The prospect of a more protectionist and inwardly focused America under Donald Trump opens room for China to widen its global economic clout.
As the proposed 12-nation Trans-Pacific Partnership trade agreement, which excludes China, looks unlikely to materialize under a Trump administration, China is pushing rival trade pacts. Meanwhile, its state-owned companies are making inroads abroad and multibillion-dollar ambitions to expand investment and trade along the Silk Road have drawn interest from some 100 countries and funding from the Beijing-led Asian Infrastructure Investment Bank.
The Obama administration has warned that failure of the TPP, which had underpinned the U.S. “pivot” to Asia, could result in China winning trade advantages at the expense of the U.S. Australian Foreign Minister Julie Bishop said this week a TPP collapse “would leave a vacuum in trade deals which most certainly will be filled by others,” and that Australia will seek deals that will benefit it wherever it can.
Ms. Bishop mentioned in particular the Regional Comprehensive Economic Partnership, which is expected to be concluded in coming months and would lower or eliminate tariffs among Pacific countries that includes China but not the U.S. Separately, China said it would seek support for a Beijing-led free-trade area in the Asia-Pacific during a leaders’ summit in Peru next week.
“Trump’s election is a bit of a dial back on globalization,” said Hong Kong University of Science and Technology professor Li Xi. That could give China “the opportunity to expand its influence,” he said.
In recent weeks, China has forged closer economic and diplomatic ties with the Philippines, a close U.S. ally, and Malaysia, which together produced more than $58 billion in deals.
He Yimin, sales manager with Xin Gang Cheng Stainless Steel Wares Co., an exporter of pots and pans based in the southern city of Yunfu, said she thinks China could benefit from the TPP falling apart. “I think it is a good thing for China,” Ms. He said. “These days, Southeast Asian countries are very friendly to China.”
In the wake of the U.S. election results, British Prime Minister Theresa May underscored that London remains “open for business” with China. On Thursday, the two countries set a plan to deepen ties between their financial-services industries. This week in Latvia, China’s premier announced an $11.1 billion investment fund to finance projects in Central and Eastern Europe.
Vincent W.C. Fung, executive director of Kin Yat Industrial Ltd., a maker of toys and consumer robots in the southern manufacturing hub of Shenzhen, said China was likely to focus more on building ties with other countries in any U.S. trade vacuum. And higher tariffs against Chinese products would push some exporters to more quickly automate and focus on higher-margin products, ultimately making them tougher competitors, he said.
Partly because they have long faced weakening global demand, Chinese exporters are less dependent on the U.S. even as the economy slows at home. Five years ago, Kin Yat exported 100% of its products. Now, 30% are sold in China. “Chinese factories are so flexible, they can adapt quickly to changes,” he said.
In one export sector that has been a particular point of contention, steel, the U.S. accounts for a shrinking share of Chinese exports, just 2.5% compared with about 6.6% a decade ago. Further tariffs under Mr. Trump would accelerate U.S. isolation but have little real impact on China’s steel industry.
The U.S. has already taken “a lot of protectionist measures,” said Chi Jingdong, deputy secretary-general of the China Iron and Steel Association. “What else can they do?”
To be sure, even as China relies less on exports, the U.S. is China’s largest trading partner and the prospect of damaging tensions with Washington if Mr. Trump carries out his repeated threats to sanction China is of concern in Beijing.
Chinese officials have said it is too early to assess the incoming U.S. administration’s policies’ effect on China, but a commentary by state-run Xinhua News Agency the day after Mr. Trump secured his electoral bid warned the U.S. against protectionism, saying that such policies had hastened the country’s crisis during the Great Depression.
Some analysts have pointed out that Mr. Trump’s threats to impose tariffs on Chinese exports in the U.S. could make them more competitive elsewhere because such a move would likely push China’s currency to fall.
Analysts point to questionable logic in Mr. Trump’s allegations that China manipulates its currency in ways that hurt the U.S. China for decades kept its yuan low to benefit exporters, but in recent years, as capital has left China’s slowing economy, the central bank has intervened in the other direction, trying to prevent the yuan from depreciating too rapidly.
“The expectation is that Trump’s ascendancy may create the conditions for more depreciation,” said Zeng Hao, pricing manager for Shanxi Fenwei Energy Consultancy Co., a coal-focused commodities firm.