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The fate of US-China relations (and the world) is in Donald Trump’s hands (or those of his advisors)
I am sure that everybody reading this email is already up to their ears in commentary on the Trump-Tsai conversation, so I will keep my comments brief. A few key points:
- This call was no accident. It is clear that Trump associates, including chief of staff Reince Priebus, have had repeated contact with Tsai and her people in recent months and were well aware of what they were doing.
- What is less clear is whether or not Trump understood the full import of his actions. His conversation calls into question the fundamental precept of US-China relations since 1979. His “she CALLED ME” tweet certainly suggests ignorance and a lack of intentionality on the part of the President-elect.
- Whether the call was Trump’s idea or one foisted on him by his advisors, the key takeaway is the same: a Trump presidency is likely to upend the status quo in many areas. Policies (One China) and institutions (WTO) that were thought to be sacrosanct may be abandoned. All scenarios seem possible, from WWIII to a grand bargain and American withdrawal from the Asia Pacific.
- The only thing that is certain is that we are in a period of deep uncertainty. Increased risk and volatility look likely to be the new normal.
Taking control, but to what end?
Meanwhile, back in Beijing Xi Jinping forged ahead this week with his project to concentrate power and create a more disciplined Party. Core leader Xi oversaw a Politburo meeting that passed two new internal Party regulations – one to standardize benefits for leaders and another regulating the practice of “democratic life meetings”.
The new measures will serve to further enhance Xi’s control over the Party, as well as Party control over state and society. Xi’s goal is to make China prosperous and powerful. And we know that Xi and his advisors see a strong, disciplined Party as a necessary prerequisite for undertaking key structural reforms that will help to achieve prosperity and power. They are right.
The question is not whether or not Xi styles himself a reformer – he clearly does. The real question is: What kind of reforms? And here Xi’s track record is decidedly underwhelming. The Third Plenum Decisions, Xi’s “new development concepts” and the current supply-side reforms are a sprawling and unfocused set of initiatives that seek to achieve a plethora of outcomes: high growth, a clean environment, industrial upgrading, corporate deleveraging, increased social spending and much, much more.
The problem is that many of these goals are in conflict. Most obviously, aggressive deleveraging will undermine economic growth. But Xi has failed to address such inconsistencies, and there has been no guidance as to how to navigate necessary trade offs and prioritize outcomes.
Xi is consolidating power. And he is creating a more obedient and responsive Party. But unless he formulates a coherent agenda, it will be for naught.
| About CPW
China Politics Weekly aims to keep business leaders, investors, diplomats, scholars and other China hands up to date on important trends in China. It is produced by Trey McArver, a London-based consultant providing advice and intelligence to firms and investors engaged in China and the region. You can find out more about Trey and CPW in this interview.
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