Could China be the key to Trump’s economic plan?

Next week, just before Donald Trump’s inauguration on January 20, Xi Jinping will be the first Chinese leader to attend the World Economic Forum at Davos in the Swiss Alps. This is where the global elite of politics and finance gather every year to network and thrash out global problems. Inevitably Mr Xi’s attendance will be seen as a sign of China’s rising global ambition just as Mr Trump is leaving the world guessing about what his “America First” strategy will mean in practice.

During the four decades since the death of Mao Zedong, the leaders of China’s Communist Party have generally avoided showing off at gabfests such as Davos. The Beijing political culture required leaders to be first among equals. The guiding principle was that of the architect of reform, Deng Xiaoping: “Hide your capacities, bide your time.”

Mr Xi is a new type of leader, more self-confident and seemingly able to gather more power in his hands. He will come to Davos accompanied by some of China’s top entrepreneurs including the e-commerce king, Jack Ma, who is said to be worth some $28 billion (Dh103bn).

The arrival of the Xi bandwagon will come as a cold shower for Europe. China has no world-beating start-ups and it struggles to produce anything but anaemic growth. Its military power is tiny, and it finds its technocratic dream of integration undermined by the rise of angry populist parties. The message will be clear: ­China may be on the other side of the world, but it is a new player which cannot be ignored.

What is not so certain is how China will coexist with the United States under Mr Trump. He has been sending out conflicting signals. He wants to remake the United States-China relationship – both politically and commercially – in America’s favour. He has threatened to impose huge duties on imports from China, accusing it of manipulating its exchange rate to “steal” US jobs. American companies that outsource production to China will be penalised.

Mr Trump has also spoken of his desire to build up the US navy to 350 ships from its current 270 – a clear signal that he wants to challenge China’s attempt to control the South China Sea with a programme of island-building. But at the same time, he has been equivocal about guaranteeing the security of US allies in East Asia such as Japan and South Korea, without which any plan to “contain” China’s rise would be impossible.

The clearest sign of the China focus is Mr Trump’s intention to patch up relations with Russia – another source of concern for Europe. By dialling down disputes with Vladimir Putin, Washington will be able to focus on China first and then on the threat of ISIL, in which he sees Russia as a key ally. As Russia – unlike China – does not produce any goods which put American workers out of jobs, the businessman-president sees an easy path to better relations with the Kremlin.

How much of this is achievable or likely to happen? Both George W Bush and Barack Obama successfully engineered a reset with the Kremlin, but then relations fell back into their bad old ways. Resets with Russia are like giving up smoking – you can do it many times. So the betting is that it will be possible for Mr Trump and Mr Putin to achieve a good understanding at the start.

But these resets do not last if their purpose is seen in the Kremlin as taking Russia off the chessboard so that Washington can pursue other goals. So even the most ardent Putin-lover, as Mr Trump now appears to be, could turn into a Russia hawk in a couple of years.

With China, the relationship is more complex. China’s rise from poverty since the 1970s has been achieved thanks in large part to America enforcing a global system that generally favours free trade. Up to now, all US presidents have accepted that the burden of global leadership has benefited America. Mr Trump begs to differ. In his view, the costs of global leadership now outweigh the benefits and America is geographically blessed to be able to thrive within its own borders, or at least its hemisphere.

This is a worrying scenario for all trading countries in the world, not least China. Its economy still needs to export to the US market. If Mr Trump were to put into effect his America First policy – and if American corporations tolerated such a choice – all bets would be off. The consequences could be catastrophic, particularly for the world’s poorer people whose standard of living has improved during the years of quickening globalisation.

A more likely scenario is that Mr Trump’s statements on China are not a plan ready for implementation but an opening bid in a commercial negotiation, in which he is far more experienced than in geopolitics.

An insight into this came with the visit by Mr Ma to Mr Trump on Monday. Apparently Mr Ma set out a plan to create a million jobs in America over five years by using his e-commerce platform to sell US goods and services in China and Asia.

Not surprisingly, Mr Trump said after the meeting: “Jack and I are going to do some great things.” Mr Ma is nothing if not experienced at aligning his business interests with political leaders, having navigated the shoals of the Communist Party.

One million jobs in the American Midwest, where voters turned out for Mr Trump, is unlikely to happen just because two businessmen say so. But it may be a straw in the wind. If under the Trump administration the American economy can boom and wages rise – a prospect that economists believe is reasonably likely – then the more radical and bellicose elements of the president-elect’s platform may fade into the background. That seems to be a language they understand in Beijing.

Alan Philps is a commentator on global affairs

On Twitter @aphilps