Posts tagged: Trade

One Belt One Road – A Lot More Than Just A Weird Name

Chinese President Xi Jinping delivers opening remarks at the One Belt, One Road Summit on May 14, 2017 in Beijing (Photo courtesy of New York Times)

For those in the United States who woke up this morning not realizing that China just opened one of the largest trade summits in Asia, you are not alone.  For the American press has barely mentioned China’s “One Belt, One Road” policy, let alone this inaugural, two-day summit of the initiative, with over 1,500 participants and 28 heads of state in attendance.

But One Belt, One Road is not something to be ignored. Although launched only four years ago, it reflects Beijing’s very real ambition to exert its economic influence – if not be the dominating economic force – in Asia, Eastern Europe and Africa.  It also reflects the historical legacy of China’s Silk Road – a trade route between Europe and China that emerged as early as the Qin Dynasty (221 – 206 B.C.) and flourished during the Tang Dynasty (618 – 907 A.D.).  It was the Silk Road that resulted in China becoming the economic and cosmopolitan superpower that it was during those time periods.  China’s current One Belt, One Road initiative seeks to replicate that route, creating a modern day trade route over land from Beijing to Europe.  But it also calls for creating a maritime trade route around South Asia to the east coast of Africa and the Middle East.

However, unlike the ancient Silk Road – where trade flowed in and out of China – with One Belt, One Road, China’s intention is predominately for trade to go out. As Peter Cai of the Lowry Institute argues in his report Understanding China’s Belt and Road Initiative, in many ways, China’s geostrategic interests – that it seeks to be the new global superpower over the United States, with control of key trade routes – are secondary to its domestic economic motivations for One Belt, One Road.

Lanzhou’s Airport, Terminal 2 (Photo courtesy of China.org.cn)

First, Cai highlights that the economic inequality between rich, east coast cities (think Shanghai, Guangdong, Xiamen) and China’s hinterland are at almost crisis levels.  But One Belt, One Road – with its reorientation on trade moving West – would focus on these land-locked, poorer cities and provinces like Gansu, Xinjiang, and even some of the less rich provinces of China’s northeast.  According to Cai, these areas are all competing to borrow money at low rates under the One Belt, One Road to build its infrastructure in anticipation of these new trade routes.  There is a reason why Lanzhou, in what feels like the middle of nowhere China, has one of the fanciest airports in the country.

Economic slowdown in China? (Photo courtesy of the Economist)

China’s second domestic economic motivation for One Belt, One Road is the fact that with economic slowdown recently, key industries such as steel, coal and construction, have excess capacity.  These are the same industries that took a lot of loans from the central government to get through the global financial crisis of 2008, loans that may not be re-payed if China’s economy stays where it is.  One Belt, One Road however, is a way to escape this conundrum.  But not just by selling steel or coal or cement abroad.  Instead, as Cai points out, China intends to actually move the production facilities to these other countries.  This would allow China to rid itself of a supply glut while providing less developed countries with manufacturing facilities that can help with their own economic development (although they will likely still be Chinese-owned).  In some ways, a win-win for China and these other One Belt, One Road countries.

China has already moved some factories abroad, such as this garment factory which was moved from China to Ethiopia where labor is cheaper. (Photo courtesy of Daily Mail/Getty Images)

And at the same time, by moving factories abroad, China will be able to refocus its economy from a low-end manufacturing country to one that can promote innovation and technological development.  With China as the key innovative country in the region, it can then use One Belt, One Road, to promote its new technologies – like the high-speed railways it is building in various African countries and Southeast Asian countries.  With all these countries being on the same railway system only deepens the trade partnership and economic integration with China.

While the United States turns inward and gets bogged down with needless political crises, One Belt, One Road is in many ways a genius strategy for China.  It gets itself out of its own economic straights, it ensures global integration in Asia, Eastern Europe and Africa with China at the center, and enables China to exert greater and greater global influence.

The Silk Road of the past – when camels roamed

But, while China has pledged $1 trillion to One Belt, One Road, much of that money has yet to be spent.  There is also the gamble of the Chinese government’s very deliberate and planned approach to developing this trade route: it does not enable Chinese companies themselves –companies who are best able to determine the risk in their industries and in the countries where China wants them to invest – to make their own decisions.  But as Elizabeth Economy, the Director for Asia Studies at the Council on Foreign Relations (CFR) noted at a CFR event the other week, if fully realized, the One Belt, One Road initiative will fundamentally restructure the political landscape for over a third of the world.

But if all you do is read the U.S. press, that fact could just pass you by.

The Trump-Xi Summit – Making Plans to Make Plans

By , April 11, 2017

Presidents Trump and Xi Jingping at Mar-a-Lago, April 6, 2017 (Photo courtesy of JIM WATSON/AFP/GETTY IMAGES)

To say that the U.S. air strike on Syria overshadowed the Trump-Xi summit last week would be an understatement.  The event basically eclipsed the two day conference, pushing the meeting between the leaders of the world’s two largest economies to second page news.

But even without the Syrian air strike, the summit would not have created much news.  In fact, in the way Trump and Xi each described the outcome of the meeting – deepening their friendship  and making progress in their relationship – it seemed more reminiscent of a marriage proposal in Elizabethan England than a discussion between two powerful countries that have been having a difficult relationship.

