Sunday, 4 December 2016

Trump's Phone Call to Taiwanese President Rattles China

     Trump’s decision to speak to the Taiwanese President Tsai has left almost everyone befuddled. Was it a deliberate decision or was the President-Elect demonstrating his colossal ignorance of international affairs? The Taipei Times recalled that “Trump reportedly agreed to the call, which was arranged by his Taiwan friendly campaign staff after his aides briefed him regarding Taiwan and the situation in the Taiwan Straits”. So if the Taipei Times story is accurate then this wasn’t an impromptu call at all, nor was it done in a fit of absent mindedness. It is reported that John Bolton, the former US representative to the UN, visited Trump the Friday before the call for undisclosed reasons. Bolton is known for his extreme right wing views and his thoughts on China/Taiwan expressed in a Wall Street Journal op-ed published in January 2016, call for the eventual establishment of diplomatic relations with Taiwan. There are also reports that the Trump family is interested in a stake in the lucrative Taoyuan Aerotropolis project. Although this may have been the first time that a US President or a President-Elect has spoken to a Taiwanese leader since the normalization of relations with China since 1979, yet to be fair, even President-Elect Reagan had invited senior Taiwanese leaders to his inaugural in 1981. Then as now the Chinese were livid.

     There were two choices open before the Chinese leadership on how to react. The first was to play down the incident as trivial and of no consequence, or to escalate matters. The Chinese chose the first option. Foreign Minister Wang Yi dismissed the phone call as the “Taiwanese side engaging in petty action”, although his Ministry was rattled enough to lodge “stern representations” with the “relevant US side”. By blaming the Taiwanese exclusively, the Chinese clearly had no intention to rile the new incoming President just yet. The well- known Chinese strategist, Shen Dengli [Fudan University] appeared to absolve the Americans of culpability by saying that the Chinese can hardly object to a “private” citizen [Trump] talking to the Taiwanese leader! But the Chinese leadership is clearly flustered by what Trump has done and watches with increasing trepidation on what he might do after he assumes the presidency. The main fear is that President Trump maybe no different from candidate Trump.  

     One of the most prescient and authoritative observations on the thinking of the Chinese leadership on Trump was recently penned down by Jin Keyu, who teaches at the London School of Economics and is the only child of Jin Liqun, the President of the AIIB. Jin Liqun is a former Vice-Minister of Finance in China, has held a string of important and powerful financial appointments and is considered to be one of President Xi Jinping’s closest economic advisors. According to Jin Keyu, the Chinese leadership’s expectations of Trump are as follows:

    [a] The Chinese leadership is neutral on Trump’s victory. They have noted that Trump posted a video of his grand-daughter reciting a poem in Mandarin. They do not expect Trump to follow through on his campaign rhetoric regarding climate change [“hoax cooked up by China”] or the imposition of 45 percent duty on Chinese goods imported into the US. Thus the Chinese leadership feels that Trump’s campaign rhetoric on economic matters bears little relation to reality.

   [b] But what is the reality? According to the Chinese, if 45 per cent imposts are put on Chinese imports then [1] the non- availability of inexpensive Chinese goods would no longer put down ward pressure on prices which has been a boon for low income American house-holds, thus effectively raising their purchasing power [2] prices in US would rise undermining consumption, impeding economic growth and exacerbating inequality. [3] low- cost manufacturing would in any case not go back to the US, but would gravitate to countries such as Vietnam and Bangladesh that have even lower labor costs than China.

  [c] China is one of the largest purchasers of US Treasury Bonds and continues to finance American consumption and investment. US should not rule out that the Chinese are capable of financing Trump’s proposed large infrastructure projects, thus reducing pressure on the US budget. Thus the anticipation is that there will not be much change in US economic policy.

  [d] It is in the Strategic and political area that the Chinese leadership feels that Trump is far from inconsequential. He is no ordinary American President. Trump should be taken seriously, though not literally to borrow a phrase from the ‘Atlantic’s’ Salina Zito. The fact that Trump wishes to put “America First” means that so far he has shown little interest in the SCS dispute. China would welcome less US involvement in Asia.

   The Chinese have noted that Trump has assured both the South Korean and Japanese leaders that the US commitment to their security would continue and he has not raised the campaign rhetoric of asking both South Korea and Japan to pay “more” for US bases. The Chinese leadership does not want any instability in North-East Asia.

   The Chinese leadership is aware of what Trump has said about Russia and President Putin. If Trump mends fences with Russia, it would mean that there would be “subtle” changes in Sino-Russian relations.

       Finally, Jin Keyu says that the Chinese leadership is focused on what it considers really important. That is the absolute need for a co-operative relationship with the incoming Trump Administration.

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