The headline number is impressive: A quarter-trillion dollars worth of deals from China that President Donald Trump can use to show he’s creating opportunities for U.S. businesses and jobs for his base.
The reality, however, is that the roughly 15 agreements unveiled on Thursday are mostly non-binding memorandums of understanding and could take years to materialize — if they do at all. A day earlier, Commerce Secretary Wilbur Ross announced $9 billion of deals, many also MOUs with few details, rather than contracts.
“To me this is an old-style visit when you pile up all the deals so you can to get a big number,” said James McGregor, China chairman of the consultancy APCO Worldwide. “This was normal when the U.S. and China were just building ties, but now China is a global business power and has very damaging industrial policies and this seems naive. This is all for show for President Trump to demonstrate his deal-making prowess.”
Both Trump and Chinese President Xi Jinping hailed the deals on Thursday, calling them examples of “win-win” cooperation between the world’s biggest economies. At the same time, Xi said that China would open its market according to its own “timetable and roadmap” while calling to respect each other’s “differences” — showing that Trump will find it harder to press him for substantive policy changes.
The non-committal nature of many of the deals reflects a lack of planning or advance work ahead of Trump’s visit to pin down significant agreements or concessions from China, according to two administration officials who asked not to be identified to speak about private deliberations.
The officials pointed to the fact that there were no agreements on giving U.S. companies more access to Chinese markets, or opening up Chinese financial markets — something investors have been demanding for years.
A top Trump official pushed back on the lack of deliverables, saying that the president has successfully built solid relationships with Xi, Japanese Prime Minister Shinzo Abe and South Korean President Moon Jae-in. These will help solve bigger problems in the future, the official said, asking not to be identified.
One of the larger deals was a joint development agreement to advance a liquefied natural gas project in Alaska, involving the state-run Alaska Gasline Development Corp., Sinopec, the China Investment Corp and the Bank of China. The project, which Alaska has pursued for years, would involve total investment of up to $43 billion.
In a joint statement announcing the deal, Sinopec said its “interested in the possibility of” purchasing LNG from Alaska. A Chinese official said the MOUs merely show China’s goodwill toward Trump, and would take years of negotiations to become real contracts.
China Aviation Supplies Holding Co. agreed to buy 300 aircraft worth about $37 billion from Boeing Co. Still, it was unclear how many of them were new orders.
Max Baucus, a former U.S. ambassador to China, told Bloomberg Television, "This is classic Chinese. They have been doing this for thousands of years."
"It’s their technique to try to suck you in,” Baucus said. "I think all this ceremony here is designed by the Chinese in part to prevent any serious conversation. The more there is pomp and circumstance, the less there is time to talk.”
In a series of public appearances with Xi on Thursday, Trump paid him personal compliments while also lamenting a trade deficit that has become the U.S.’s largest.
“It’s too bad that past administrations allowed it to get so far out of kilter,” Trump said ahead of a bilateral meeting with Xi. “But we’ll make it fair and it’ll be tremendous for both of us. My feeling toward you is an incredibly warm one.”
Still, the business community in Beijing is abuzz with talk that Trump may announce very tough trade policies against China when he gets back to Washington, said McGregor, who attended the signing ceremony with Ross on Wednesday. The U.S. is currently investigating China’s intellectual property practices, a move that Beijing has said could lead to a trade war.
Speaking about trade in Beijing on Thursday, Secretary of State Rex Tillerson said that “the things we have seen thus far are pretty small” in light of what he called a $300 to $500 billion trade deficit. The U.S. deficit with China last year totaled $327 billion, according to International Monetary Fund data.
“In terms of really getting at some of the fundamental elements behind why this is happening, there’s still a lot more work to do,” Tillerson said.
The lack of substance during the trip risks undercutting one of Trump’s main objectives in Asia: to cut deals that effectively narrow the U.S.’s trade deficits with some of the region’s biggest economies. Trump walked away from Japan and South Korea largely empty-handed from visits that focused mostly on solidifying security ties.
In China, the stakes were higher: Trump regularly accused Beijing of stealing American manufacturing jobs on the campaign trail, and portrayed himself as uniquely qualified to fix the problem. Since taking office, he’s backed down on campaign pledges to label China a currency manipulator and slap high tariffs on the nation’s goods, but he still rails against the trade imbalance — calling it “embarrassing” earlier this month.
While the one-off deals announced on the trip are fine, it’d be even better to eliminate China’s structural market access barriers, said Jacob Parker, a vice president at the U.S.-China Business Council in Beijing. Many companies are forced to transfer technology for market access, and cannot own 100 percent of their operations.
“What the business community wants most is results-driven, solutions-focused engagement that will provide greater access to — and a more level playing field with — the world’s second-largest economy,” Parker said.