China Files Protest Over Trump’s Taiwan Call

China Files Protest Over Trump’s Taiwan Call

Has WWIII started? I thought I’d wake up to a desolate United States after the way the media treated President-elect Donald Trump’s call with Taiwan President Tsai Ing-wen, which is the “first time a president or president-elect has spoken with the leader of Taiwan since Washington established diplomatic ties with Beijing in 1979.” Of course China threw a hissy fit and lodged a protest with Washington:

“It must be pointed out that there is only one China in the world,” the Chinese foreign ministry said in a statement on Saturday, adding that it had lodged “solemn representations with the US”.

But as far as I know the world has not ended or China has not severed ties. The dependence on America (yes, China needs America) has shown that China will not retaliate against America except with a few strong words.

The 10-minute phone call included a discussion on “economic and security ties” while both “congratulated each other on their respective election victories. The Taiwan government brushed off China’s concerns:

“It’s normal for President Tsai to congratulate the U.S. president-elect and emphasize the maintenance of friendly relations in the future,” Taiwan’s Mainland Affairs Council said in a statement sent to reporters Saturday. “The mainland Chinese side should view this in a calm manner.”

Sean King, a specialist on Asia, does not view the phone call as a big deal and believes “Beijing will only attack Taiwan if Taipei declares independence.” Chinese Foreign Minister Wang Yi described the phone call as “a petty trick” by Tsai and believes it will not “affect U.S. support for the ‘One China’ principle.”

Of course, people have forgotten that Trump is only president-elect, not the president yet, which is an important fact to remember:

That Trump is the president-elect and not yet the president leaves Beijing some room to maneuver, said Shen Dingli, deputy dean of the Institute of International Affairs at Shanghai’s Fudan University.

“If he were president of the United States now, this could lead to a breaking-off of diplomatic relations between China and the U.S.”

“Having this mishap occur before he is president is better than having it occur after he is president,” said Glaser of the Center for Strategic and International Studies. “Privately, I expect Beijing to find a way to give him an education on Taiwan.”

Question remains, would China really sever ties over the United States? Would the government bomb us over a phone call? No. Everyone needs to calm down and remember that China needs the United States as much as the United States needs China. The countries have entangled themselves in a messy marriage that could possibly destroy both if one decides to file for divorce.

In February 2010, Zachary Karabell, author of Superfusion: How China and American Became One economy and Why the World’s Prosperity Depends on It, penned an article in Time about why neither country would end the relationship. Everyone has fussed about this phone call, but they forget about about January 2010, which had many situations that raised tensions between the two, including a meeting with the Dalai Lama. China lodged a protest over this phone call, but one senior Communist Party leader said a meeting between President Barack Obama and the Dalai Lama “would ‘seriously undermine the political foundation of Sino-U.S. relations’ and would lead to ‘corresponding action’ — a phrase made more ominous by its utter vagueness.”

Let’s not forget that Obama sold arms to Taiwan, which led the Chinese to threaten “sanctions against U.S. defense companies, which include conglomerates doing substantial nonmilitary business in China such as United Technologies, which has seen booming demand for its Otis elevators in Chinese skyscrapers, and Boeing, which has staked its future growth in part on demand from China’s air carriers.”

But both countries will just exchange angry words and letters because a divorce cannot happen. Karabell wrote:

To begin with, it holds more than $1 trillion in U.S. assets, mainly in U.S. Treasuries. No other country or entity in the world could absorb those assets if China wanted to sell them, and with China’s currency value pegged to the dollar, any massive sale would lead to a steep decline in the Chinese currency and economy. China’s holding of U.S. debt is leverage only in a theoretical world where it could dump its U.S. assets or stop buying more. What’s more, even a hobbled America is the world’s largest economy and the most significant market for Chinese goods. In 2009, a supposedly bad year, Chinese exports to the U.S. were approximately $300 billion, about the same as in 2007. That is a vast source of income for China — and one that no other part of the world can provide.

The U.S., meanwhile, has been a source of billions of dollars in direct investment in China, from thousands of American companies big and small. While it’s true that China doesn’t need any one of these companies as much as each one needs China, China needs all of them and depends on them for everything from brand-name goods to know-how and capital. Beijing can’t just snap its fingers and go it alone; its domestic economy is far too entwined with that of the U.S., its companies, its capital and its consumers.

There’s little question that neither China nor the U.S. wants to be dependent on the other. China’s rhetoric of late is proof, and you could easily demonstrate the same attitude coming from Americans. But each country has tied its economy to the other, and buyer’s remorse notwithstanding, there is no immediate exit from this relationship. It remains a source of stability and prosperity for both countries. Two decades ago, China cast its lot with the United States, and until recently, that has brought it affluence. Now that things have gotten difficult, the Chinese want out. But when the heady intoxication of these weeks wears off, they will find that they have nowhere else to go. One day, perhaps, but not today.

Then in 2012, Gordon Change published an article in Forbes about how China became 175.6% dependent on the United States. He notices that China “increased its dependence on the United States” between 2011 and 2012 (emphasis mine):

China’s overall trade surplus in 2011 was $155.1 billion, according to the Ministry of Commerce.

And how much of that surplus is related to America? Commerce Department figures show that, through the first 11 months of last year, China’s trade surplus against the United States was $272.3 billion. That’s up from $252.4 billion for the same period in 2010, a 7.9% increase.

The Commerce Department has not released the December trade number yet, and some are predicting that China’s surplus against us will top $300 billion when all the figures are in. Yet let’s assume, merely to be conservative, that China’s December surplus is zero. If December’s surplus is zero, then 175.6% of China’s overall trade surplus last year related to sales to the United States. That’s up from full-year figures for the three preceding years: 149.2% for 2010, 115.7% for 2009, and 90.1% for 2008.

Notice a trend? The Chinese economy is becoming even more hooked on selling things to the United States. Why the big jump last year? Because orders from the 27-nation European Union for Chinese goods collapsed. And if Europe falls apart this year—increasingly likely—China will become even more reliant on the American consumer.

Then Chang offered advice to Obama, which the Trump administration could use (emphasis mine):

Perhaps it is, but we don’t need to get fancy on this issue. All we need is for President Obama to tell the Chinese that they need us more than we need them. And all he has to say is “175.6%.” The clever officials in Beijing will not need interpreters to figure out what that means.

In 2014, Stephen Roach, the former chairman of Morgan Stanley Asia, said the marriage between the two needs to end before it is too late:

“China depends on the U.S. for exports … for the dollar to benchmark its currency. We depend on them for cheap goods to make life easy for American consumers, for saving, and buying Treasurys,” he said.

China has been making a big push to try to become a more consumer-led economy.

“They are rebalancing their model to keep the growth and development story going, and that will certainly take them to a larger scale of their economy than ours in the next five to 10 years,” he said.

Roach said the U.S. needs to alter its course to prevent China’s resurgence from becoming a zero-sum game. “We continue to under-save, under-invest in people, infrastructure, and capacity.”

Something tells me it is too late and it would take a lot more than a phone call for China to end any ties with America.

Donations tax deductible
to the full extent allowed by law.