Guest Research FellowSIIS at Pangoal Insight Forum January 14, 2017

In exactly one week, Mr. Donald Trump will be in the White House and become the 45th US President, which earmarks a new chapter of the bilateral relations between China and the United States. When the dust of the campaign rhetoric and party politics have settled down, where will President Trump lead the United States? How will the president rejuvenate the US? And, for that matter, how will the president handle the bilateral relations that have hitherto provided critical steam for both economies? All these questions warrant a close look at the dynamics that have powered the bilateral relations so far.

I. Status of Current Bilateral Relations

For  eight years during the Democratic administration, President Xi Jinping and President Obama have managed to build up a momentum that has withstood the impact of the 2008 international financial as well as the US domestic politics. The two countries have managed to build and maintain the new type of the major state relations, which have brought tangible results for both sides. The two leaders have made a record to meet regularly via bilateral visits, regional and international summits which have allowed them to make strategic and political decisions on some tough issues. Will President Trump continue to do so?Up till now, the two countries have established 94 bilateral dialogue mechanisms which have facilitated conditions for both sides to address tough issues through dialogues and negotiations. Currently, the bilateral trade in 2016 surpassed $500 billion against the backdrop of the sluggish global trade. Currently, China and the United States are the major trading partners to each other and the two countries have now become major investor to each other. Since the 21 century, frequent people to people exchanges between the two countries have promoted the understanding and friendship. Now, there are more than one hundred flights each week in order to service travelers for political, commercial and civil activities between the two countries. Last year, people to people exchanges of the two countries once again broke the 5 million mark.

At the global level, China and the United States have been key members at many regional and international organizations, where the leaders and officials from both countries have mostly been the active players. The two countries are both permanent members at the UN Security Council where the two sides have been coordinating policies on many key issues in order to promote the global governance, even though the two sides have had occasions when the two sides were locked in arm-twisting on issues that divided the two countries in terms of national interests. The largest achievement that the two countries jointly achieved so far was the singing of the Climate Change Convention at the summit in Paris in 2015, which would help save the world from sliding into the scenario of the human self-destruction in terms of environment degradation.Both countries have been working closely at the APEC and the G20 summits which have the mandate to promote regional economic integration and global governance. However, the issue is whether the new US administration would join hands with the Chinese side and continue with the working relations that would benefit not only the two countries, but also to the countries around the world.

II. Pending Issues to Be addressed

There is no doubt that mature relations are bound to be accompanied by complicated issues and frictions, so are the China-US relations. In short, under the Trump administration, the bilateral relations between China and the United States are likely to be punctuated by the following pending issues, which would become “hidden Himalayas” if they were not properly addressed.

From the political perspective, there should be no denying that China and the United States have been implementing different political systems. The two countries are having different cultural traditions and different values. Consequently, these differences are likely to cause misunderstanding and mutual suspicion on many issues. It is an open secret the the US is yet accustomed to the fast pace of development of China and, thus, the US politicians and strategists have regarded China as an actual competitor. For that matter,the successive US governmentshave been hedging against the China rise. It is out of the above consideration that the Obama government initiated the pivotal to Asia which is intending to bring China under check in political, economic and security areas. Meanwhile, the bilateral relations between the two countries lack the solid support of mutually binding treaties. The three joint communiques are hitherto often subject to the “interpretations” by the US side. The President-elect has stated publicly that his administration would revisit the one China policy which is the red line and the life line by the Chinese side. The whole world is holding the breath whether the President Trump would really disregard the core interest of the Chinese side. With these scenarios in the background, when President Trump is in the White House, the two countries arelikely to experience a bumpy start in terms of the bilateral relations.

From the economic perspective, there is the issue of misalignment of  economic relations. China and the United States are the two largest economies in the world, and both countries are main engines of the global economy. However, the two economies are a world apart in terms of  stages of development, both countries are at the different ends of the global production chains and value chains, which pretty much decide what each side is to produce and how much benefit each side would gain from the bilateral or multilateral production chains and value chains. More importantly, the two economies are forming different cycles which have made the bilateral policy coordination very difficult. More importantly, the ever growing bilateral economic and trade relations still lack the institutional support. The two countries have been conducting negotiations on the bilateral investment treaty and are about to sign the deal, but it remains a question whether the Trump administration would continue with the above process. Meanwhile, the two countries are major trade partner to each other, but the two countries are yet to negotiate and sign the free trade agreement.      From the governance perspective, the political cycles in the United States have become “roadblocks”for the bilateral relations. During the campaigns, most presidential candidates would use “China bash” tactics in order to attract media attention or to win popular votes. Likewise, when the president-elects get to the White House, they would always experience a period of “learning curve” in order to deviate from the campaign politics and party politics, and bring the US-China relations back to the right track. The above scenarios have always resulted in the fluctuations of the bilateral relations. It is noteworthy that the two governments are very often locked into arm-twisting on many issues because of the lack of common understanding or benchmarks on the issue at stake. And, the above scenario would continue to become the source for misunderstanding and even conflicts.

