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Driven to Distraction: Why President Trump May Not Be Focused on His Asia Trip

 6 min read / 

The Trump Show has moved into overdrive this week. Washington is buzzing over the dramatic indictment of three of US President Trump’s former advisors, including election campaign manager Paul Manafort, by special counsel Robert Mueller and the accompanying salacious details of money laundering, false evidence and surreptitious meetings with Russian aides that have dominated the mainstream press.

But as the President flew out to Asia for meetings with the leaders of Japan, South Korea, China, as well as Vietnam and the Philippines, his administration’s focus on these domestic issues are already overshadowing the most important foreign policy trip of his presidency. The diversions at home risk exposing a lack of strategy for bilateral trade and political discussions with China and the other major Asian economies. Trump seems distracted and unprepared, and the signs are that he is already being wrong-footed by a confident Chinese President Xi Jinping.

Struggling to Focus

The situation in Washington is unprecedented, and it is understandable that the US political machine has been consumed by the Russia investigations. Special counsel Mueller’s first round of indictments are probably only a start and Mr Trump, ever ready to deflect attention via Twitter, has fed the furore, and his Fox News watching base, with counter- allegations against Hillary Clinton regarding the uranium to Russia deal. Foreign policy focus has never been one of Trump’s strengths, and he has a lot to be distracted by at home.

And the signs are that the US administration has been struggling to focus Trump’s attention on the Asia trip, both regarding strategy and protocol, with stories of cancelled briefings circulating in Washington. Domestic diversions are likely to have added to the worries coming from US business interests, most recently voiced by the American Chamber of Commerce in China, that the US administration is unprepared to tackle trade issues with the Chinese government.

Trade Looking East

Trade will be one of the two items that top the agenda in discussions with Xi, and Trump this week labelled the US’s $300bn trade deficit with China “embarrassing.” But beyond US talk of steel and solar panel tariffs, as well as last week’s imposition of preliminary import duties on aluminium foil, it does not look like Trump’s hardline rhetoric is being matched with a coherent strategy or detailed aims.

Little progress has been made in the 100-day economic plan launched by the two countries in April and there has been no real news on the US probe into China’s Intellectual property practices. Concerns are running high that measures to open the Chinese economy to foreign businesses, or deal with China’s skilful use of WTO protocols to gain an advantage in global trade, are not being addressed.

And China is showing its upper hand on tactics ahead of the visit with a mixture of flattery and well-timed industrial reform measures. China is appealing to Trump’s love of pomp by labelling the trip a “State-visit-plus” and the People’s Bank of China is making sure that the Chinese currency drifts higher to head off Trump’s favourite accusation of “currency manipulation” and present him with an easy win. Trump will also probably be presented with a few token US job-creating investments by Chinese companies. The Chinese government’s recent shutdowns of large swathes of aluminium production capacity, as well as pledges to cut down 150m tons of steel capacity representing close to 20% of the country’s output, will be used as arguments to resist US tariffs threats.

Perhaps most telling in illustrating China’s current big picture approach is that while Washington has been focused on domestic politics, Xi last week met with Apple’s Tim Cook, ex-US Treasury Secretary Henry Paulson, Blackstone Chairman Stephen Schwarzman and Facebook’s Mark Zuckerberg in Beijing after the end of the 19th Communist Party Congress. Xi is working hard to burnish his image as a beacon of economic globalisation and these US business leaders are probably much more important to future trade and financial flows than aluminium foil tariffs. It is significant that while Mark Zuckerberg’s executives are in Washington facing the House Intelligence Committee over Russia investigations, he is in Beijing with Xi.

China’s Korea Side-step

The other issue that will be top of the agenda is the Korean peninsula, and again Xi seems to have executed a deft sidestep that could limit Trump’s strategic options in the region and make a mockery of his policy of urging China to put real pressure on North Korea. Xi’s instigation last week of a rapprochement between Beijing and Seoul follows more than a year of economic and political hostility from China over the installation of US anti-missile THAAD defences in South Korea. A reconciliation could drive a wedge between the US and Seoul and relations will not be helped by nervousness surrounding Trump’s threats to ditch a US-South Korea Free Trade Agreement.

