Ahead of Xi-Trump summit, what China should do to get ties with the US on an even keel
Access to Chinese markets and policies on North Korea and the South China Sea are among the issues Beijing needs to address, writes Francesco Sisci
After a lot rhetorical sparring and the puzzling visit to Beijing by US Secretary of State Rex Tillerson, President Donald Trump and his Chinese counterpart Xi Jinping are due to meet in Florida early next month.
Nobody knows if it will be the scene of a grand bargain between the US and China or will merely open the stage to a period of enhanced confrontation between the two countries.
Trump has made a virtue of being unpredictable and Xi has a history of keeping his cards close to his chest. To underscore the uncertainties ahead of the meeting, just hours before his arrival in China, Tillerson said military action against North Korea was an option (something bound to irritate Xi) and yet at the Great Hall of the People in Beijing he cordially brushed aside such hard talk and called for cooler heads on the issue of Pyongyang’s nuclear weapons programme.
So far we don’t even know what the two presidents will talk about in the US, but it is not just their two nations’ ties at stake. The international situation in which both have stakes is highly complex. The old World Trade Organisation order, set up just after the end of the cold war, is falling apart and is perhaps being replaced by a cobweb of bilateral commercial treaties centred on the United States.
The IMF and the World Bank, the backbones of global finance since the second world war, have also been wobbling for years, but nobody shows any real interest in fixing them. In the meantime, the US dollar has regained traction, despite the fact that its exchange rate has not surged against major currencies, thus helping American exports and stemming its imports.
There has been in fact a weakening in the euro area because of Brexit and EU political failures, plus the withdrawal of the Chinese yuan from many international markets, amid Beijing’s fears over the destabilising effects of the flow of currency out the country.
At the same time, oil-producing countries are losing bargaining power as shale reserves are making the US energy independent again, establishing Washington as the price setter for hydrocarbons in global markets once more.
Therefore, despite all official chatter about its decline and waning clout, the US is emerging as quite strong. So, however, is China, the US’ preferred arch-rival.
Despite its mounting internal debts, slowing GDP growth rates and its fierce anticorruption drive, which is scaring many businessmen, China’s economy is still set to be larger than the US’ in about five to 10 years.
This in itself would already be a major source of concern for America because in theory, with a larger GDP, Beijing could force Washington into an arms race that could bankrupt the US, just as Washington bust the Soviet economy in the 1980s.
There are also a myriad of other grave concerns about China worrying the US and many Asian countries.
Although they may not bubble to the surface of diplomatic meetings, and some of the issues have no immediate consequences, they may have serious long-term impacts. We simply list below what we view as the most serious. We don’t know if they will be discussed by Trump and Xi in Florida, but no doubt they will be in the back of American minds and unless addressed and solved, could thwart improved relations between the two countries.
First, there are concerns about the lack of transparency in China’s political system. The Chinese decision-making process is unpredictable and differs greatly from the rest of the world. Nobody knows how China chooses its leaders and many can only try to guess. Nobody knows what will happen after Xi retires or even when Xi will retire. Even Russia, publicly criticised in the West for its lack of democracy, has a clear process of elections. This maybe tampered with, pushed and pulled by President Vladimir Putin, but it is clearer than the situation in China.
China’s mysterious politics could be ignored when the Chinese economy was globally insignificant, but now that consumer decisions to drink or not drink coffee in China moves the price of coffee beans worldwide, nobody can afford this kind of mystery.
China replies that it has its own system and cannot change because others tell it to do so. It also argues democracy doesn’t work and brings instability. Sure, everybody knows democracy’s limitations, but so far it’s less bad than any other system. As for stability, every 10 years China has undergone massive power struggles that leave the country shaken for years, meaning there is no genuine stability in China’s current political system. Any decision today can be suddenly overturned tomorrow by a political fiat. But most importantly and put simply, the world is Westernised (modernisation is just another word for it) and if China doesn’t accept these general rules, it will eventually shut itself out.
The “One Belt, One Road” initiative is another issue facing China-US ties. It is a geopolitical revolution, with massive implications for everyone. It is starting to bring back politics centred on the Eurasian continent as it was before Columbus’ discovery of America - and it must include the US.
The initiative is important because it reopens routes that were closed for centuries by the expansion of the old Turkish Empire first and then the cold war. New train technology makes it viable to move people and goods through the vast continental expanse. This creates massive new commercial opportunities that are reshaping the world economy.
The initiative to forge closer trade, cultural and diplomatic ties from China, Asia and beyond
creates huge new commercial opportunities that are reshaping the world economy. However the US and Japan are marginalised because they are physically out of the Eurasian trade routes.
Therefore whatever the Chinese intentions with its different initiatives - the Asian Infrastructure Investment Bank, for instance, could supplant the World Bank - if America is not part of “One Belt, One Road” it is bound to meet many difficulties and Washington may consider it aimed against the US.
China responds simply that it invited the US and Japan and they didn’t want to join. But this attitude only makes things worse - this is not a dinner party. The initiative is a revolution and if America is not part of it, the US has every interest in considering it an open challenge to its future and well-being and will thus work to make it fail.
Apart from these massive issues, difficult to tackle during one meeting but no doubt consciously or unconsciously in the back of American and Chinese minds, there are also more concrete questions.
Chinese state-owned enterprises are inefficient and market access for foreign companies is shrinking. The US and EU chambers of commerce in China complain, but Chinese or foreign businessmen have little or no bargaining power with state officials. This creates hurdles for Chinese growth and primes the rise of underperforming debts.
It also vexes foreign companies interested in expanding in Chinese markets and seeking possible access to the future privatisation of state-owned firms, which would rekindle high growth in China. Problems here create an unholy alliance of foreign and domestic businesses against Chinese officials.
Another vexing issue is North Korea, which is out of control and poses a threat to all its neighbours. Yet Beijing seems more alarmed by the missile defence shield deployed in South Korea than by Pyongyang’s erratic behaviour.
This perception isolates China in the region and deprives Beijing of the support of Seoul, which for the past 20 years has been an important conduit of communication with Washington and Tokyo. If not addressed, Beijing could easily slide into being bundled with Pyongyang as not realising what is important for regional order.
Chinese claims in the South China Sea are also a delicate issue. That part of the world moves maybe a third of shipping cargo, 70 per cent of Japan’s oil energy imports and 50 per cent of its food imports. It is just too important to be simply handed to China.
Moreover, Beijing’s control of that part of the world would be tantamount to the US expulsion from a large part of Asia. This is peppered with unending tales of neighbours being disrespected by arrogant Chinese officials and fears of the return of a bossy, conceited China that wants everybody in the region to bend a knee to the new empire.
With this long list of problems, the Trump-Xi summit could very easily fail and unleash a greater wave of tension in the region. After all, why should Trump, who has been playing tough with China so far, make a U-turn when he is still at the beginning of his mandate and far from his first test, the midterm elections?
On the other hand, if China starts to address these issues, it may be the beginning of a new global ball game.
Francesco Sisci is a senior researcher at Renmin University in Beijing