In recent decades, China and the United States have developed a pretty peculair model of economic relations. China is the largest supplier of cheap goods to the US market, and the Chinese Government, in turn, has been the largest holder of US foreign debt. In addition, in recent years Beijing has been investing heavily in nonfinancial assets of the United States. This scheme allowed China to grow pretty rapidly, while the United States had a way of compensating for its rapidly diving domestic production levels.
However, the fact that China decided to outsource a portion of its production capacities to the countries where the labor is even cheaper is now starting to affect China itself, since it is now facing the inevitable consequences of its own dynamic industrialization. The growth of salaries has been outpacing inflation for years in China, resulting in the wages being four times higher than in the neighboring countries of South-East Asia – Cambodia, Laos, Myanmar. And this, in turn, is now pushing Beijing to transfer most of its production capabilities to the countries with lower incomes.
Today, Chinese goods are getting more expensive by the day, that is why it’s no longer profitable to import them for a long list of countries, including the United States.
In addition, the stagnation of American industry and the depressing state that the Rust Belt has found itself in, is beginning to pose a real threat to the future of the United States. All this dictates the redefinition of the US-China trade and economic relations, since it’s no longer possible for Washington to import cheap goods without facing serious challenges.
As it’s been noted by the Project Syndicate, some of Donald Trump’s nastiest attacks have been directed at China, since he has accused it of “raping” the United States with its trade policies, and of creating global warming as a “hoax” to undermine US competitiveness.
Under these conditions, the policies announced by the 45th US president imply the protection of local producer and re-industrialization of the American economy can radically affect the balance of economic relations between the US and China, that can potentially lead to the situation when the ties between the two countries will be cut off completely. Yet, it is still hard to say how far Donald Trump can go in his confrontation with Beijing.
Meanwhile, the growing contradictions of the existing US-China relationships do not end just there. Everything is much more serious. In recent years, China has been seeking ways to demonstrate Washington its growing military power along with its geopolitical ambitions that have led to recent struggle for the South China Sea.
It’s no wonder that Donald Trump argues that China enjoys unprecedented trade advantages, and that Washington must introduce new customs procedures to put an end to the flow of Chinese goods to the US. Additionally, Trump has been provoking China by establishing closer ties with Taiwan. The US has been selling Taiwan military equipment mostly for self-defense, and as a signal to China that the US will not stand idly by in the event of Chinese military action against the island.
Earlier, Trump announced that he was ready to discuss the One-China policy, but he is not bound to follow it, since there’s nothing sacred about it, therefore it “can be negotiated.” Beijing rejects this entirely, since it believes that Taiwan is an integral part of China, and this view is the basis of any diplomatic relations one can seek with Beijing.
However, the appointment of Peter Navarro as the head of the newly established National Trade Council that Trump made promises no good to the future of US-Chinese bilateral relations. He, in particular, is the author of the non-fiction book Death by China, which states that China is the root of all evils in the United States.
The anti-China rhetoric has been repeatedly voiced by the members of the relatively young Trump administration. In particular, Rex Tillerson has recently stated that China should not be given access to the artificially created islands in the South China Sea, since this development would greatly increase its military capabilities.
At the same time, Trump appoints Iowa’s Governor Terry Branstad ambassador to Beijing, whose personal relationship with Xi Jinping date back to 1985, when the current Chinese leader arrived to this American state when he was still a provincial official. It’s been noted that Terry Branstad has repeatedly traveled to China and now his way around the Chine government.
It should be noted that ever since Trump’s TPP announcement was made, many Asian countries pledged their determination to join a regional trade bloc spearheaded by China. With Trump’s help, the “Chinese Century” may arrive sooner than anyone expected. Why, then, are many Chinese policy advisers and commentators sanguine about future US-China relations. The reasoning seems to be that Trump is a businessman, and China has always been a business-oriented state. However, the two states still have difficult negotiations ahead of them in a bid to establish mutually-beneficial bilateral relations.
Grete Mautner is an indepenent researcher and journalist from Germany, exclusively for the online magazine “New Eastern Outlook.”