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Trump’s S$340 billion “miracle” deals in China add gloss to imbalanced trade ties

BEIJING/SHANGHAI - President Donald Trump can return to the United States claiming to have snagged over US$250 billion (S$340.4 billion) in deals from his maiden trip to Beijing. Whether those deals live up to the lofty price tag is another question altogether.

United States President Donald Trump (L) and China’s President Xi Jinping attend a business leaders event inside the Great Hall of the People in Beijing on Thursday (Nov 9). The US inked US$250 billion (S$340.4 billion) in deals as part of Mr Trump’s maiden trip to Beijing. Photo: AFP

United States President Donald Trump (L) and China’s President Xi Jinping attend a business leaders event inside the Great Hall of the People in Beijing on Thursday (Nov 9). The US inked US$250 billion (S$340.4 billion) in deals as part of Mr Trump’s maiden trip to Beijing. Photo: AFP

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BEIJING/SHANGHAI - President Donald Trump can return to the United States claiming to have snagged over US$250 billion (S$340.4 billion) in deals from his maiden trip to Beijing. Whether those deals live up to the lofty price tag is another question altogether.

Watched by Mr Trump and China’s President Xi Jinping at a signing ceremony in Beijing, US planemaker Boeing, General Electric and chip giant Qualcomm sealed lucrative multi-billion dollar deals.

“This is truly a miracle,” China’s Commerce Minister Zhong Shan said at a briefing in Beijing.

The quarter of a trillion dollar haul underscores how Mr Trump is keen to be seen to address a trade deficit with the world’s second-largest economy that he has long railed against and called “shockingly high” on Thursday (Nov 9).

Mr Trump has ratcheted up his criticism of China’s massive trade surplus with the US - US$34.6 billion in September - calling it “embarrassing” and “horrible” last week.

But many long-standing concerns that US businesses have in China remain, including unfettered access to the China market, cybersecurity and the growing presence of China’s ruling Communist Party inside foreign firms.

“This (deal) shows that we have a strong, vibrant bilateral economic relationship, and yet we still need to focus on leveling the playing field, because US companies continue to be disadvantaged doing business in China,” Mr William Zarit, chairman of the American Chamber of Commerce in China, told Reuters.

US tech companies like Facebook Inc and Google are mostly blocked in China. Automakers Ford Motor Co and General Motors must operate through joint ventures, while Hollywood movies face a strict quota system.

 

PUMP IT UP

As is often the case during state visits, many of the deals were packaged as “non-binding” agreements, gave scant details or rolled over existing tie-ups, helping pump up the headline figure.

Qualcomm signed non-binding deals worth US$12 billion with Xiaomi, OPPO and Vivo, three Chinese handset makers the firm said it had “long-standing relationships” with.

Qualcomm already earns more than half of its revenues in China.

China Aviation Supplies Holding agreed to buy 300 aircraft worth about US$37 billion from Boeing as the nation’s airlines ramp up capacity to meet rising demand.

The purchase includes 260 narrowbody planes and 40 widebody aircraft, the Chicago-based planemaker said on its website. Representatives for Boeing declined to provide details of the airlines that would take deliveries of the aircraft or say how much of this was new orders.

“Interesting to see how many of those are past agreements/purchase orders repackaged. Beijing is a master of selling the same agreement 10 times,” former Mexican ambassador to China Jorge Guajardo posted on Twitter.

The reality, however, is that the roughly 15 agreements unveiled on Thursday are mostly non-binding memorandums of understanding and could take years to materialise — if they do at all.

A day earlier, Commerce Secretary Wilbur Ross announced US$9 billion of deals, many also MOUs with few details, rather than contracts.

“To me this is an old-style visit when you pile up all the deals so you can to get a big number,” said Mr James McGregor, China chairman of the consultancy APCO Worldwide.

“This was normal when the US and China were just building ties, but now China is a global business power and has very damaging industrial policies and this seems naive. This is all for show for President Trump to demonstrate his deal-making prowess.”

Both Mr Trump and Mr Xi hailed the deals on Thursday, calling them examples of “win-win” cooperation between the world’s biggest economies.

At the same time, Mr Xi said that China would open its market according to its own “timetable and roadmap” while calling to respect each other’s “differences” — showing that Mr Trump will find it harder to press for him for substantive policy changes.

The non-committal nature of many of the deals reflects a lack of planning or advance work ahead of Mr Trump’s visit to pin down significant agreements or concessions from China, according to two administration officials who asked not to be identified to speak about private deliberations.

The officials pointed to the fact that there were no agreements on giving US companies more access to Chinese markets, or opening up Chinese financial markets — something investors have been demanding for years.

One of the larger deals was a joint development agreement to advance a liquefied natural gas project in Alaska, involving the state-run Alaska Gasline Development, Sinopec, the China Investment Corp and the Bank of China. The project, which Alaska has pursued for years, would involve total investment of up to US$43 billion.

A top Trump official pushed back on the lack of deliverables, saying that the president has successfully built solid relationships with Mr Xi, Japanese Prime Minister Shinzo Abe and South Korean President Moon Jae-in. These will help solve bigger problems in the future, the official said, asking not to be identified.

In a joint statement announcing the deal, Sinopec said it is “interested in the possibility of” purchasing LNG from Alaska. A Chinese official said the MOUs merely show China’s goodwill toward Mr Trump, and would take years of negotiations to become real contracts.

Mr Max Baucus, a former US ambassador to China, told Bloomberg Television, “This is classic Chinese. They have been doing this for thousands of years.”

“It’s their technique to try to suck you in,” Mr Baucus said. “I think all this ceremony here is designed by the Chinese in part to prevent any serious conversation. The more there is pomp and circumstance, the less there is time to talk.”

Still, the business community in Beijing is abuzz with talk that Mr Trump may announce very tough trade policies against China when he gets back to Washington, said Mr McGregor.

The US is currently investigating China’s intellectual property practices, a move that Beijing has said could lead to a trade war.

The lack of substance during the trip risks undercutting one of Mr Trump’s main objectives in Asia: to cut deals that effectively narrow the US’ trade deficits with some of the region’s biggest economies. Mr Trump walked away from Japan and South Korea largely empty-handed from visits that focused mostly on solidifying security ties.

In China, the stakes were higher: Mr Trump regularly accused Beijing of stealing American manufacturing jobs on the campaign trail, and portrayed himself as uniquely qualified to fix the problem. Since taking office, he’s backed down on campaign pledges to label China a currency manipulator and slap high tariffs on the nation’s goods, but he still rails against the trade imbalance.

Mr Trump did press Mr Xi hard on improving the trade balance between the two countries on Thursday.

“The United States has to change its policies because they have gotten so far behind on trade with China and frankly with many other countries,” he told reporters, adding previous US administrations had allowed it to get “out of kilter”.

“We have to fix this,” he said.

Asked whether the big package of deals would go some way towards helping fix American trade concerns in China, executives were cautiously optimistic.

“Generally, the sense was that this is all a good thing, and that’s great,” said Mr Gentry Sayad, a Shanghai-based lawyer who took part in the delegation in Beijing. “Now let’s see what really happens.” AGENCIES

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