Former U.S. ambassadors discuss U.S.-China relations in Biden era
AAs the Biden administration begins to repeal parts of the Trump-era bans on investing in China, investors may wonder what the next step is.
KraneShares Managing Director and General Counsel and former US Ambassador to Singapore David Adelman recently sat down with former Ambassador to China Max Baucus to discuss current U.S.-China relations, as well as the Biden administration’s expectations for the future.
The Biden Administration’s Policy Towards China
Former Ambassador Baucus explained that the tension between perceived public pressure and the opinion of the Biden administration and also political parties has led to an aggressive view towards China, which is reflected in policies. Trump was what Baucus called a “transactional president,” and his policies reflected a very isolationist approach.
While Baucus doesn’t see Biden canceling many of the sanctions or tariffs, he believes Biden’s human rights values will be the guiding force globally going forward.
Baucus also expressed concerns about the lack of U.S. involvement in the Pacific-Oriented Trade Agreement (RCEP) that China recently concluded, as well as potential membership in the Trans-Pacific Partnership (TPP).
Baucus sees the US departure from the TPP as a big mistake, because in leaving, US interests are no longer defended in the region of the world where China already dominates. TPP accounts for around 40% of the global economy according to Baucus, while RCEP accounts for almost 30%.
Not being a member of either agreement means the United States will need to strengthen its presence in the region with trade deals and, potentially, a regional trade deal with China.
“I think China was very smart, very strategic in many ways when President Xi Jinping announced at the time One Belt One Road, now the BRI (Belt and Road Initiative). I thought it was very insightful, very strategic, a very smart thing to do. It is clear that China has taken advantage of the BIS and aggressively pushed the BRI for several reasons; first, to strengthen its own economy, but second, to gain strategic interests in other parts of the world and help provide resources to China. “
Baucus discussed the pivot to the Asian approach that occurred under the Obama administration and the mistaken belief that engaging more with China would make China more like the United States. United have banded together with European countries as well as other Pacific countries to push back on some of China’s policies.
Stand up to China
Former Ambassador Baucus sees no return to the policy of giving allies more room to deal with China on their own, instead highlighting pressure from the Biden administration on Australia and other allies to they “stand up to China”.
He continues to say that “the Biden administration is trying to get more cohesion and more cooperation among the allies when it comes to China.”
The growing attention to technology and Chinese companies, among the world’s largest, is of increasing interest to investors. However, this is something Baucus does not see as a priority for the administration at this time, as concerns so far have mostly been about growing the national economy.
He believes it will be another year or two before the Biden administration really begins to tackle sanctions and tariffs on other countries, especially China, but that those sanctions will be addressed on a basis. less political.
China as a leader in green energy?
When discussing China’s potential to be a leader in the green energy movement and the Paris Agreements, Baucus said, “In the end, I think China will try, I think China will try. will try to take the lead for many reasons. One is that because climate change is here, we have to deal with carbon emissions around the world. China, by volume, is the largest emitter in the world relative to the United States, and the per capita basis is the largest emitter in the world. China will try to take the lead.
China, he continued, saw a great opportunity to be a key player on the world stage with renewable energy, as well as a chance to push back national opponents.
Financial markets in China
Turning to the discussion of the role of foreign investment in China in joint ventures, Baucus said investment will continue, albeit slowly.
“A lot of American companies,” says Goldman (Sachs), “have a lot of expertise and can help, if you will, raise the bar in some respects of some Chinese national service companies and that also means more investment, more US investment in China. China wants more investment, ”he said.
Asked about his opinion on the long-term strength of the US dollar against the renminbi, Baucus said he did not see the dollar threatened in a short-term scenario by the renminbi. He noted that the biggest challenge to the strength of the US dollar lies in the cryptocurrencies created by national banks in different countries. “If central banks can issue their own (cryptocurrencies), it could potentially replace payments systems like Alibaba, Tencent, and WeChat, and then the banks have a lot more control. This is, I think, the biggest potential disruptor.
Finally, Baucus was asked about the growth of capital markets. He said China is moving forward in a beneficial and constructive manner.
“China has moved from government approval to a disclosure-based system and I think that’s very, very helpful because it’s going to really open up capital markets. Western investors are going to see this and like it. Chinese regulators are looking for ways to open up and modernize, but within limits, and carefully in a way that preserves China’s interests.
For more news, information and strategy, visit the website China News Channel.
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