Friction between Donald Trump and Mexico may have abated (or at least until the president feels like he needs to play the “caravans are coming” card again to distract voters from some new domestic crisis of his own making), but tension between the administration and Beijing is running higher than ever.
Over the course of the last week, Trump has delivered all manner of inflammatory rhetoric, going so far as to say, on Friday, that “it doesn’t matter” if Xi Jinping agrees to meet at the G20. “If he shows up, good. If he doesn’t, in the meantime, we’re taking in billions of dollars a month”, Trump told Fox.
The president went on to parrot his manifestly false tariff narrative: “Look, they’re paying hundreds of billions of dollars.”
[Narrator: No, they’re really not]
The G20 meeting is being billed as a make or break moment for the stalled trade talks. While the argument that Trump will ultimately seek to deescalate the situation in the interest of preserving the US economic expansion and driving US stock prices higher ahead of an election year is a compelling one, it’s possible that the Huawei escalation pushed things past the point of no return. Indeed, China’s subsequent maneuvers – from establishing a corporate blacklist of their own to launching an investigation of FedEx to calling in global tech behemoths for a sit-down – all point to a spiraling conflict that may be difficult to defuse even if the political will is there on both sides.
According to reports out Friday, Mike Pence still plans to deliver a highly contentious foreign policy speech on June 24, highlighting China’s less-than-exemplary human rights record, in the process laying the groundwork for sanctions against key Chinese surveillance companies including Hikvision.
That speech was scheduled for June 4, but Trump reportedly pushed it back to avoid deep-sixing the chances for a trade truce later this month. If Pence goes ahead with what sounds like another one of his hawkish specials, it may mean Xi decides against dialogue.
(Goldman)
Earlier this month, we brought you some excerpts from Goldman’s interview with Michael Pillsbury, the China hawk who has helped inform the Trump administration’s policy towards trade and bilateral relations with Beijing more generally.
Those excerpts were from the latest edition of the bank’s “Top Of Mind” series, which are expansive takes on whatever the market topic du jour happens to be. They combine interviews with Goldman’s own employees and also with outside sources in an effort to provide a balanced and comprehensive assessment on whatever seems to be the most important question on market participants’ minds (hence “Top of Mind”).
Well, in the same “Trade War 3.0” edition of the series, Goldman talks to Dr. Wang Huiyao, Founder and President of the Center for China and Globalization, a nongovernment think tank in China. He’s described as “a leading voice in global debates on the role of China in the world today” and currently serves as Counselor for the State Council.
It’s worth highlighting a couple of quotes from the interview. Even if the US were currently run by a traditional president with a cabinet that isn’t predisposed to perpetuating the kind of hyperbole that’s been the trademark of Donald Trump for decades, it would be worth hearing from the other side. The fact that the current US administration has been caught in too many lies to catalogue at this point (and that’s just the reality of the situation – it’s not necessarily a partisan statement), makes it even more important to consider alternative perspectives.
Asked by Goldman’s Allison Nathan to identify “the biggest misperception that Americans have about China today”, the above-mentioned Dr. Wang Huiyao offered the following response:
The biggest misperception is that China poses a threat to the United States. It is not unusual for a dominant power to feel threatened by a rising power, especially given the exceptional pace of China’s growth and its achievements; it now has the fastest train network, the biggest 5G network, and is set to overtake the US in terms of GDP over the next 10-15 years. These concerns are exacerbated by China’s different system, which is not well understood. China is often viewed as a state-run economy that poses a risk to the liberal world order. But, in fact, 80% of the Chinese economy is private with 10% of that comprised of foreign multinationals in China. Without this mixed economy, China would not have been able to achieve the same level of innovation, or have lifted 800 million people out of poverty, which is unprecedented in the history of mankind. In reality, China is a substantial contributor to the world. It contributes over 30% of global GDP growth, is the largest trading nation for over 130 countries, and is one of the largest donors to the United Nations. China has embraced the Paris accord, taking a global leadership role in combatting climate change. And it is on the way to becoming the largest consumer market in the world, with its middle class of about 400mn people set to double within the next couple of decades. In all of these ways, China is a supporter of the current world order.
He then goes on to pose one simple question to America, which we’ll present without further comment:
So my question is: why try to kill the goose that lays the golden eggs? The whole world will benefit from China’s contributions and should not feel threatened by them.
Dear Dr. Wang Huiyao, unfortunately your comment cannot be translated at this time. Please try again, perhaps next year, on January 20, after 12:00 PM.
Best answer I read all morning……