Helen Wang, an award-winning author and expert on China’s middle class, recently penned the following article for Forbes on what President-Elect Trump’s presidency signals for the future of United States-China trade relations. We are sharing it now with you with our comments at the conclusion:
One never knows whether President-elect Donald Trump means what he says or says what he means.
After his provocative phone call with Taiwan president Tsai Ing-wen and his tweet storms bashing China, many China watchers started to worry that a United States-China trade war might be imminent. But then, he nominated Iowa governor Terry Branstad as his ambassador to China, a move immediately welcomed by Beijing. Branstad is considered “a longtime friend of the Chinese people” and knows the Chinese President Xi Jinping personally.
If approved by the Senate, Branstad can play a positive role in United States-China relations. First, the Chinese value personal relationships more than anything else. Branstad’s connection to President Xi goes back to 1985 when he, as a first-term governor of Iowa, hosted a Chinese delegation that included a 31-year-old unknown official, who would become the president of China.
Twenty-seven years later in 2012, Xi Jinping returned to Iowa as the vice president of the world’s second-largest economy and presumed future Chinese president. Xi fondly recalled his first experience in America when he stayed in a spare bedroom of an Iowa family. Now Brandstad refers to President Xi as “an old friend” and vice versa.
Personal relationships can also help ease tensions when things get tough. Dr. Henry Kissinger has used his personal relationships with Chinese leaders to weather many storms during trying times. At least a trade war, which both sides stand to lose, now seems a lesser probability.
Second, Branstad’s nomination signals that the United States will push harder to open the Chinese market for U.S. goods. U.S. exports to China have been growing in recent years, thanks to increasing demand by the Chinese middle class. But the United States still imports a lot more from China—about four times more than it exports.
President-elect Trump said that his administration will have simple principles, which are “buy American, and hire American.” He sees Branstad as someone who has aggressively sought China as a market for Iowa’s agricultural products. He wants the rest of the country to follow suit.
But Branstad did it not by threatening to impose a 45 percent tariff on Chinese exports, but by investing in long-term relationships and building trust. China will not respond well to bullying. The good news is that China’s growing middle class loves American products, from Victoria’s Secret lingerie to Chevrolet pickup trucks. Hundreds of millions of Chinese are traveling every year, both domestically and internationally. China is expected to add 6,810 aircraft over the next 20 years, a trillion-dollar opportunity for Boeing.
Boston Consulting Group predicts that China’s consumer market will reach at least $6.5 trillion by 2020. American companies such as Costco, Macy’s, and Target are all betting big on Chinese consumers—the biggest consumer market in history.
China will respect an American leadership that shows respect, and is friendly but firm. Branstad seems to have the ears of both President Xi and future President Trump. Companies can expect greater opportunities for selling to China.
The PaizaBio Perspective: The Chinese Are Business, so Is Trump!
We agree with Ms. Wang that Trump’s nomination of Iowa Governor Terry Branstad as ambassador to China is a stroke of genius. The appointment signals Trump recognizes the great value of a positive U.S.-China relationship even with his provocative chat with Taiwan and tweets.
Trump’s best-selling book, The Art of the Deal, is a favorite of the Chinese and they love his transactional style. However, unlike previsou U.S. trade negotiators, the Chinese will be dealing with a master dealmaker who plays all angles. The Mandarins will need to up their game to stay in the game with Trump.
Trump’s rhetoric about the huge trade deficit between the United States and China is, in effect, the beginning of what will be a long and arduous conversation to balance opportunities between the two countries.
As a backdrop, China is a nation in transition. China’s economy has been based on a low cost export economy with a low consumer economy. As the Chinese have become more affluent, the government recognizes they need to shift from a low cost export economy to a higher-value-add export economy and a greater internal consumer economy. The shift has already begun; Chinese consumer consumption is ~50 percent GDP versus 35 percent a few years ago. By comparison, U.S. consumer consumption is 70 percent of GDP.
Additionally, China seeks to move into more sophisticated manufacturing and industries like global pharmaceuticals, competing with Western nations. While they are changing the rules of engagement with multi-national biopharm companies (MNCs), they want to engage with MNCs. This is one reason why PaizaBio is in China with our contract fill-and-finish operations and aggressive growth plans in terms of partnerships with Western MNCs and Chinese Sea Turtles.
Trump’s end game is simple: he wants more U.S. participation in the Chinese economy and to not be locked out by state-owned enterprises that are run by the government and given privileged advantages over the private sector, both domestic private and foreign. The question is: are the Chinese willing to deal?
There’s a lot at stake. Half of China’s 1.4 billion population is still at poverty level. There is significant room for improvement, which is what Trump—and PaizaBio—is betting on.