Platt Perspective on Business and Technology

China and its transition imperatives 39: rethinking China’s emerging trends and challenges in the emerging era of a United States Trump presidency

Posted in macroeconomics by Timothy Platt on December 6, 2016

This is my 46th installment, counting supplemental additions, to this ongoing and even open-ended series on China. Basically, what I am doing here is to trace how China has changed under the rule of Xi Jinping, with this series narrative starting approximately one year after he first took leadership of their Politburo Standing Committee, and through that of their entire Communist Party of China and of China as a whole (see Part 1, as written to first go live on this blog on February 8, 2014.)

This is also my first new posting to this series that I have written since the election of Donald Trump as the 45th president of the United States. I wrote Part 38 of this series, to go live to this blog on November 6, 2016: prior to the US presidential election (of November 8.) And at the time that I wrote that, I freely admit that I expected Hillary Clinton to win that election, and most likely with the Democratic Party taking control of the US Senate. I did not expect the landslide Democratic Party victories that many of the polls predicted; I did expect these elections to be much closer than that. But I did expect that Donald Trump would lose. He won and even as a president elect who has yet to take office, he has already made statements, selected cabinet officers and other senior appointed office holders, and taken actions that have had a significantly destabilizing impact.

Trump has sewn discord and concern among the United States’ traditional allies. He has given hope to the leaders of governments that prior US administrations: Republican as well as Democrat have sought to contain. And he has created real uncertainty as to whether he even has a unified, consistent policy or plan in mind behind all of this – besides the making of snap decisions on the basis of here-and-now assessments of what might be “pragmatic” for him in the moment, and with none of those decisions particularly framed by or shaped by longer term contextual considerations. The one point of consistency that he has been developing and building towards can be found in how he has been rewarding loyalty from the more alt-right political extreme that supported him in his election bid. He has been quite consistent in that, in how he has made and announced his selections for high level government appointments – where those office holders if approved, can be expected to assiduously and consistently hew to their own already well established principles and priorities, and their own long-held goals.

And all of that has very significantly impacted upon China and on the relationship between China and their neighbors, and between China and the United States, and the West as a whole. I had a series of puzzle pieces already lined up for this posting from before the elections, and certainly as to their basic types and topics – and with a goal here of pursuing a more or less linear continuation of the narrative that I have been developing here in this series from its beginning. But Trump’s election, and a combination of his pre-election campaign rhetoric and of his post-election behavior, has prompted me to reconsider and to re-orient what I will discuss here.

First, to put this posting into a more explicit context, I have at least as of this writing posted five times to this blog about American politics and the state of the Union here in 2016, starting with a brief essay: Part 1: Thinking Through the Words We Use in Our Political Monologs (that initially went live on June 6, 2016 – prior the national conventions that formally selected Trump and Clinton as the Republican and Democratic Party candidates.) You can find that progression of postings at Social Networking and Business 2 as its postings 244 and loosely following. And the more recent of those five are particularly pertinent here, and for this thread of discussion.

But this is a series about China and its issues and challenges, so let me consider this new shift in the US political landscape, from that perspective. And I begin doing so with the pre-election, and even the pre-candidate nomination campaigning that took place in the United States – and with free trade agreements, and with the Trans-Pacific Partnership (TPP) in particular.

There has been a global shift over the past several generations, and even across recent centuries, towards increased connectedness, and in travel and trade, communications and more. And Thomas Friedman famously captured the basic message of this trend, and in a very positive and affirming manner in his book:

• Friedman, T.L. (2007 edition) The World Is Flat. Picador/Farrar, Straus and Giroux. New York.

And to continue along that line of reasoning, I also note books like:

• Fung, VK, Fung, WK and Wind, Y. (2007) Competing In A Flat World: building enterprises for a borderless world. Wharton School Publishing.

But at the same time that this fundamentally disruptive trending change has taken place, there have been people and communities, and entire significant demographics that have seen themselves left out – and harmed from it. Friedman himself, to cite one of those authors, has written about this side of that complex of issues too, as have others. And to cite one of his relevant works here for that perspective, I suggest:

• Friedman, T.L. (2008) Hot, Flat, and Crowded . Picador/Farrar, Straus and Giroux. New York. (where this book is now freely available as a downloadable PDF file.)