South Korean President Moon Jae-in’s policy of constructive engagement with Pyongyang is more in keeping with China’s view, running counter to Trump’s bombastic threats, and a lifting of China’s unofficial boycott of South Korean products will actually drive Seoul closer to Beijing and further from the US. The recent warm exchange of words between Xi and North Korean leader Kim Jong-un, with Xi expressing hope for a “sound and stable” relationship in response to Kim’s congratulatory message after the Communist Party Congress, conflicts with US hopes of increased Chinese pressure on North Korea.

Xi in Pole Position

Xi Jinping is newly emboldened after his successful party congress and has swiftly moved to present himself as a force for globalisation to accompany his consolidation of power at home. The other Asian nations eye China’s economic and political rise with apprehension and Trump’s distancing from Asia, illustrated by his decision to pull the US out of the Trans-Pacific Partnership (TPP) agreement at the start of his presidency, has heightened the nerves of countries who rely on the US as a counterbalance to China’s increased dominance. While Trump is likely to come home to the US with some deals and small concessions to please his “America First” supporters, his lack of focus and vision for America’s role in Asia looks set to hand an easy advantage to China.

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China’s Central Bank Reacts to Federal Reserve Rate Rise

 1 min read / 

China Interest Rate Rise

The Story

China’s central bank increased rates on short terms lending instruments within hours of the Federal Reserve raising their base rate from 1.25% to 1.5% on Wednesday. In doing so, the Chinese government aims to put a stop to potentially destabilising capital outflows.

Chinese reverse repurchase agreements increased by five basis points for 7-day and 28-day reverse repurchase by 5 basis points to 3.5% ad 3.85% respectively.

Why It’s Important


The move signals a departure from ultra-low interest rates, which have become the norm since the global financial crisis.

China said their response was a “normal market reaction.” However, the Chinese rate rise was too small to have had a significant effect on capital flows, says Chen Ji, a Bank of Communications analyst. Whether this response will shield China from capital outflows is questionable.

Keep reading |  1 min read


Google to Open in Beijing

Google Beijing

Alphabet announced that it will open an AI research facility in the Chinese capital yesterday.

Under CEO Sundar Pichai, Google has been recommitting itself to China after it had most of its services blocked in 2010 when it refused to censor search content. In recent months, the tech giant has been marketing its new TensorFlow AI tools to the Chinese market, which aligns with the state’s ambitions to become a world leader in AI by 2030. Google’s new facility will consist of a small number of AI researchers, supported by hundreds of Chinese engineers. Google expects to face stiff competition for talent given how local tech giants, Baidu and Tencent, are ramping up their own AI efforts.

Keep reading |  1 min read


Google to Open Artificial Intelligence Centre in China

 2 min read / 

Google AI China

Google will be opening its first artificial intelligence (AI) research centre in China, despite many of its services being blocked there.

Fei-Fei Li, Chief Scientist of Google Cloud, said:

“I believe AI and its benefits have no borders. Whether a breakthrough occurs in Silicon Valley, Beijing or anywhere else, it has the potential to make everyone’s life better for the entire world. As an AI first company, this is an important part of our collective mission. And we want to work with the best AI talent, wherever that talent is, to achieve it.”

The research centre will focus on basic AI research, and will consist of a team in Beijing, who will be supported by Google China’s engineering teams.

Google’s search engine and its Gmail are banned in China. However, the country has 730 million internet users, making the market too large to ignore.

Google is not the only tech giant facing restrictions in China. Facebook is also banned, while Apple’ App Store has been subject to censorship. In order to comply with government requests, Apple removed many popular messaging and virtual private network (VPN) apps from its App Store in China earlier on this year.

China has recently announced plans to develop artificial intelligence, and wants to catch up with the US. However, human rights groups are concerned by China’s use of artificial intelligence to monitor its own citizens.

Keep reading |  2 min read