Donald Trump’s protectionist agenda is widely perceived as potentially harmful for China, since the US is China’s largest export market after the EU. However, Jan Dehn wouldn’t be Jan Dehn if he didn’t see it differently. Ashmore’s head of research, who makes Mark Mobius look like a pessimist on emerging markets, believes Donald Trump’s presidency is a golden opportunity for China to extend its global economic power.
“China has been preparing for this for years with aggressive reforms, even at the expense of slower growth,” he says. “We have finally arrived at the inevitable turning point, when China formally took over the mantle from America as the world’s undisputed leader on economic issues.”
A country can, however, only become a sustainable economic world leader if it has accompanying political and military power. China is still a long way from becoming anywhere near a political superpower, and with the US remaining the world’s leading military power by a distance, China remains a very long march away from assuming a true global leadership role. China’s cultural and soft power also remains limited for now.
Dehn seems to implictly acknowledge this though, as he is refferring to a China leadership role “on economic issues” only.
Pivot to Asia
Donald Trump seems intent to become the anti-Obama in every respect, even when it comes to his favourability ratings. So a reversal of his predecessor’s ‘pivot to Asia’ policy is on the cards.
Rob Simpson, an emerging market debt portfolio manager at Insight Investment, believes America’s retreat offers China great opportunities to make itself great again in the region.
“US president Donald Trump’s decision to withdraw from the Trans-Pacific Partnership (TPP) in favour of one-on-one trade agreements could open up a significant avenue of influence for China in the years ahead as the remaining members turn to the world’s second largest economy in a bid to salvage the pact,” he says.
“Leaders of the remaining nations have expressed a commitment to push ahead with the initiative in some form potentially paving the way for a new regional trade agreement for Asia focused around China. South East Asian economies are already shifting toward the Beijing-backed Regional Comprehensive Economic Partnership (RCEP), a step closer towards Asian regional integration.”
But the new US administration’s stance to trade obviously does not just offer opportunities to China. It presents threats as well, such as an increase of tariffs on Chinese goods. “While the focus has long been on economic stability, China’s hand might be forced in to playing defence on US policy and, as such, China’s priorities might increasingly be shaped by external factors.”