Trump Ups The Ante, But What Is The Game?

WHAT HAD SEEMED to be a passing storm in a teacup has blown up into a tempest.

Taking a telephone call from Taiwan’s president, Tsai Ing-wen, was one thing, especially when the US president-elect’s entourage subsequently played down the potential consequences. It did not signal a change of US policy towards China, they insisted.

But then the man himself upped the ante. He suggested that unless Beijing makes concessions on trade, America will consider abandoning the One China policy, the foundation of Sino-American relations since 1979 and which has allowed the world’s sole superpower to develop a working relationship with the world’s aspirant one.

What had been a restrained response on Beijing’s part hitherto, interrupted into anger, albeit channelled through the state-run Global Times, a publication that never misses the opportunity to blow hard about Chinese nationalism.

It has a reason, though, to suspect that there is an organised campaign to restore Taiwan’s a diplomatic status in the United States. Beyond the telephone call from Tsai, John Bolton, likely to be Trump’s assistant Secretary of State, is known as a China hawk, especially over the issue of Taiwan. Our man in New York sends word that Trump and Bolton met shortly before Trump dropped his hint that the One China policy was in jeopardy.

The extent to which Trump understands the ramifications of the United States abandoning the one China policy is unclear. Less so his advisers. They will know that Taiwan is a red line for Beijing. Trump, on the other hand, possibly regards his comments as no more than an opening bid in a trade negotiation.

In this scenario, Taiwan is no more than a bargaining chip. Beijing, however, sees Taiwan as a first domino that must not be allowed to fall.

Its default position is that the Americans are playing a long game, just as it would. If Taiwan goes, then Hong Kong might also be at risk, especially as there would be support from within the former British colony for any advocacy of Hong Kong independence.

More importantly, Tibet might be next; then possibly Xinjiang. America, this theory goes, is trying to pick apart China one province at a time and thus must be resisted from the outset.

What, though, can Beijing do, and especially against a man who isn’t yet president?

Its easiest option would be to stop supporting the yuan, making Chinese imports into the United States cheaper. That would skewer Trump’s accusations that China is a currency manipulator, at least in the eyes of economists, if not, perhaps, in those of the blue-collar Americans who supported him, in large numbers in the rust belt, in the election campaign.

It could also make life a lot harder in China for those American direct investors, particularly high-tech companies, who manufacture there to export back to the United States or to pursue the market share in China itself of which they dream.  China could also go after big-ticket US exporters to China, such as Boeing, by cancelling orders.

The hope that would be on both scores that US companies would apply pressure on Trump at home not to endanger the trade and investment relationship with China by insisting one following the reckless path of abandoning One China policy.

What Beijing has to do first, however, is to figure out Trump’s true intentions. That may be the hardest part of all.