Xi sends Trump a Putin message

Editorial | Mary Ma 11 Jun 2019

President Xi Jinping said he has met with Russian leader Vladimir Putin nearly 30 times over the past six years. But he rarely did so with so many business leaders accompanying him.

When Xi arrived in Moscow last week along with 1,000 company chairmen and chief executives - armed with a shopping list worth US$20 billion (HK$156 billion) - the latest meeting was absolutely different, all done with a special purpose.

The contracts were an expensive gift for Putin.

As for Putin, it's in his country's interest to grab the business that would have gone to America if not for the ongoing Sino-US trade war. As for Xi, elevating the geopolitical axis with Russia would help show US President Donald Trump that Americans would lose their share of the pie if he drags out the trade war.

That's probably the most common reading of Xi's Moscow visit, but the message could be more than that.

The following statistics are self-explanatory. In 2017, the total worth of goods produced and services provided by the United States reached US$19.39 trillion, whereas those of China and Russia were US$12.24 trillion and US$1.578 trillion, respectively.

If not due to its nuclear warheads and conventional military hardware, Russia's international influence would have fallen behind even that of India, whose GDP in 2017 stood at US$2.597 trillion - or 1.64 times that of Russia.

The choice before China couldn't be more obvious. If trade ties with the Americans have been one of surplus for the mainland, those with Russia would be a deficit one that would drain rather than enrich China's foreign currency reserves.

As the trade war intensifies, Beijing has reportedly imposed extraordinarily tight control on forex transactions. It's reported that retail banking customers were paid the equivalent in yuan for withdrawals from US dollar savings.

Out of self interest, China must maintain a stable relationship with Washington in the long term, and policymakers in Beijing are well aware of that.

It's more probable than not that by naming Putin as his "best friend," and raising bilateral relationship to the "comprehensive strategic partnership of coordination for a new era and on strengthening contemporary global strategic stability," Xi hopes to increase his bargaining chips ahead of the G20 summit in Osaka later this month, during which he'd most likely meet with Trump separately.

Trump needs a trade deal that he can brag about to Americans between now and the 2020 presidential election, and Xi wants a deal to end the trade war that threatens to disrupt the manufacturing sector, resulting in millions of unemployed workers.

The Osaka event presents an opportunity that neither should miss if a drastic escalation in the trade war is to be avoided.

Encouraged by news of a meeting between US treasury secretary Steven Mnuchin and central banker Yi Gang, along with some positive news about Huawei, the Hang Seng Index recovered more than 600 points yesterday.

But will Trump and Xi ever cut a deal - or at least narrow their differences? Let's stay tuned to developments.

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