By Tom Clifford in Beijing
Like viewers the world over, the Chinese are relishing the spat between the world’s richest man and the world’s most powerful. They know a thing or two here about people suddenly falling out of favor. But they also know that the really important news does not involve adults exchanging electronic barbs and acting like over-privileged children.
The shop owner was smiling, almost ebullient, as I ordered my lunchtime noodles. “He’s coming to China.” Behind me, the queuing restaurant customers murmured in consent. They knew what was important.
“He” was President Donald Trump. The view from Beijing is simple: Trump is coming to pay his respects, like the leader of a vassal state in imperial times seeing the yellow-robed emperor. Trump may not prostrate himself, but then the Chinese wouldn’t want him to. It is enough that he is here. In fact the leaders invited each other to visit their respective countries. In the noodle shops of Beijing, President Xi Jinping going to the US is considered an act of graciousness, almost of kindness. But Trump coming to China, in their view, is by far the more significant.
This is being interpreted, in Beijing, as a Chinese victory in the trade war. The announcement that Trump and Xi spent 90 minutes on a phone call came after the news that China would not be labeled a currency manipulator by Washington. A double victory for Chinese diplomacy.
It is no secret that Trump has long pushed for a meeting with Xi. China refused the many requests because traditionally, stretching back centuries, Chinese leaders only met their foreign counterparts when a deal is certain. For the mandarins of Beijing it is unthinkable that Trump would come to China in the absence of a pre-agreed deal.
The fact that the US had declined to label China a currency manipulator in a Treasury report released on Thursday, of course, was linked to this. Nonetheless, and somewhat disingenuously, Washington still accuses Beijing of standing out among America’s major trading partners for lacking exchange-rate transparency. It’s right but it only has itself to blame for not standing up to Beijing. Time and time and time again the US has refused to name China a currency manipulator. It is of course important to stress that this has nothing to do with China being the second largest holder of American debt, after Japan. It currently has $784 billion. If it sold this or a large part of it, it would be a currency manipulator, devaluing the dollar.
The report, Macroeconomic and Foreign Exchange Policies of Major Trading Partners of the United States, was submitted to Congress and it makes for unpleasant reading. China, it claims, is playing fast and loose with the rules. And Washington is doing nothing.
Trump said on Thursday that his first call with China’s Xi Jinping since returning to office was “very positive.”
China actually holds – pardon the pun – a trump card. Beijing sees mineral exports as a source of leverage. Halting exports from China of rare earths, vital for electronic goods, aircraft, and mobile phones, will severely damage the US economy.
There are still areas of contention, Taiwan and the status of Chinese students in the US.
But the direction of ties is obvious. China has called Trump’s bluff. The noodle shop owner will be smiling for some time to come.
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