Embattled Trump Seeks Wins From `King of China’ in Beijing

(Bloomberg) -- Shortly after Donald Trump’s surprise election win, Barack Obama gave some advice to President Xi Jinping in the final minutes of their last meeting as leaders of the world’s biggest economies.

Obama explained the factors that led to Trump’s victory following a campaign that featured regular China-bashing, and suggested that Xi take steps to put relations with the U.S. on a sustainable path, according to a person familiar with the meeting, which took place on the sidelines of the Asia-Pacific Economic Cooperation summit in Lima, Peru.

After carefully listening to Obama, the person said, Xi replied that he wouldn’t throw the first punch at Trump -- but he also wouldn’t sit back and take one.

Almost a year later, Trump will head to Beijing with more incentive to show off his self-proclaimed deal-making skills than to pick a fight. His approval rating has plunged to an all-time low amid legislative failures and an investigation into collusion with Russia during the campaign. At the same time, Xi has tightened his grip on power to become China’s strongest leader in decades.

“He needs to show his base that he’s gone to China and he’s gotten a lot of great deals for U.S. companies,” said Paul Haenle, a former China director on the National Security Council.  “The Chinese leadership thinks it can give out a little bit here and there and settle Donald Trump’s political imperatives in the short term,” he said, adding: “They do feel that to a certain extent they can manipulate him.”

Over the longer term, however, the relationship faces challenges. A high-level economic dialogue held in Washington this July ended with no joint statements or major breakthroughs after compromises proved impossible. Trump last week called the U.S.’s $347 billion trade deficit with China “embarrassing.”

And though he’s praised Xi recently for helping with North Korea, China’s still wants to avoid a collapse of Kim Jong Un’s regime that could change the strategic balance in the region. Trump has linked China’s ability to rein in North Korea with better trade terms.

“He’s going to get frustrated at some point on North Korea because what he wants from China is frankly not realistic,” Haenle said of Trump. If that happens, “it’s likely he could return to some kind of trade and economic punishment measures to show frustration.”

In remarks to reporters on Air Force One ahead of his first stop in Japan on Sunday, Trump rejected assertions that he was entering the meeting with Xi in a weakened state. He cited a soaring stock market, low unemployment, a strengthened military and gains against the Islamic State in the Middle East.

“We are coming off some of the strongest numbers we’ve ever had, and he knows that and he respects that,” Trump said. “He’s a friend of mine. We’re friends.”

In Japan on Monday, Trump touted Prime Minister Shinzo Abe’s interest in U.S. defense equipment while criticizing the country for importing “virtually no” American cars. After a few days in Tokyo and Seoul, he’ll arrive in China on Wednesday with executives from some 40 companies seeking deals in sectors ranging from energy to aviation to financial services.

One of the biggest under negotiation would see China Petroleum & Chemical Corp. invest billions of dollars to create thousands of jobs in hurricane-hit areas of Texas and the U.S. Virgin Islands.

‘Significant Outcomes’

Ahead of the visit, China has raised expectations. Ambassador Cui Tiankai told reporters in Washington on Oct. 30 to expect “significant outcomes.” China wanted to make Trump’s trip a “state visit plus,” he said, to reciprocate the “warm hospitality” extended to Xi at Trump’s Mar-a-Lago resort in April. Trump’s two-day itinerary includes a stop the Forbidden City in Beijing as well as a state dinner.

Last week, Xi told a group of U.S. executives in Beijing -- including Apple Inc. Chief Executive Officer Tim Cook and Facebook Inc. founder Mark Zuckerberg-- that he would “continue issuing a series of measures to further open up.” Bloomberg previously reported that his government was considering easing restrictions for foreign automakers such as Tesla Inc. and Wall Street firms such as JPMorgan Chase & Co.

Trump’s rhetoric on China has softened since his days on the campaign trail. Back then he blasted China for “raping” the U.S. economy, militarizing the South China Sea and failing to do more to stop North Korea. After the election he even threatened to use the One-China policy regarding Taiwan as a bargaining chip to get better trade terms.

Trump ended up relenting in a February phone call with Xi, and later walked away from campaign threats to declare China a currency manipulator and slap heavy tariffs on Chinese goods. While he has periodically hit out at China -- in July he accused Beijing of doing “NOTHING” to stop North Korea -- that language has been tempered with praise. Trump described Xi as “the king of China” in a recent interview.

In Beijing, Trump plans to press Xi on trade issues such as forced technology transfer and intellectual property theft, according to a senior administration official who requested anonymity. No U.S. web company has succeeded in China, the official said.

Trump will also ask China to do more to stop North Korea’s nuclear ambitions, the administration official said. That includes full implementation of sanctions, as well as steps that go beyond United Nations sanctions, the U.S. official said.

But while China understands Trump’s need for tweetable deliverables, it expects concessions in return.

Several Chinese deals have fallen apart this year after objections from an interagency panel that reviews foreign acquisitions of U.S. companies for national security risks. Other sticking points include the U.S. investigation into China’s intellectual property practices, and its refusal to classify the country as a market economy.

Xi’s government has “active expectations” that the U.S. will ease restrictions on selling high-tech goods to China, Vice Minister of Foreign Affairs Zheng Zeguang told reporters on Friday. He welcomed U.S. companies to participate in Xi’s Belt-and-Road Initiative, adding that the two countries could cooperate on infrastructure, liquefied natural gas and shale gas.

“Trump is very transactional and I think Chinese leaders have an appreciation of that,” said Wang Dong, a secretary-general of the Pangoal Institution, a Beijing-based research group. “China is willing to address the trade imbalance issue, but it’s a two-way street.”

--With assistance from Miao Han Jennifer Jacobs and Sarah Chen

To contact Bloomberg News staff for this story: Peter Martin in Beijing at pmartin138@bloomberg.net, Justin Sink in Washington at jsink1@bloomberg.net.

To contact the editors responsible for this story: Daniel Ten Kate at dtenkate@bloomberg.net, Brendan Scott

©2017 Bloomberg L.P.

With assistance from Peter Martin, Justin Sink