What Trump gets right on China

Some things are true even if Mr Donald Trump believes them. I explored one of them in China last week - the US President's charge that China is playing unfair on trade.

My visit to Beijing left me with two very strong responses. The first is that we underestimate China - and attribute all of its surge in growth to unfair trade practices - at our peril. The country has been fast and smart at adopting new technologies, particularly the mobile Internet. For instance, it has moved so fast into a cashless society, where everyone pays for everything with a mobile phone, that Chinese newspapers report that beggars in major cities have started to place a printout of a QR code in their begging bowls so any passer-by can scan it and use mobile payment apps like Alibaba's Alipay or Tencent's WeChat Wallet to contribute to the beggar's mobile payment account.

Chinese friends tell me they no longer carry purses or wallets, only a mobile phone, which they use for everything - including for buying vegetables from street vendors.

"America has been dreaming of becoming a cashless society," Mr Ya-Qin Zhang, president of Baidu, China's main search engine, remarked to me, "but China is already there". It has "leapfrogged the rest of world" and is now going mobile-first in everything.

Mr Wang Xing, the founder of Meituan.com - a Chinese mobile website that is a combination of Fandango, Yelp, OpenTable, Grubhub, TripAdvisor, Booking.com and Angie's List - told me that he has around 300,000 people on electric bicycles who deliver takeout food and groceries to 10 million Chinese mobile Internet users daily. "We are the largest food delivery company in the world," he said.

And in an age when raw data from the Internet of People and the Internet of Things is the new oil, the fact that China has 700 million people doing so many transactions daily on the mobile Internet means it's piling up massive amounts of information that can be harvested to identify trends and spur new artificial intelligence applications.

US President Donald Trump (right) and Chinese President Xi Jinping shaking hands during dinner at the Mar-a-Lago estate in West Palm Beach, Florida. PHOTO: AFP

Moreover, while Mr Trump is pulling out of the Paris climate deal, China is steadily pulling out of coal. Career International CEO Xin Guo told me two of his hottest job openings in China are in "software and new energy" - everyone is looking for engineers for electric cars, solar and wind. Mr Walter Fang, a top executive at iSoftStone, which helps design China's smart, sustainable cities, told me he recently "brought in about a dozen green energy start-up companies from Massachusetts" to show them opportunities in China.

And yet, as smart as China has been in adopting new technologies, Mr Trump's broad complaint that China is not playing fair on trade and has grown in some areas at the expense of US and European workers has merit and needs to be addressed - now. Before going to Beijing, I e-mailed the smartest person I know inside China on trade (who will have to go nameless) and asked if Mr Trump had a point.

He answered: "Your note has arrived as I slide across the Chinese countryside at 300kmh from Beijing to Shanghai. There are nearly 60 trains going from Beijing to Shanghai every day, typically with 16 cars able to carry nearly 1,300 people... We glide past endless brand-new factories and immaculate apartment buildings in practically every city along the way, with many more still under construction. As you suspect, I have been sympathetic to many of Trump's trade and industrial policy ideas. But if anything, Trump may be too late." Ouch.

The core problem, US and European business leaders based in China explained, is that when the United States allowed China to join the World Trade Organisation (WTO) in 2001 and gain much less restricted access to our markets, we gave China the right to keep protecting parts of its market - because it was a "developing economy". The assumption was that as China reformed and become more of our equal, its trade barriers and government aid to Chinese companies would melt away.

They did not. China grew in strength, became America's equal in many fields and continued to protect its own companies from foreign competition, either by limiting access or demanding that foreign companies take on a Chinese partner and transfer their intellectual property to China as the price of access, or by funnelling Chinese firms low-interest loans to grow and buy foreign competitors.

Once those companies got big enough, they were unleashed on the world. China plans to use this strategy to implement its new plan - "Made in China 2025" - to become the world leader in electric vehicles, new materials, artificial intelligence, semiconductors, bio-pharmacy, 5G mobile communications and other industries.

The latest annual survey of the American Chamber of Commerce in China, released in January, found that 81 per cent of its members felt "less welcome" in China than in the past and had little confidence any longer that Beijing would carry through on promises to open its markets. Apco Worldwide's Mr James McGregor, one of the keenest observers of China trade, recently noted that Beijing tells the world that its policy is "reform and opening", but on the ground its policy "more resembles reform and closing". Today, Alibaba can set up its own cloud server in America, but Amazon or Microsoft can't do the same in China. China just agreed to allow US credit card giants, like Visa and MasterCard, access to its huge market - something it was required to do under WTO rules but just dragged its feet on for years - but now domestic Chinese financial services companies, like UnionPay, so dominate the Chinese market that US companies will be left to fight over the scraps. The world leader in industrial robots, the German company Kuka Robotics, was just bought by the Chinese company Midea; Beijing would never allow the US to buy one of China's industrial gems like that.

This is not fair. China needs to know that some people who disagree with everything else Mr Trump stands for - and who value a strong US-China relationship - might just support Mr Trump's idea for a border-adjustment tax on imports to level the playing field. Because our economic relationship with China is out of whack - and not just because China makes great products, but because we do too, and it's high time they are all allowed through China's front door.


A version of this article appeared in the print edition of The Straits Times on June 08, 2017, with the headline 'What Trump gets right on China'. Print Edition | Subscribe