But did anything substantive come out of the summit?  The South China Morning Post has a great review of the issues discussed – and not discussed – at last week’s summit.  But here are some highlights:

Trade

At Mar-a-Lago last week (Photo Courtesy of AP Photo/Alex Brandon)

Trump did raise the issue of trade and, according to Secretary of State Rex Tillerson, Trump “underscored the need for China to take concrete steps to level the playing field for American workers, stressing repeatedly the need for reciprocal market access.”  But it is unclear if the statement resonated with the Chinese delegation.  And, contrary to some pundits’ expectations, Xi did not come to Mar-a-Lago with a peace offering, namely proposing job-creating investments in the United States.

Instead, the two sides announced the 100-Day Plan, a policy to completely overhaul their trade relationship within 100 days.  While most countries take years to rebalance a trade relationship, Trump and Xi are going to do it in a mere 100 days.  Secretary of Commerce Wilbur Ross correctly noted that this approach would be a “very big sea change” but offered no explanation exactly how all of this can occur in a matter of three-and-a-half months or even why it should; why such a rush to recalibrate the most important trade relationship in the world is a good idea.

North Korea

While both countries acknowledged North Korea as a growing nuclear threat, no middle ground was met.  It appears that Trump continued to warn China that if it did not do more, the U.S. would follow its own course of action, and with the Syrian attack in the backdrop, one can only imagine what Xi was thinking in all this.  China’s foreign minister however noted that if North Korea ceases its nuclear program, then military action in the region should also cease.  Interestingly, this was the suggestion that Beijing made last month: to halt the joint U.S.-South Korea military drills to induce North Korea to coming back to the negotiating table.  The U.S. did not listen and instead continued with the drills.

Human Rights

Just say no to human rights

Neither side mentioned whether human rights was raised during the summit and, given the agendas of these two men, it likely was not.  But in a White House-approved statement after the summit, Tillerson again used the vocabulary of the Chinese Communist Party (“CCP”) to describe the U.S.-China relationship: one of “mutual interest.”  For the Chinese, this is not rhetoric but words that come with baggage.  Mutual interest is often used by China to scold other countries when those countries question China’s domestic policies.  Usually used in relation to China’s interest in Tibet and Taiwan, it can also be used in defense of foreign criticism of policies that seek to viciously stamp out civil society. So expect human rights to play a low role in Trump’s policy toward China.

State Visit & U.S.-China Comprehensive Dialogue

Trump – already big in China

Xi invited Trump to a state visit in China this year and Trump said yes.  But more importantly, the U.S. and China established a framework by which to hold high-level talks, the U.S.-China Comprehensive Dialogue.  Make no mistake, this is not a new idea.  Under the Obama Administration, the U.S. and China would periodically host the Strategic and Economic Dialogue, the Human Rights Dialogue and on occasion, the Legal Experts Dialogue.  It appears that Trump and Xi are going to replace these dialogues with the U.S.-China Comprehensive Dialogue (date yet to be announced) which will have four tracks: a diplomatic and security dialogue; a comprehensive economic dialogue; a law enforcement and cybersecurity dialogue; and a social and cultures issues dialogue.  Again, human rights was not named as a specific issue and if it is unclear if this issue will merely be squished into the social and cultural issue dialogue.

So in the end, not many outcomes from the Trump-Xi summit.  Perhaps what is more telling though is what was not said at the summit.  No mention of Taiwan, no mention of human rights and no mention of increased Chinese investment in the U.S. to create jobs.  But check back in 100 days.

State of the Union & China

By , January 28, 2010

State of the Union addresses are mandated by the Constitution, and like most requirements in life, are often dull.

Barach Obama's first State of the Union

Barach Obama's first State of the Union

The speech usually turns into a laundry list of the President’s priorities with little rhetorical flair.  Often the most exciting part is when the TV cameras pan the audience and catch Senators and Congress members misbehaving.  This year it seems as if everyone Congress member was “tweeting” on their blackberry.

So to spice it up a bit, we at China Law & Policy decided to analyze President Obama’s first State of the Union address in terms of China.

Not surprisingly, President Obama’s speech focused mostly on the domestic agenda.  But China was mentioned twice, although both times only briefly.   China was first mentioned in regards to the technology behind its fast trains.  Similarly, when President Obama brought up China a second time, it was in regards to its technological advancement and that the U.S. must not fall behind.  In both instances, China was used more as a foil than anything else.

More compelling were the points when China wasn’t named but perhaps should have been.  In terms of trade partners, President Obama stated that he wanted closer ties with Panama, South Korea and Colombia.  But this is likely less of a snub to China than the fact that the Obama Administration is waiting on Democrats in Congress to approve free trade agreements with these three nations.

China was also absent when President Obama discussed the nuclear threat from both North Korea and Iran.  In fact, no other nation was mentioned and while President Obama was very forceful in threatening the two countries with increased sanctions, his actions appeared rather unilateral.  This is in contrast to his predecessor; in George W. Bush’s 2003 State of the Union address, the President specifically mentioned China as necessary to reach a peaceful solution on the Korean peninsula.

Does this mean that the U.S. is not receiving China’s support on this front?  It’s hard to tell.  Given the American public’s focus on the economy, health care and the corruption culture of Washington, it’s not surprising that President Obama’s speech had very little focus on foreign policy.  To draw any conclusions from the little he did say is speculative, but at the same time is something to be aware of and to watch.

Click Here for a Transcript of the State of the Union Address

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