BEIJING: The Chinese woke up on Wednesday morning (Nov 7) to a new reality where the chances of US President Donald J Trump and Chinese President Xi Jinping coming to a compromise to end the trade war and signing an historic bilateral trade agreement have become slimmer, at least for the next two years.
After Tuesday’s midterm elections, and the Democrats winning the House, many have predicted that Trump is likely to focus on winning over US voters and championing an “America workers first” mantra to boost his re-election bid for the White House in 2020.
To do that, Trump can utilise executive powers to invoke measures through Section 301 of the Trade Act that allows him to raise tariffs on Chinese imports without requiring approval from Congress.
On the other hand, we must also expect President Trump and House Speaker-elect Nancy Pelosi to clash in the coming years. A new era of gridlock on legislative matters, including the passage of trade agreements, can be expected.
Accordingly, China must adjust its stance on global trade. Instead of shutting down trade, and retaliating with tariffs and other forms of trade control, it must do the opposite. It must encourage other countries to sign lucrative multilateral and bilateral trade and investment deals.
There are steps in this direction, as China hosts the China International Import Expo in Shanghai this week.
RECONNECTING WITH THE WORLD
The expo is a symbol of China’s shift away from a reliance on domestic manufacturing and exports as a key engine of growth, and a signal that the country understands its future success depends on welcoming more foreign imports and connecting with global supply chains.
China intends to open up further to foreign businesses, promote free trade and trade facilitation, while demonstrating to foreign partners they can all achieve successful outcomes with win-win deal-making in the Chinese market, said Zhang Yuqui, dean of the School of Economic and Finance at Shanghai International Studies Universities.
The tide has already turned in recent years. In 2017 alone, China’s foreign trade topped US$4.1 trillion and the Chinese government has publicly announced a projected increase in imports cumulatively totalling US$24 trillion for the next 15 years.
Beijing also announced just last week it would slash tariff rates on over 1,000 taxable items, including temporary tariffs on imports from most favoured nations – the sum of which amounts to average tariff rates dropping from 10.5 per cent to 7.8 per cent.
More than 3,000 international companies from over 130 countries participate in the expo in Shanghai this week, a gathering that will introduce more channels of collaboration between Chinese retailers and foreign importers. 5,000 new products will be on display for visitors, and the expo is expected to generate more networking opportunities for foreign importers seeking Chinese buyers.
There isn’t a better venue for this event. Home to the Shanghai Stock Exchange and Shanghai Gold Exchange, Shanghai has long been recognised as the nation’s financial capital.
The city aspires to become one of the leading financial hubs in the world, competing against New York, London, Tokyo, Hong Kong and Singapore as a regional centre for banking and capital markets.
The expo is held at a time when China is expanding diplomatic efforts to build closer ties with emerging markets. Chinese President Xi Jinping has embarked on a series of state visits to countries in Africa, South Africa and the Middle East in recent months.
His bold Belt and Road Initiative (BRI), which promotes cross-border trade and investments in infrastructure with participating nations from Asia, Europe, Middle East and Africa, is a central prong of China’s diplomatic push.
Through the construction of mega projects, whether railroads, ports, and roads, through joint projects, with financing from the Asian Infrastructure Investment Bank, the BRI opens up regional economic corridors, such as the China-Pakistan Economic Corridor, that can serve as a bridge between developing and developed markets and facilitate greater trade and cross-border exchanges.
Despite criticisms of the BRI being a debt trap for recipient countries, the BRI is delivering on the construction of much-needed infrastructure, including high-speed railways, highways and bridges, and power plants.
In this, Chinese companies have done much of the heavy lifting and assumed substantial risk to complete construction on such infrastructure projects.
The stronger economic cooperation with other countries, especially with emerging markets, China has charted out will help it weather the stormy seas of US-China trade and investment ties.
The Chinese economy may face further challenges over trade with North America but it stands well-prepared, in forging a path that embraces globalism and collective global prosperity.
Tom McGregor is a commentator on Asia-Pacific affairs based in Beijing.