Given the scrutiny that the $250 billion in deals announced during U.S. President Donald Trump's visit to Beijing has come under in his homeland, it is worth considering whether they amounted to mere showmanship or a sign of substantial progress in the world's most important bilateral relationship.
True, the majority of the deals announced were just nonbinding, memorandums of understanding. However, these deals were founded on pre-established business relationships and the economic and trade consensus between the U.S. and China. This makes their chances of coming to fruition much more likely.
At the very least, the trade deals demonstrate that Trump and Chinese President Xi Jinping can engage in fruitful discussion to address the $310 billion U.S. deficit in goods and services trade with China and also prove Beijing's willingness to further open its markets to the U.S. The trade deals show the business opportunities and potential to create employment on both sides of the Pacific.
Trump is feeling pressure to create jobs and address the trade deficit. For China, liberalizing its economy and seizing opportunities from globalization are clear priorities. The benefits that both countries can gain from their trade deals are significant and point to a positive future for U.S.-China relations.
Trump's visit was built on the established trust and broad consensus formed during Xi's stay at Trump's Mar-a-Lago estate in April. The American leader's arrival in China on Nov. 8 came at a politically significant time. The 19th Communist Party Congress, which saw Xi become the first living Chinese leader to have his ideological contributions integrated into the party constitution since Chairman Mao Zedong, had just concluded on Oct. 24.
The congress also saw top officials set out a strategic plan to define China's path toward becoming a powerful, modern nation. Key elements include strengthening China's global influence and further liberalizing its markets. The China-U.S. relationship will play a significant part in achieving these aims.
In the U.S., Trump is facing mounting pressure, fast approaching the end of his first year in the White House without a major legislative win to show for it. He has made lofty promises to revive the U.S. economy and reform trade relations with China. The American public expected him to "make a deal" in Beijing and he did. That is a win for the Trump administration.
U.S. companies still face a number of trade frictions and investment barriers in China. From their perspective, an open China market is key to seizing opportunities. Restrictions on investment areas and capital flows, in addition to inherent geographical, cultural, institutional and policy differences, are persistent challenges for U.S. companies doing business in China.
Beijing is actively addressing these issues as part of its overall drive to further open its markets and liberalize its economy. A day after Trump left Beijing, for example, the government announced it would raise limits that have restricted foreign investment in banks, insurers and other financial-sector businesses. Earlier this year, seven new pilot free trade zones opened, a further signal of Beijing's dedication to more open trade.
The trade deals announced during Trump's visit, in this context, represent another way in which Beijing is addressing business frictions and opening up a constructive dialogue. China will continue to move ahead with transitioning from a middle-income state to a modern, socialist nation. It will build on its economic development and strong domestic consumer demand to transform away from investment-led growth.
For this to happen, further opening of its markets will be important as Beijing must ensure that its economy can meet the demands of the new Chinese consumer and needs to upgrade its infrastructure and manufacturing capabilities. Thus, China's development strategy should naturally accommodate ample opportunities for American companies to invest in China.
The widening trade deficit will remain a serious point of concern in the U.S. Globalization, particularly in the U.S. and Europe, has led to rapid changes in industry and declines in real wages for some groups and has fueled anti-globalization sentiment. A readjustment of its trade terms with China is just one part of what the U.S. must do to revive its economy and save its working class.
But neither globalization nor China should be blamed for America's economic woes. All countries must adapt to the challenges of the new era and seize its opportunities. Realigning a nation's economic structure and retraining people to succeed in the new economy are by no means easy feats.
Yet China recognizes that as an emerging global leader, it has a role to play in promoting inclusive, global growth. To do so, the U.S. and China must pursue a sustainable, long-term solution with both countries enacting structural reforms and cooperating with each other. In this way, globalization's negative side effects will gradually diminish and both sides can gain greater benefits. The meeting in Beijing was an important opportunity to move toward collaborative and fruitful action and away from baseless criticisms.
Yuyu Chen is a professor of economics at Peking University's Guanghua School of Management and director of its Institute of Economic Policy Research.