Trump’s China Stop Provides Feel Good Breather, but Challenges Remain
China and the U.S. signed a stunning $250 billion in deals, but failed to break any new ground on market access in China or North Korea.
BEIJING — President Donald Trump’s two-day stop in China saw the signing of $250 billion in deals between the world’s two biggest economies and the two countries aligning themselves closer in resolute opposition to North Korea’s nuclear ambitions. But analysts say little new ground was broken on trade or North Korea, an issue that will continue to top President Trump’s agenda as he travels to Vietnam and attends the Asia-Pacific Economic Cooperation Summit. And the true test of the feel-good foundation forged during the meetings, analysts said, is likely to come in the days, weeks and months ahead. By design, the $250 billion sum of the deals was meant to provide a sharp contrast to the $300-500 billion deficit that exists between the United States and China, something Trump called “horrible” before departing for his 12-day trip to Asia. Chinese state media have kicked into overdrive hailing the visit as a huge success. Media reports have highlighted the tone of the meetings, repeatedly noting the total amount of the deals. An editorial in the official  Friday said, “Although the differences that had been pestering bilateral ties have not instantly disappeared, the most important takeaway from their talks in Beijing has been the constructive approach to these issue the two leaders demonstrated.” Chinese President Xi Jinping has called the meeting “historic.” “We will definitely write a new chapter in the U.S.-Chinese relations. We will definitely make a new contribution to realize a beautiful future for U.S.-Chinese relations,” Xi said at a banquet Thursday evening. Whether the “historic” nature of the meetings will hold, however, remains in question. Liao Qun, chief economist at China CITIC Bank International, said that the size of the deal shows trade takes priority above all else. “Though the U.S. and China do not see eye to eye, both still compete on many geo-political issues, trade still remains at the top of their agenda. With closer trade relations, the U.S.-China relation will still make headway,” Liao said. But not all agree with that assessment. Some analysts said that despite Trump’s softer approach and “incredibly warm” feeling he expressed about his Chinese counterpart, the president is likely to be back to criticizing China again in a few months. “The president likes deals, and he likes big numbers, but we’re not going to change something he doesn’t like, which is the big China trade deficit, without changing Chinese practices,” said Derek Scissors, a resident scholar at the American Enterprise Institute. “China has to have a different approach to trade in the world than it does.” Scissors said that more than the deficit, it is what is behind the numbers, such as the fact that Chinese state-owned enterprises never go out of business. “Which means American goods and services can’t ever win in the China market,” he said. Paul Haenle, director of the Carnegie-Tsinghua Center for Global Policy said we may have a case of misaligned assessments of how the visit has played out. The Chinese leadership may think that they have done a lot to give President Trump face, with all of the pomp and business deals, and that that has put the relationship on solid footing, he said. “But President Trump may go home to a domestic political environment where people are disappointed he hasn’t achieved more progress on the structural trade and economics issues (market access, more fair and reciprocal treatment for U.S. businesses, intellectual property rights, forced technology transfer, and Chinese unfair industrial policies) and North Korea,” Haenle said. “My concern is you may see a shift towards a much harder line coming from the U.S. administration. That will be a huge surprise to China and President Xi.” The huge deals reached could create jobs in America and provide a small boost to exports, but the meetings did little to advance market access. “Open markets are better for both sides. It is also better for China to open up its market. But China is not interested in opening markets,” said Christopher Balding, associate professor of finance at Peking University’s HSBC Business. In a briefing with reporters Thursday after the two leaders issued a joint statement, Secretary of State Rex Tillerson said that “in the grand scheme of a $300- to $500-billion trade deficit, the things that have been achieved thus far are pretty small.” “I mean, they’re not small if you’re a company, maybe, that has seen some relief. But in terms of really getting at some of the fundamental elements behind why this imbalance exists, there’s still a lot more work to do,” he said. China has repeatedly pledged to do more to open its markets, and the Communist Party recently approved amendments to its charter that called for letting “the market play a decisive role in the economy. But progress has been slow and contradictory. Earlier this year, China announced it would be allowing U.S. credit card companies to operate fully owned units in the country after years of stalling. However, several sources recently told Reuters that authorities are still pressing foreign credit card companies to form joint ventures with Chinese companies. On Friday, China announced that it will raise the ownership limits in joint venture firms involved in securities, futures and fund markets. China’s Vice Finance Minister Zhu Guangyao said that ownership limits would be raised from 49 to 51 percent, allowing foreign companies to hold a majority stake. No time frame for implementing the measures was given, but according to Reuters Zhu did say that all restrictions on equity holdings for the sectors would be removed in three years. Analysts note that while it is still hard to say what else was discussed behind closed doors, on trade and North Korea, the ball is clearly in China’s court. “Trump has put the onus on President Xi to solve the North Korea problem. This is why he said that if Xi wants something to happen, it will happen,” Balding said.