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Zhao Minghao: Cautious optimism needed on Xi-Trump meeting in Osaka

2019-07-01

By Zhao Minghao    Source: Global Times    Published: 2019-6-26


Chinese President Xi Jinping and US President Donald Trump are set to meet on the sidelines of the G20 summit in Osaka, Japan, amid widespread expectations of the rendezvous cooling tensions ignited by a corrosive US-launched trade war.


Nonetheless, Beijing is aware that unless the Trump administration is willing to change its unrealistic demands and step back from hegemony against China, the outcome of the meeting between the leaders will not be significant.


There shouldn't be too much optimism about the upcoming meet. A string of actions, taken and to be taken by the US in the near future, has indicated that the Trump administration is piling pressure on China, which will inevitably cast a shadow on the two leaders' meeting. If China's economic and trade concessions lead to more US bellicosity in other areas, that's obviously not fair trade.


Despite opposition from many US companies, the Trump administration is stubbornly expanding the technology cold war. In an attempt to suppress China's technological progress in areas such as supercomputing, the US Department of Commerce decided to add five more Chinese entities to a US blacklist on Friday.


Meanwhile, Washington has further cranked up pressure on Chinese telecommunications companies Huawei and ZTE. The Wall Street Journal reported that the Trump administration is examining the need to have the next-generation 5G cellular equipment used in the US designed and manufactured outside China.


The move is aimed at reshaping the global industrial chain according to US whim, forcing major telecommunications companies such as Nokia and Ericsson to move their business out of China.


This decoupling tendency will inevitably exacerbate tensions between China and the US. Ironically, some US senators are trying to change the law to prevent Huawei from demanding more royalties from US firms for using technology patented by the Chinese company.


Washington has also signaled its intention to take the trade war to the financial sector. Earlier this month, US Senator Marco Rubio, a known China hawk, wrote to CEO of global index provider MSCI Inc Henry Fernandez, saying that the inclusion of certain Chinese stocks in its widely tracked emerging market index would hurt the interests of US investors and pensioners, claiming the move could expose American investors to "companies with poor corporate governance and a track record of fraud".


It's obvious that if Chinese companies were excluded from the US capital market, China-US economic and trade relations will be seriously affected. According to statistics by independent researcher Rhodium Group, Chinese foreign direct investment in the US fell to just $4.8 billion in 2018 from $46 billion in 2016, a drop of 83 percent. Chinese enterprises are experiencing chills in the US market.


Moreover, after launching global trade wars, Trump may be preparing for "currency wars" in the next stage. He has tweeted a number of times about the European Central Bank. It is rare to see a US president intervene in the monetary policy of other economies, which is also a wake-up call for China.


Trump has repeatedly claimed that other economies manipulate their currencies leading to a stronger US dollar, thereby increasing the cost of US exports. Although the US Department of the Treasury has been refusing to list China as a currency manipulator based on facts, the possibility of the Trump administration playing the exchange rate card against China cannot be ruled out.


The Trump administration's vicious moves on a range of sensitive diplomatic and security issues have fueled China's discontent.


It is said the US will sanction some Chinese officials because of the so -called re-education camps in Northwest China's Xinjiang Uyghur Autonomous Region. Many US departments have reached a consensus on the newly proposed sanctions plan. However, US Treasury Secretary Steven Mnuchin, worried about the effect the move will have on trade negotiations and the planned Xi-Trump summit at G20, delayed the action.


Furthermore, the White House has allowed Vice President Mike Pence to criticize China's human rights records - especially on Hong Kong - in a speech he is set to give at the Wilson Center.


Reuters reported that the US is planning to sell tanks and weapons worth over $2 billion to Taiwan, four people familiar with the negotiations said. The armaments include 108 General Dynamics Corp M1A2 Abrams tanks. Analysts in China predict more provocative measures by the US on Taiwan in the next few months, which could lead to heightened tensions across the Taiwan Straits.


Confronted with pressure from the Trump administration on various domains, Beijing has reasons to put in more efforts to cope with Washington's vicious moves rather than reaching a trade deal.


There is a fatal flaw in the Trump administration's China policy, which is a winner-takes-all approach. The policy tries to confuse issues of trade, economy and technology with national security and steps on the redline of respect between the two giants.


Just as noted by Stephen Schwarzman, chairman and CEO of Blackstone, a global private equity firm, the top leaders of the two countries must first decide "how far they are willing to go conceptually". It is then that senior trade officials of the two countries can draft details.


If Washington wants the Xi-Trump summit in Osaka to be a success, it needs to adopt a more practical and consistent China policy. The White House needs to rein in the impulse to corner China.


The author is a visiting fellow at the Chongyang Institute for Financial Studies at Renmin University of China.

Key Words: Xi Jinping   Trump   G20   Zhao Minghao  

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