One never knows whether President-elect Donald Trump means what he says or says what him means.
After his provocative phone call with Taiwan president Tsai Ing-wen and his tweet storms bashing China, many China watchers started to worry that a US-China trade war might be imminent.
But then, he nominated the Iowa governor Terry Branstad as his ambassador to China, a move immediately welcomed by Beijing. Mr. Branstad is considered “a longtime friend of the Chinese people,” and knows the Chinese President Xi Jinping personally.
If approved by the Senate, Mr. Branstad can play a positive role in US-China relations.
First, the Chinese value personal relationships more than anything else. Branstad’s connection to President Xi goes back to 1985 when he, as a first-term governor of Iowa, hosted a Chinese delegation that included a 31-year-old unknown official, who would become the President of China.
Twenty-seven years later in 2012, Xi Jinping returned to Iowa as the Vice President of the world’s second largest economy and presumed future Chinese President. Xi fondly recalled his first experience in America when he stayed in a spare bedroom of a Muscatine family.
Now Brandstad refers to President Xi as “an old friend,” and vice versa. This kind of trust and personal relationship can help open doors for trade and other engagements between the two countries. For example, Iowa is now a preferred provider of corn and pork to China.
Personal relationships can also help to ease tensions when things get tough. Dr. Henry Kissinger has used his personal relationships with Chinese leaders to weather many storms during trying times. At least a trade war, which both sides stand to lose, now seems a lesser probability.
Second, Branstad’s nomination signals that the U.S. will push harder to open the China market for U.S. goods. US exports to China have been growing in recent years, thanks to increasing demand by the Chinese middle class. But the U.S. still imports a lot more from China — about four times more than it exports.
President-elect Trump said that his administration will have simple principles, which are “buy American, and hire American.” He sees Branstad as someone who has aggressively sought China as a market for Iowa’s agricultural products. He wants the rest of the country to follow suit.
But Branstad did it not by threatening to impose a 45% tariff on Chinese exports, but by investing in long term relationships and building trust. China will not respond well to bullying.
The good news is that China’s growing middle class loves American products, from Victoria Secret lingerie to Chevrolet pick-up trucks. Hundreds of millions Chinese are traveling every year, both domestically and internationally. China is expected to add 6,810 aircraft over the next 20 years, a trillion dollar opportunity for Boeing.
Boston Consulting Group predicts that China’s consumer market will reach at least $6.5 trillion by 2020. American companies such as Macy’s, Costco, and Target are all betting big on Chinese consumers – the biggest consumer market in history.
China will respect an American leadership that shows respect, and is friendly but firm. Mr. Branstand seems to have the ears of both President Xi and future President Trump. Companies can expect greater opportunities for selling to China.