From the cultural perspective, both countries are of great nations among the world of nations, both countries have demonstrated global influences at different historical period, and both cultures have national characteristics, in accordance with national situations. It is true that common cultural traditions and common values are the “lubricants” to the modern state relations and “power boosters” to the regional economic integration process. However, the bilateral relations are exactly marred by the common benchmarks of the above traditions and values, which explains why the two countries often find it difficult to proceed with the bilateral programs or agendas.

From the security perspective, China and the United States are the neighbors that neither side could afford not to build the harmonious relations with. However, the two countries are having different global strategies. China has assured the international community to embark on the road of peaceful development, and does not want to challenge the dominant position of the United States. However, the US is yet to be accustomed to a fast growing China. For that matter, the recent US governments have been treating China as a real potential competitor, and, thus, have been implementing the “policy of hedging” on China, driven by the Cold War logic. One the one hand, the US has been tangling with China in the economic filed, in order to maximize the benefit of economic cooperation and to influence China in terms of orientation of development, cultural values and traditions. One the other hand, the US government has been implementing policies of leverage on China. In the political arena, the US has been building alliance relations, which is based on the values and tradition, with countries surrounding China. In the economic arena, the US government has been trying to build the “next generation” of trade and investment institutions that are excluding China. In the military arena, the US government has been implementing the Pivotal to Asia, which is to target on China, by establishing security alliances with countries in and around Asia and the Pacific.

III. Policy Thought for theRelations between China and the United States under the Trump Administration

Based on the above analysis, China and the United States are both at the crossroad in terms of sustainable economic development and national rejuvenation. Both countries are under the pressure of the sluggish global economy and the contracting global trade. Both countries are under the traditional and non-traditional security threats. Both countries have the obligations to join hands to promote global peace, development and cooperation. Therefore, the “same boat spirit” is still to apply to the bilateral relations.

First, the two countries should carry out more more dialogues and communications. Both governments should carry out more policy coordination and cooperation. Both countries should adopt the spirit of  “gives and takes” as well as that of the “balanced rights and obligations”, in dealing with the bilateral relations. From the outset, it is the legal obligation for the US side to recognize China’s market status in accordance with the WTO agreement.

Second, both countries should join hands to build a bilateral relations that are sustainable relationship based on avoidance of conflict and  confrontation, mutual respect andwin-win cooperation. Therefore, it pays for the two countries to conclude the BIT which will allow more Chinese entrepreneurs to set up their business in the US and help create jobs for the local people. And, it is also very much desired for both countries to start negotiation on a free trade agreement which will help to avoid unnecessary frictions.

Third, both countries should each take steps forward and implement reciprocate policy measures to reduce the deficit of mutual trust, which warrants both side to respect the core interests of the other side. Both countries should avoid implementing policies at the expense of the other side.

Fourth, both countries should further tap into the economic potentials by allowing a real two-way investment which would help immediately reduce the trade deficit on the US side. Both countries should build on the cooperation in the area of clean energy and environment protection where the US side has clear technology advantages. Both countries should step up cooperation in IPR protection which would generate new steam for the bilateral trade. Both governments could facilitate conditions for the enterprises of both countries to form the joint-ventures in the United States, produce and market the end products to the third markets, etc.

Fifth, both countries should refrain from finding “scapegoats” for the domestic matters. For example, the ever growing trade deficit between the US and China is the resultant scenario of the globalization. More than a quarter of million US enterprises have outsourced their production lines or manufacturing links to China, and reship the end products back to the US market, which forms the substitution of the goods to be produced on the US soil. As a matter of fact, the bulk of the FDI enterprises across China have been doing the same thing. Currently, roughly about 60% of the exports from China is handled by the FDI owners in China or exporters and importers of other countries across the world. Therefore, China has been given the “name”largest exporting countries in the world in trade volumes, but not in trade benefits. More importantly, the bulk of the products from China are the ones that the US is not manufacturing. Therefore, the US could cut off the commodity imports from China by administrative or legal measures, but will not help reduce the total trade deficit at all. The only sure thing is that the US customers would have to spend more on the same products from other countries minus the same quality.  

In summery, against the backdrop of the globalization and the volatile international situation, it would be to our common interests to build a sustainable relations that would benefit both countries and peoples. As one American saying goes, it takes two to tangle. Whether the two countries tangle or not, the consequences would be felt by the international community. In this regard, the Chinese side is ready, but is the new US leader and the government ready, too?  

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