All looked rosy on Thursday as the US and Chinese Presidents trumpeted trade deals countries supposedly worth over $250 billion between their countries. But is the striking figure quite what it seems?
US President Donald Trump and Chinese President Xi Jinping celebrated trade deals between their countries supposedly worth over $250 billion (€223 billion) on Thursday, during day two of Trump’s visit to the country.
Several major deals were announced. Aircraft manufacturing giant Boeing agreed to sell 300 planes worth $37 billion to the state-controlled China National Aviation Holding while US telecommunications company Qualcomm agreed deals worth $12 billion with three Chinese phone makers.
The biggest and arguably most significant deal of all sees an $83.7 billion investment by the China Energy Investment Corp, to take place over a 20-year period, in chemical manufacturing projects and shale gas developments in West Virginia, a state that recorded a huge Trump vote in last year’s US Presidential election.
Several other smaller agreements, many involving energy companies, were also announced.
However, while Trump will likely return to the United States hailing the agreements as further evidence of his self-proclaimed reputation as a master deal-maker, there are more than a few caveats attached to the “$250 billion” figure, primarily the fact that many of the agreements are nonbinding memorandums of understanding rather than legal contracts. In other words, they can very easily be reneged on.
Also, many of the biggest deals are centeredon US companies that already do major business in China — such as Boeing and Qualcomm — so to what extent the deals are actually new, or in any meaningful sense connected to Trump’s dealmaking skills, is unclear.
Trump, who has long railed against China for the country’s trade policies, was in a far more conciliatory mood when speaking alongside Xi in Beijing. He blamed his US predecessors for an “out of kilter” trading relationship with China and repeatedly praised the Chinese leader as “a very special man”.
The art of the deals?
US Commerce Secretary Wilbur Ross — who earlier this week was named in the Paradise Papers for investments he made in a company linked to Vladimir Putin’s son-in-law — boasted on Wednesday of “$250 billion” worth of deals between China and the US but the full details were only revealed on Thursday.
With a raft of high-ranking US CEOs accompanying Trump on his trip, several deals were expected and Ross announced agreements on Wednesday worth $9 billion, featuring around 20 US companies including General Electric, DowDuPont and Bell Helicopter, many of which already have extensive Chinese partnerships.
The Qualcomm deal saw $12 billion worth of nonbinding agreements signed with phone makers Xiaomi, OPPO and Vivo, a continuation of the San Diego-based firm’s longstanding investment in China, where it already does most of its business.
The deal between Boeing and China National Aviation Holding certainly sounds major although among those to proclaim skepticism at the significance of the deal was former Mexican ambassador to China Jorge Guajardo, who, amid a series of comments on Trump’s trip, wrote on Twitter: “Interesting to see how many of those are past agreements/purchase orders repackaged. Beijing is a master of selling the same agreement 10 times.”
The West Virginia investment is the first major overseas investment by the newly formed China Energy group and will be very well received by those US voters whose faith in Trump was based on his supposed ability to bring about such deals.
China’s Commerce Minister Zhong Shan said the deals were “truly a miracle” but there was much more caution from market analysts.
“I suspect they might be primarily MOUs (memorandum of understandings) instead of actual contracts and the actual contract amount may be substantially less,” Alex Wolf, an economist at Aberdeen Standard Investments, told Reuters.
“Tremendous for both of us”
Other criticism focused on the fact that the deals would not grapple with more structural concerns regarding the bilateral trading relationship with China, such as the various restrictions the Chinese government places on the operations of several US firms operating in the country, ranging from the blocking of internet giants such as Facebook and Google to the protectionist measures used against car makers.
Nonetheless, the generally positive tones were welcomed by US and Chinese commentators. Xi heralded the dawn of a more transparent and open Chinese economic age in relation to how it deals with foreign firms while Trump, although regularly referring to the “shockingly high” trade deficit between the countries, was also effusive.
“We will make it fair and it will be tremendous for both of us,” Trump said, drawing a wide smile from Xi when he insisted that it was previous US Presidents, rather than China, who were to blame for the deficit.
Yet while the rhetoric was soaring and will no doubt continue to be, many of Thursday’s deal announcements have a way to go to prove they are worth the paper they are written on, if they are on paper at all.
aos/mm (Reuters, dpa)