Pushback against free trade agreements and barrier-free trade zones, such as North American Free Trade Agreement (NAFTA) that are already enacted and in place, has become intense and particularly in the more economically and industrially developed nations. Quite simply, all of these nations have large and significant populations that are well positioned to gain from the new opportunities that are emerging from free trade and global flattening. But all of them also contain in them significant populations and demographic groups that do not have the training or experience or the opportunity to move into new types of work that free trade can create, and even as the work and the jobs that they have always done and the businesses that they have worked for have faced increasing new international competition. These people have seen their jobs, and their footholds on the middle class, and even their entire ways of life threatened – and precisely because of free trade, and I add the open flow of immigration that often accompanies it. That at least, is their basic overriding belief and it has led these many to feel anger and anomie and an intense sense of betrayal.

And one agreement that is still being pushed for acceptance and implementation as a part of this, and as a key next step in the world is flat free trade zone movement, has provoked particular ire in this regard: the TPP. Both Clinton and Trump spoke out against the TPP when they were running for election in 2016. As one of the few points of agreement that they shared in their campaigns, they both cited it as a cause for job loss in Middle America, and in our industrial heartland.

President Obama and his administration actively worked to develop this agreement and to make the United States a signatory nation member of it, as one of his crowning achievements while in office. But it is effectively dead now, and certainly insofar as it would be cripplingly limited and ineffectual without US participation.

Why do I mention this news story here and now? I wrote a 10 Part series on Vietnam in 2015, when the TPP was still actively under development and with prospects for its being signed onto and approved internationally – starting with countries such as the United States. And the primary reason why Vietnam actively sought to become a signatory member of this agreement too, and with the TPP as strongly framed as possible, was China (see my series: Vietnam, Doi Moi and the Search for Business and Economic Strength and Global Relevance, as can be found at United Nations Global Alliance for ICT and Development (UN-GAID), postings 34 and following.) Vietnam, and I add several other nations flanking the East and South China Seas, saw membership in and active supportive participation in an agreement of this type as offering them counterbalancing leverage against China, where the Beijing government has forcefully dominated, and has sought to so dominate all other nations in what they see as their domain.

Trump attacked the TPP, at least initially with claims of it being just another Democratic Party darling. And then he began attacking it even harder as he saw his early words against it resonate with his supporters, and particularly with those who saw agreements such as the TPP as harming themselves. He saw this attack as helping him in securing his party’s nomination; he positioned himself as the voice of the angry and the disaffected, who see themselves has having been left out of the benefits that disruptive change such as the TPP and agreements like it can bring – to others. And then when he won that battle and his party’s nomination, he ran against the TPP as one of his prime targets of opportunity in his campaign for the presidential election too. Some of his announced high level appointees are very actively anti-TPP so that issue will not go away as he enters office. And Trump’s words and his professed plans for action in this one area certainly, can only have served to embolden Xi Jinping and his Beijing government, as decisions that would help free their hands.

But the prospects of a Trump presidency should not, and do not present themselves as an unalloyed positive for anyone, with that definitely including China’s leadership. And that point of observation brings me to post-election Trump as he has continued to speak and act on the spur of the moment. That brings me to how president elect Trump has broken with decades of routinely followed Republican and Democrat diplomatic policy with regard to Taiwan, by calling their president on the phone, directly, for a supportive post-election chat.

Taiwan has always presented United States foreign policy with challenges, as China has claimed it as a rogue, attempted break-away part of their sovereign national territory, while Taiwan has actively sought to promote and follow a more democratically principled form of government than mainland China ever has – and certainly under communism. So the US government has consistently sought to both support and encourage Taiwan and their government for their democracy and for their open economy too. But at the same time, the US government policy has been to at least tacitly behave as if the Beijing government’s Taiwan policy were valid too – at least as a very distantly realizable resolution to a thorny international diplomatic challenge. So high level US government and Taiwanese government officials have not openly, publically met or spoken – with that decision at least playing the game of acknowledging Beijing’s claims to the island, and even as US government policy has actively promoted trade and travel and essentially all other agreements and relationships that exist between countries that are on friendly and supportive terms with each other.

And this leads me to some still recent, as of this writing, “in the news” puzzle pieces for this posting:

Trump Speaks With Taiwan’s Leader, an Affront to China,
China Sees New Ambiguity With Donald Trump’s Taiwan Call, and
Donald Trump Thrusts Taiwan Back on the Table, Rattling a Region.

This is a news story that could easily be seen as overblown, and certainly if this one phone call that has prompted it were to simply represent a one-time anomaly. But at least one other recent and still actively unfolding event would suggest that this news story represents the start of something much larger than just one phone conversation. And that brings me specifically and directly to Donald Trump’s business ventures, and his failures to disclose their details – even as it is publically known that Trump’s businesses actively do business in more than 20 countries. And this brings me directly to the ongoing emerging concern that Donald Trump is not planning on actually separating himself from his business relationships, and even when that could create completely untenable conflicts of interest issues for him and for his government with him serving as the president of the United States. And this brings me to this puzzle piece:

Taiwan City Planning a Makeover Says a Trump Agent Showed Interest.

