Trump’s China Visit: What to Expect

By Alexander Chipman Koty

China is preparing a lavish welcome for US President Donald Trump, who is set to arrive in Beijing for a three-day visit beginning November 8^th.

China’s Vice Foreign Minister, Zheng Zeguang, has stated that Trump will receive a “state visit-plus”, and that the two countries are preparing for the visit to be a “historic success”. The visit will include a private tour of the Forbidden City in Beijing and an extravagant banquet, among other events.

However, while Trump’s China visit will be high in pomp, most observers do not expect significant progress to be made on substantive bilateral issues.

Business Intelligence from Dezan Shira & Associates

National mood

Since Chinese President Xi Jinping visited Trump at Mar-a-Lago in April, Trump has become embroiled in a series of domestic scandals – including most recently new revelations about his administration’s connections to Russia – while Xi has consolidated his power and projected a more confident China.

At the 19^th National Party Congress that recently wrapped up in Beijing, Xi got his name written into the Communist Party of China’s constitution and declared a ‘new era’ for China. At the Congress, he depicted a confident and more international China – one ready to take “center stage” in world affairs – and outlined a plan for China to become a global power by 2050.

While Xi’s declarations alarmed many in the US security community, many observers have remarked that the Trump administration appears to be arriving in Beijing disorganized and with no clear China strategy.

For example, William Zarit, chairman of the American Chamber of Commerce in China, said that the administration had done little advance work for the visit, and as a result there might not be much discussion on structural issues.

Dispute resolutions unlikely

The Trump administration has raised numerous issues about the US’ relationship with China, but seems unlikely to resolve any of these disputes at the meeting.

Although Trump has at times stressed his strong rapport with Xi, he has criticized China for issues such as the bilateral trade imbalance, forced technology transfers, IP infringements, and action on North Korea, among other issues. Recent visits to China by US Commerce Secretary Wilbur Ross and US Secretary of State Rex Tillerson have laid the groundwork for the visit.

Ross has stated that the administration is looking for “immediate results” and “tangible agreements”. This suggests that China and the US may agree on some sectoral agreements – like those struck in the trade deal earlier this year that opened China to US beef – but little in the way of resolving issues, such as uneven market access.

China also has qualms with the US, including the blocking of high-tech acquisitions for security reasons and anti-dumping duties on aluminum foil.

But progress on economic issues will be difficult, especially if Trump continues to tie bilateral trade disputes with North Korea policy.

LNG deals likely

Although it does not appear that Trump’s visit will produce significant results for China-US relations, US liquefied natural gas (LNG) companies could be in line for lucrative deals.

The China-US trade deal struck in May encouraged Chinese firms to purchase LNG from the US. Since then, state-owned enterprises such as Unipec have explored the feasibility of purchasing US LNG. The US business delegation accompanying Trump is reportedly filled with energy and commodities firm, with few finance and tech representatives.

China is currently the world’s third largest LNG market, and aims for LNG to constitute 10 percent of its energy consumption by 2020 and 15 percent by 2030. LNG made up about 6.6 percent of China’s energy consumption in 2016.

China has also been on an extensive anti-pollution campaign that has seen an estimated 40 percent of factories shut down for environmental inspections and local governments drastically reducing coal consumption. Xi recently stated that China will become a leader in “ecological civilization”, which requires a transition away from heavily polluting coal and greater LNG consumption.

RELATED: China Bans Imports of Foreign Waste to Combat Pollution

High on spectacle but low on substance

Many experts expect the visit is set to be high on spectacle but low on substantive negotiations.

While the proceedings will be tightly scripted on China’s side, Trump is known for his unpredictable off-the-cuff remarks, which could generate unexpected outcomes. For example, during his visit in Japan – one of the US’ closest allies in the region – he berated the country for unfair trade practices.

To avoid ratcheting up tensions, China may offer Trump small sectoral deals, kind words, and a lavish experience. Foreign investors looking for progress on technology transfers and investment access, however, may be disappointed.

Dezan Shira & Associates Brochure

Dezan Shira & Associates is a pan-Asia, multi-disciplinary professional services firm, providing legal, tax and operational advisory to international corporate investors. Operational throughout China, ASEAN and India, our mission is to guide foreign companies through Asia’s complex regulatory environment and assist them with all aspects of establishing, maintaining and growing their business operations in the region. This brochure provides an overview of the services and expertise Dezan Shira & Associates can provide.

An Introduction to Doing Business in China 2017

This Dezan Shira & Associates 2017 China guide provides a comprehensive background and details of all aspects of setting up and operating an American business in China, including due diligence and compliance issues, IP protection, corporate establishment options, calculating tax liabilities, as well as discussing on-going operational issues such as managing bookkeeping, accounts, banking, HR, Payroll, annual license renewals, audit, FCPA compliance and consolidation with US standards and Head Office reporting.

China’s Investment Landscape: Identifying New Opportunities

China’s foreign investment landscape has experienced pivotal changes this year. In this issue of China Briefing magazine, we examine how foreign investors can capitalize on China’s latest FDI reforms. First, we outline new industry liberalizations in both China’s FTZs and the country at large. We then consider when an FTZ makes sense as an investment location, and what businesses should consider when entering one. Finally, we give an overview of China’s latest pro-business reforms that streamline a wide range of administrative and regulatory measures.

Dezan Shira & Associates

• Previous Article China’s Business Reform Agenda
• Next Article China’s e-Commerce Shopping Festivals