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Trump could be good news for Beijing

By Fareed Zakaria

Donald Trump has perhaps attacked no country as consistently as he has China. During his campaign, he thundered that China was exploiting the United States, “killing” it on trade and artificially depressing its currency to make its goods cheap. Since being elected, he has spoken to the leader of Taiwan and continued the bellicosity toward Beijing. So it was a surprise to me, on a recent trip to Beijing, to find Chinese elites relatively sanguine about Trump. It says something about their view of Trump but perhaps more about how they see their own country. “Trump is a negotiator and the rhetoric is all part of his opening bid,” said a Chinese scholar, who would not agree to be named (as was true of most policymakers and experts I spoke with). “He likes to make deals,” the scholar continued, “and we are good deal-makers as well. There are several agreements we could make on trade.” As one official noted to me, Beijing could simply agree with Trump that it is indeed a “currency manipulator” – although it has actually been trying to prop upthe yuan over the past two years. After such an admission, market forces would likely make the currency drop in value, lowering the price of Chinese goods. Chinese officials point out that they have economic weapons as well. China is a huge market for American goods, and last year the country invested more than $53 billion in the US economy, according to Forbes. But the officials’ calm derives from the reality that China is becoming far less dependent on foreign markets for its growth. Ten years ago, exports made up a staggering 37 percent of China’s GDP. Today they make up just 22 per cent and are falling. China has changed. Western brands there are rare, and the country’s own companies now dominate almost every aspect of the huge and growing domestic economy. Few businesses take their cues from American firms anymore. Technology companies are innovating, and many young Chinese boasted to me that their local versions of Google, Amazon and Facebook were better, faster and more sophisticated than the originals. The country has become its own, internally focused universe. This situation is partly the product of government policy. Jeffrey Immelt, the CEO of General Electric, noted back in 2010 that China was becoming hostile to foreign firms. American tech giants have struggled in China because of formal or informal rules against them. The next stage in China’s strategy apparently is to exploit the leadership vacuum being created by America’s retreat on trade. As Trump was promising protectionism and threatening literally to wall off America from its southern neighbor, Chinese President Xi Jinping made a trip through Latin America in November, his third in four years. He signed more than 40 deals, Bloomberg reported, and committed tens of billions of dollars of investments in the region, adding to a $250 billion commitment made in 2015. The centerpiece of China’s strategy takes advantage of Trump’s declaration that the Trans-Pacific Partnership is dead. The trade deal, negotiated between the United States and 11 other countries, lowered barriers to trade and investment, pushing large Asian economies like Japan and Vietnam in a more open and rule-based direction. Now China has offered up its own version of the pact, one that excludes America and favors China’s more mercantilist approach. Australia, once a key backer of the TPP, has announced that it supports China’s alternative. Other Asian countries will follow suit soon. At the Asia-Pacific Economic Cooperation summit in Peru in November, John Key, who was then New Zealand’s prime minister, put it simply: “The TPP was all about the United States showing leadership in the Asia-Pacific region. We like the US being in the region. But if the US is not there, that void needs to be filled, and it will be filled by China.” Xi’s own speech at the summit was remarkable, sounding more like an address traditionally made by an American president. It praised trade, integration and openness and promised to help ensure that countries don’t close themselves off to global commerce and cooperation. Next week, Xi will become the first Chinese president to attend the World Economic Forum at Davos, surely aiming to reinforce the message of Chinese global leadership on trade. Meanwhile, Western leaders are forfeiting their traditional roles. Angela Merkel and Justin Trudeau announced last-minute cancellations of their plans to speak at the Swiss summit. Trump has only made sneering references to globalism and globalisation and no senior member of his team currently plans to attend. Looking beyond his tweets, Beijing seems to have concluded that Trump’s presidency might well prove to be the best thing that’s happened to China in a long time. —Khaleej Times

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