It is safe to categorically state that:

• If Donald Trump is the sitting president of the United States,
• And he is also at least arguably involved in the decision making and running of his business empire and its construction ventures,
• Even as they are officially being run by one or more of his children and his son in law,
• And his construction business takes on and carries through upon a vast infrastructure redevelopment program in one of Taiwan’s cities: Taoyuan,
• This would create both conflict of interest legal challenges in the United States for his presidency, and direct and tremendously impactful collisions between the United States government and China. Just considering the first of those consequences, this would directly and specifically violate Article 1, Section 6, Clause 2: the Sinecure Clause, of the United States Constitution (recently if ambiguously referred to in news reporting as the emoluments clause.)

The Taoyuan Aerotropolis infrastructure project under consideration here would represent the single largest development project in Taiwan’s history, with overall costs reaching into the many billions of dollars (in US currency) before anything like it could be completed. And a Trump representative is in Taiwan negotiating this work contract for his business right now. And this brings me to a question that I never even considered asking, until the events that I write of here began taking shape and occurring:

• If a sitting president of the United States actively reaches out to the sitting president of Taiwan, and if that US president owns and at least indirectly runs a business that has agreed to do literally billions of dollars of infrastructure development work in Taiwan, and in support of their government as much as of their private sector, what comes next?
• Let me be more specific than that with a brief set of follow-up questions. If this does happen, how long will it take before a President Trump is calling on the US Congress to grant Taiwan recognition as a separate sovereign nation, with the exchange of ambassadors and all of the other steps taken that this essentially always leads to? He would feel at least somewhat compelled to do this in order to protect his own personal business interests, if for no other reason. And how would Beijing react to a threatening affront like that? That, of course, is precisely how Beijing would see this: a regime threatening affront. How long would it take Beijing to take actions against the United States in reply, including the institution of trade war tariffs, increased government sponsored cyber attacks against the United States and US interests – and even the severing of diplomatic relations between the US and China. There, I would classify a significant diminution of such relationship with the closing of consular offices and the like as a step that is uncomfortably close to a severing of relationships, and certainly for how it would degrade any possible potential for corrective dialogs.

I was going to conclude this posting there, on that note but at the risk of simply adding to its length, I would offer a few words of advice that I am certain neither Xi Jinping nor Donald Trump will ever see. And I am fairly sure they would ignore them even if they saw them or words like them. But as an exercise in admitted futility, I offer the following:

• Dear Xi Jinping,
Please remember that Donald Trump is not a politician, and that he is not much of a student of either politics or history, or of economics or of anything else. He tends to act first and then seek to find justifications for what he did if challenged, so patience is important here, as is a need to reason calmly to give him a face saving way out. Trump does not have a grand malevolent plan for his dealings with China – or really any type of plan for that. So be prepared to step back and blink in surprise – and then reengage in a way that would be more conducive to reaching mutually agreeable results, and particularly where the leader on the other side of all of this has just taken a sudden and unexpected step that would concern (anger) you. Believe me, his senior advisors and Cabinet officers are just as surprised by … (fill in the blank) … as you are. Calm might make it easier for everyone to back away from that.
• And Dear Donald Trump,
I know that you like to shoot from the hip and take spur of the moment decisions and actions – and not necessarily in that order. But sometimes it really does make sense to get some background information first – and even from people like those “State Department experts” who you hold in disdain for their willingness to work in support of people who you vehemently disagree with too. You might end up still disagreeing with them but listen to them before you put yourself and the country in places that we all might prefer not to be in. So if you do disagree, make it informed disagreement, and with that “informed” giving you time to make more long-term effective decisions yourself.

I am in fact going to end this posting on that note, and will continue this ongoing narrative in a next series installment – probably in about a month again. And I have two agenda elements that I am likely to address there: the flow of issues that I have been addressing in this series up to here, and the disruptively emerging issues that I turned to in this posting. Meanwhile, you can find this entire series and all of its postings at Macroeconomics and Business as postings 154 and loosely following for Parts 1-12 and for a supplemental posting: Part 12.5. And see Page 2 to that directory for subsequent main sequence and supplemental installments to this. You can also find other, China-related postings and series at those directory pages, and at Ubiquitous Computing and Communications – everywhere all the time too. (Note: I wrote this as a single quick draft on December 5, 2016, only pausing to add in the links included.)

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