Free trade should be fair trade

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1. Free trade should also be fair trade — Mahathir in Beijing

Tun Dr. Mahathir bin Mohamad was prime minister of Malaysia from 1981 to 2003. He was re-elected earlier this year. During his campaign, he sharply criticized deals struck with China by his corruption-tainted predecessor. He is in China now, on a mission to renegotiate those deals.

  • Hangzhou was Mahathir’s first stop. The Straits Times reports that he visited carmaker Geely, which owns 49.9 percent of Malaysia’s Proton, and Alibaba. He met both companies’ chief executives — Li Shufu 李书福 and Jack Ma 马云.

  • Mahathir met Premier Li Keqiang this morning in Beijing, where they signed an agreement on currency swaps, and the importing of Malaysian frozen durian and palm oil into China.

  • Mahathir toned down his harsh campaign-trail rhetoric about Chinese investment in Malaysia for this visit, as CNN points out. After meeting Li, he told reporters that  Malaysia could “learn a lot” from Beijing, adding, “I believe in cooperation with China because China has got a lot that will be beneficial to us.”

  • But he made a few frank comments, as Reuters reports. Li Keqiang tried to adjourn the press conference to announce the signing of the durian and palm oil deals by saying that if Mahathir was in agreement that they both supported free trade, they could end the press conference there. Mahathir paused long enough to make Li uncomfortable (video clip), and then said:

Well, I agree with you that free trade should be the way to go. But of course, free trade should also be fair trade… We don’t want a situation where there is a new version of colonialism because poor countries are unable to compete with rich countries in terms of open free trade. It must also be fair trade.  

  • Nonetheless, the visit was positive, and as the South China Morning Post notes, Mahathir “pinned blame for the large debt his country owes China squarely on his predecessor Najib Razak,” not on Beijing.

  • Xi Jinping met Mahathir in the afternoon. Naturally, they both affirmed the excellence of the Belt and Road initiative, reports Xinhua News Agency. The Chinese version of that report is Xinhua’s top story today.  

  • What does this all mean for the region? An opinion piece in the South China Morning Post says that Mahathir’s thinking “offers an insight into weaker states’ views of the evolving Asian order in the Trump-Xi era and suggests a firmer stance on the South China Sea.”

2. Transit-stop-plus: Tsai Ing-wen in America

President Tsai Ing-wen 蔡英文 of Taiwan stopped over in the U.S. a second time on the way home from Paraguay and Belize.

  • These visits are called “transit stops” rather than official visits because Taiwan does not enjoy official diplomatic relations with America, but Beijing has always objected to them. In 1995, the then president of Taiwan, Lee Teng-hui 李登辉, spoke at his alma mater, Cornell: China called the visit a “wanton wound inflicted upon China [that] will help the Chinese people more clearly realize what kind of a country the United States is” (see New York Times story, paywall).

  • Tsai met a “trio of pro-Taiwan US House representatives” on her first stop in Los Angeles on August 13, according to the South China Morning Post.

  • “In a first, Taiwanese journalists were permitted to follow Ms. Tsai and report from the sites of events she attended,” reports Chris Horton for the New York Times (porous paywall). “She visited Taiwan’s de facto consulate in Los Angeles — another first — and she addressed American media at the Ronald Reagan Presidential Library near Los Angeles.”

  • On her return to the U.S. yesterday, she stopped at the Johnson Space Center in Houston, Texas. These activities “significantly raised her public profile and made her seem more like a normal leader making a normal visit to a foreign country,” said Julian Ku, a professor at Hofstra Law School, to the New York Times.

  • As for the future: “Congress is eager to do things to help Taiwan, so nothing, not even a Tsai address to Congress, can be ruled out in the current environment.”

See also:

—Jeremy Goldkorn

3. Trade war, day 46: China becomes convinced U.S. seeks to contain its rise

The U.S. and China are counting down the clock to August 23, when the second tranche of $16 billion in tariffs will activate, bringing the total taxed in taxed goods in the trade war to $50 billion.

Asian financial markets closed higher today, CNBC reports, on news of a Wall Street Journal report (summarized in Friday’s Access newsletter) that hinted at a four-month timeline to end the trade war by mid-November.

But tensions in broader U.S.-China relations are rising, whether or not the trade war hits a pause in the next four months:

  • “I believe that Xi has decided the US is intent on keeping China down,” noted China-watcher Bill Bishop writes (paywall), after a two-week trip to China. He added, “While there may be some exploratory efforts to see if a palatable deal exists that mitigates some of the worst of the trade tensions for as long as possible, I do not expect the PRC side to make concessions approaching those demanded by the US in May, even if they are now being slightly watered down.”

  • Bloomberg and the South China Morning Post reported the same trend: “A grand strategy, devised and led by Trump, to thwart China’s rise as a global power” is perceived widely in Beijing, Bloomberg says (paywall), while the SCMP writes, “There are signs of a new resolve that sees the trade conflict as part of Washington’s design to temper China’s rise to greater power.”

  • The SCMP cites three specific policies in Washington, besides the trade war, that have helped push Beijing toward this view:

    • The National Security Strategy (NSS) published in December 2017, which branded China a “strategic competitor” of the U.S.;

    • The Better Utilization of Investments Leading to Development Act (BUILD Act), currently pending legislation that would “double the spending cap of [the] U.S. overseas investment agency to US$60 billion,” part of the Trump administration’s “Indo-Pacific Economic Vision” to compete with China’s Belt and Road; and

    • The Foreign Investment Risk Review Modernization Act (FIRRMA), part of the defense spending bill that Donald Trump signed on August 13, which applies extra scrutiny of Chinese deals in particular. Bloomberg reports that the “world’s doors are shutting to Chinese investments,” with FIRRMA leading the way, leading to resentment in Beijing.

  • Trump lobbed two unusual non-trade complaints toward China, via Twitter of course, in recent days: “It is outrageous that Poisonous Synthetic Heroin Fentanyl comes pouring into the U.S. Postal System from China” (August 20) and “All of the fools that are so focused on looking only at Russia should start also looking in another direction, China” (August 18). National Security Adviser John Bolton confirmed that the August 18 tweet was related to interference in the upcoming 2018 midterm election, saying that besides Russia, “it’s a sufficient national security concern about Chinese meddling, Iranian meddling and North Korean meddling that we’re taking steps to try and prevent.”

  • The Washington Post sees a recent, even more hawkish turn in Washington: “Trump and his advisers have come to view the communist nation as a malign power and direct competitor and adversary whose expanding influence must be blunted through more extreme countermeasures,” a report titled “After detente with North Korea, Trump increasingly takes aim at a new foe — China,” suggests.

More on the trade war:

—Lucas Niewenhuis

4. Xinjiang update

The weekend saw a few new reports on the mass detention camps in Xinjiang:

  • “Securitisation and mass detentions in Xinjiang” is the title of a big picture description of what we know about the camps and security measures, by Rachel Harris, of SOAS University of London.

  • The camps are expanding, confining even “the secular, old and infirm,” according to this new report (paywall) by the Wall Street Journal’s Eva Dou, Jeremy Page, and Josh Chin.

  • “The number of individuals held in detention may possibly number in the millions,” a State Department official told ABC News, enlarging a previous number cited by official U.S. sources.

  • Editorials condemning the camps were published in Al Jazeera and HuffPost.

  • SupChina is working on an explainer that summarizes what has been reported about the Xinjiang camps — stay tuned.

—Jeremy Goldkorn

—–

Our whole team really appreciates your support as Access members. Please chat with us on our Slack channel or contact me anytime at jeremy@supchina.com.

—Jeremy Goldkorn, Editor-in-Chief


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