is imbalanced.

According to reliable sources, the U.S. debt to China is $1.157 trillion as of September 2016. That’s 30 percent of the $3.9 trillion in Treasury bills, notes, and bonds held by foreign countries.

According to Forbes, the Chinese now own — or seek to own — some of America’s biggest companies. In the past few years, Chinese companies — some with government support — have acquired the following U.S. corporations: Starwood Hotels for $14.3 billion; Smithfield Foods for $7.1 billion; Ingram Micro for $6.3 billion; General Electric’s (GE) appliance business for $5.4 billion; Terex Corporation (heavy equipment) for $5.4 billion; Legendary Entertainment Group for $3.5 billion; Motorola Mobility for $3.1 billion; AMC Entertainment for $2.6 billion; and the list is growing.

Chinese buying power in the U.S.

As reported by CNBC, direct investments from China put over $15 billion into transactions in the U.S. last year, a near-30 percent increase compared to the previous year and a new all-time high.

According to a report by the National Committee on U.S.-China Relations and a research firm Rhodium, 2016 could be another record year for Chinese investments. “In 2016, China’s outbound foreign direct investment (OFDI) will likely grow even faster than in previous years,” the report said. “A more pronounced slowdown in economic growth and concerns about the stability of the renminbi exchange rate have visibly accelerated the pace of Chinese deal-making abroad since mid-2015, with a record $100 billion of announced M&A [mergers and acquisitions] transactions worldwide in the first three months of the year.”

The “art of the real”

With expanding Chinese involvement in our economy, Trump’s recent comments on the U.S.-China relationship should not be taken lightly.

Heretofore, it was political heresy to even think of a two-China policy, let alone tinker with it. But Trump’s very public questioning of China’s fiscal and trade policies has shaken up the status quo and left the Chinese off-balance.

For years, Taiwan has been laboring for a scintilla of recognition on Capitol Hill, at the United Nations and in capitals throughout the world. Trump’s public engagement with Taiwanese president in a simple phone call was the most promising and comforting sign Taiwan has seen since 1979.

Whether Trump is posturing for better trade and economic negotiations with China is anyone’s guess. Only time will tell whether this proves prudent foreign policy.

What we know today is that Trump will use every stick in a fight and, for better or worse, will not be constrained by precedent. We can expect that American policy options will not be limited to the carefully circumscribed lexicon of the past. What was once off-limits — a two-China policy — could become a more pronounced component of a complicated relationship between Washington and Beijing.

In this respect, President-elect Donald Trump could become as historically relevant as Richard Nixon concerning China. And that is why Taiwan might matter to Trump.


Learn more in our Global Ready China Seminars


Sources:

Article: The Hill / Image: Max Goldberg

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About

Stefan

Stefan (from Austria, Europe) has been living, studying and working in China since 2010. Stefan has worked on several research, publication and consulting projects focusing on the China Travel Market. He holds two Masters degrees and is an expert on China Outbound Tourism, Marketing and Social Media in China. Stefan works with BMG on the Global Ready China Seminars as well as the Global Ready China News and related projects. He also has teaching engagements in the areas of eMarketing and Tourism Strategy.

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