Editor’s Note: Shaun Rein is founder of the China Market Research Group (CMR) and author of “The End of Cheap China” and “The End of Copycat China.” CMR is a Shanghai based marketing firm that specializes in helping equity firms and companies looking to invest in China. The views expressed are his own.
Story highlights
Trump offers a new type of US President to China
He has personal experience of problems US businesses face there
On Monday, Donald Trump indicated he would follow through on campaign trail promises to scrap the Trans-Pacific Partnership, announcing plans to pull out of the controversial trade deal in his first 100 days in office.
Japanese Prime Minister Shinzo Abe said that without the US, the deal “is meaningless.”
While trade is likely to dominate Trump’s immediate relations with Asia, long-term strategic US interests are most challenged by a rising China that is increasingly staking out its interests in the South China Sea and Africa by setting up military bases and reclaiming islands.
China has quickly moved to fill the vacuum left by unease over a Trump presidency – Beijing is pushing for free trade agreements of its own and publicly rebuked Trump over climate change, the reality of which China knows only too well, awash as it is with crippling pollution.
Sino-Trump relations
During the campaign, Trump demonized China over alleged currency manipulation and for stealing American jobs. To get tough on China he threatened to slap a 45% tariff on goods made there.
However, contrary to the fears of many China’s watchers who are put off by Trump, there are several reasons a Trump presidency might actually help US-China relations, lowering the risk of military tensions and buttressing US business interests.
Because Trump is less concerned about diplomatic niceties, and doesn’t appear to have an underlying strict foreign policy ideology, he can and should lobby for an end to protectionism in China.
While Beijing seems to regard President Obama as a pushover, they won’t be able to ignore a threatening and volatile Trump who fights for a fairer playing field for US firms.
Free trade
Protectionism has always been a problem in China.
US automakers like GM are forced to enter into joint ventures with state-owned enterprises rather than owning outright their production facilities.
Banks and insurance companies like Citigroup are similarly hamstrung by regulations limiting ownership and business scope.
For the internet sector, good luck trying to get into China – websites from Facebook to Twitter to YouTube are all blocked in the name of national security.
When China entered the World Trade Organization 15 years ago, protectionism was less of an issue when the market accounted for a relatively small proportion of the global economy and lumbering Chinese companies were playing catch up.
But now, China is the world’s second largest economy and has global champions like Huawei – the world’s largest producer of mobile phones – or Wanda – a real estate firm buying up Hollywood studios and cinemas – that cannot be allowed unfettered access to the US market when American firms are left picking up scraps in China.
Intellectual property
Trump knows personally the problems of copyright and intellectual property (IP) in China, issues hurting US interests from companies as varied as New Balance to Microsoft.
The President-elect recently won a case against a real estate services firm using the Trump name, he’s going to have another one to deal with soon – a Chinese firm is making Trump-branded toilets.
China needs better IP protection enforcement so US firms feel comfortable selling their value-added products in the country without fear of them being stolen.
Only a strong, vocal President, capable of threatening, cajoling and waving carrots to Beijing can open up market access to China. Beijing respects strength and runs circles around weakness, as it has done to the Obama administration.
Military tensions
For his part, Trump can offer Beijing an ideology based on reducing the US role as the world’s policeman. He has already said Japan and other nations need to pay more for their own defense, and may reduce the number of troops the US has in South Korea and Japan.
China is especially concerned by US troops in South Korea with a direct land path to China. The Korean War technically never ended, and Kim Jong-un’s regime in North Korea appears likely to implode, making China worried it may wake up one day with US troops on its border. Imagine if China had tens of thousands of troops stationed in Mexico.
By reducing troop numbers in South Korea, Trump can assure Beijing the US is not trying to contain China, and deescalate military tensions between the two powers without hurting US strategic interests in Asia.
A Trump presidency is looked at with fear by many in the foreign policy establishment. The reality however, is that he may be able to cut through unsuccessful policies and chart a new course with China.