This Month in Geoeconomics

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Trump-Xi Summit: A Modest Outcome and a Missed Opportunity

CARLOS BARRIA/REUTERS

CARLOS BARRIA/REUTERS

The actual outcome from President Donald J. Trump’s summit with Chinese President Xi Jinping was modest: the Strategic and Economic Dialogue, begun by George W. Bush and expanded by Barack Obama, will give way to the Comprehensive Economic Dialogue, and the two countries will conduct a lightning round of trade negotiations over the course of a hundred days. The analysis from CFR fellows preceding the summit was in some ways more interesting than the actual outcome, and is likely to be of continued value in the months ahead as Trump and Xi seek common ground. 

Senior Fellow Elizabeth C. Economy provided a guide to the summit’s potential pitfalls, advising the Trump administration to play a long game. Her counsel to avoid settling for “tweetable” deliverables seems to have been followed. Senior Fellow Ely Ratner noted that China’s desire for a summit offered leverage that the United States did not, in the end, use. 

Going forward, United States will need to decide what specific results and policy changes it will prioritize in the Comprehensive Economic Dialogue—and how Washington should use its potential sources of leverage if the dialogue fails to generate sufficient progress. 

Senior Fellow Sebastian Mallaby argues that Beijing’s selective respect for intellectual property, high tariffs on some imports, and government support of strategic industries all are legitimate sources of concern. He also emphasized that the United States should welcome China’s desire for global economic leadership, but then Beijing will need to live up to that high standard.

 

CHINA'S CURRENCY AND ECONOMY

Getting Beyond the Manipulator Label
 
U.S. TREASURY  

U.S. TREASURY

 

The U.S. Treasury’s semiannual currency report was released on April 14. Senior Fellow Brad Setser argues that this was not the right time to label China’s currency management as “manipulation,” but the question of how China manages its currency remains a first-order issue.  Read more »

 
Fostering Competition
 
REBECCA COOK/REUTERS  

REBECCA COOK/REUTERS

 

At his much-publicized speech in Davos this January, Xi underscored China’s commitment to a globalized economy. Setser has suggested that China could demonstrate its commitment to globalization by lowering its 25 percent tariff on imported cars. Closer to home, distinguished CFR Visiting Fellow A. Michael Spence and David Brady of the Hoover Institution, laid out the many steps the United States could take on its own to foster more inclusive growth. Read more »

 
China's Accounts Facing Crisis
 
CHINA STRINGER NETWORK/REUTERS  

CHINA STRINGER NETWORK/REUTERS

 

In an incisive column, former CFR Visiting Fellow (and current Financial Times chief economics commentator) Martin Wolf points out that a narrow focus on trade issues is insufficient to address the full gamut of risks from China. He highlights the risks from China’s financial account. The combination of high savings and a “wild west” financial system has created the raw material for a financial account crisis, one where massive outflows could lead to a substantially weaker yuan and much larger Chinese current account surpluses. 

Setser shares Wolf’s core concerns, but notes that China’s current combination of “credit and controls” may have provided its economy with a bit of breathing space: activity has picked up, and the combination of controls and the yuan’s current stability look to have slowed outflows. This period of stability needs to be used to introduce fundamental reforms to lower China’s still high level of savings. Read more »

 
RMB Internationalization
 
THOMAS PETER/REUTERS  

THOMAS PETER/REUTERS

 

A few years ago, the global advance of China’s currency, the renminbi (RMB), seemed unstoppable. The “redback” was in increasing use around the region, and China’s membership in the special drawing rights (SDR) basket was taken as a sign that Chinese financial markets were soon to be much more globally integrated. This trend, however, is now headed in reverse. In the latest Geo-Graphics post, Senior Fellow Benn Steil and Analyst Emma Smith take a look at what happened. Read more »

 

BREXIT BEGINS

 
POOL NEW/REUTERS  

POOL NEW/REUTERS

 

British Prime Minister Theresa May formally triggered Brexit last month, setting off a two-year negotiating calendar in which Britain and the remaining European Union countries will have to reshape their deeply entwined relationship. Mallaby observes that the limits of the populist impulse that swept Brexit into being may soon be discovered. On the other hand, Senior Fellow Charles Kupchan fears that Brexit may be the start of retrenchment across the West, not just in Britain.

 

IN CASE YOU MISSED IT

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  • Geo-Graphics, a visual take on geoeconomic issues, with links to the news and expert commentary by CFR Senior Fellow Benn Steil and Analyst Emma SmithRead the latest analysis »
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ABOUT CGS

The Maurice R. Greenberg Center for Geoeconomic Studies (CGS) works to promote a better understanding among policymakers, scholars, journalists, and the public about how economic and political forces interact to influence world affairs.

 
Brad W. Setser
Senior Fellow and Acting Director of the Maurice R. Greenberg Center for Geoeconomic Studies @Brad_Setser

Edward Alden
Bernard L. Schwartz Senior Fellow @edwardalden

Thomas J. Bollyky
Senior Fellow for Global Health, Economics, and Development @TomBollyky

Willem H. Buiter
Adjunct Senior Fellow

Blake Clayton
Adjunct Fellow for Energy
@bcclayton

Heidi Crebo-Rediker
Senior Fellow
@heidirediker

James P. Dougherty
Adjunct Senior Fellow for Business and Foreign Policy

Jennifer Harris
Senior Fellow
@jennifermharris

Miles Kahler
Senior Fellow for Global Governance @MilesKahler
Robert Kahn
Steven A. Tananbaum Senior Fellow for International Economics

Robert E. Litan
Adjunct Senior Fellow

Sebastian Mallaby
Paul A. Volcker Senior Fellow for International Economics

Meghan L. O'Sullivan
Adjunct Senior Fellow

Kenneth S. Rogoff
Senior Fellow for Economics

Varun Sivaram
Douglas Dillon Fellow
@vsiv

Matthew J. Slaughter
Adjunct Senior Fellow for Business and Globalization
@MattJSlaughter

A. Michael Spence
Distinguished Visiting Fellow @amspence98

Benn Steil
Senior Fellow and Director of International Economics
@BennSteil