China Research

Many analysts seemed to be relieved after the recent APEC summit in Korea. The meeting between the American and Chinese presidents, Trump and Xi Jinping turned out to be polite with some concrete results – at least on the surface. President Trump gave his meeting with Xi the grading “fantastic” and the score ”12 out of 10”. This strong statement certainly does not point at a good American understanding of Chinese culture, politics and strategies.

Different time horizons – short-term versus long term

I have described many times before in different articles that President Trump and China’s leadership – personified by President Xi Jinping – often use to apply different time horizons in their policy measures or strategies. Trump usually acts short-term oriented and may be open for sudden policy changes whereas Chinese decision makers can be both short-term and long-term oriented simultaneously, even the same person or institution. Obviously, Donald Trump does not look very familiar with this distinct Chinese attitude. 

Trump’s tariffs against the rest of the world favor without doubt China’s long-term ambitions to dominate the global trade system at some point. When Xi in Korea pleaded for the protection of multilateral trade, he certainly mainly had in mind China’s strategically strived future pole position in international trade influence (see also my previous comments on this topic in some of my blogs: https://blogg.lnu.se/china-research/?p=3702, https://blogg.lnu.se/china-research/?p=3693; https://blogg.lnu.se/china-research/?paged=17).

The strategic trade message to the rest of the world: China first instead of America first! It can be recognized that President Trump does not (want to?) understand that his tariffs are the best instrument to support China’s long-term objective to become the leading power in global trade policy, preferably via the WTO. Long-term trade objectives are   considered to be more important than short-term frictions with the U.S.!

China applies also short-term trade policy

We can conclude by now that China’s current political leadership has learned to live with Trump’s erratic trade policy – from month to month or even from year to year. In the nearer future, China knows about the power of its rare earths in forthcoming trade negotiations with the U.S. Trump’s recent sensitive deal with China to secure U.S. production of high-tech products may receive again a new pattern or content one year from now at the latest – originated by China or the U.S. Who knows? Unfortunately, uncertainty will remain in place for the EU as well. And in the background, the risk of a bursting AI bubble still exists.

Hubert Fromlet
Affiliate Professor at the School of Business and Economics, Linnaeus University