Just Like Nixon, Trump is Making China Great Again!

Trump has given China an unexpected opportunity to soar and become even greater all over again, writes Raghav Bahl.

What has Donald Trump done in the first two months of his second term? Like his fellow Republican Nixon, he has given China an unexpected opportunity to soar and become even greater, all over again.

(Photo: Aroop Mishra/The Quint)

In 1971, Henry Kissinger, America’s legendary National Security Advisor, flew on secret missions to meet Premier Zhou Enlai in Beijing.

For 22 years, since its independence in 1949, mainland China had been a black hole for Uncle Sam. The two countries simply did not speak to each other. America recognised only Taiwan. 

In February 1972, however, US President Richard Nixon put Kissinger’s covert operation in full global view as he visited the People’s Republic of China for a week. Nixon’s goal was a classic “my enemy’s enemy is my friend” ploy, aimed at weakening Soviet communism by pulling China into America’s orbit.

Propelled by Deng Xiaoping’s visionary leadership, the 'sleeping dragon' used America’s patronage, technology, and dollars to become a soaring Frankenstein for the Yankees.

China Used America to Become Great

Just see how China used America to ultimately become its rival. From 1980 to 2000, China extracted prodigious economic surplus in four ways.

First, China seized land from its farmers and gave it at throwaway prices to feed the greed of American investors who came rushing in. So, the first big surplus was extracted from Chinese farmers.

Second, China artificially depressed the value of its currency. With fewer dollars and more yuan, American investors set up massive factories to export to their homeland and the world. Every dollar of this export fetched them more yuan to buy cheaper and cheaper within China, piling up profits.

Third, a low yuan was akin to a big inflationary tax on domestic consumers, who were forced into yielding another dollop of surplus.

Finally, China brutally suppressed workers’ wages, creating another economic surplus for government and foreign investors.

What did China do with its vast economic surplus? It parked most of it in US treasuries, which lowered interest rates in America, thereby fuelling a consumption/investment boom that buoyed the Chinese economy even higher.

China also created physical infrastructure – ports, roads, bridges, power plants, airports, and new cities – at a scale hitherto unknown to human civilization. It spent heavily on upgrading education and healthcare facilities. At one stage, nearly half of China’s GDP was being so invested. I have described this unusual, audacious strategy as the “escape velocity model of investment growth” in my book SuperPower? The Amazing Race Between China’s Hare And India’s Tortoise (Penguin Allen Lane, 2010).

Once China had crossed the economic Rubicon by the turn of the century, it joined the World Trade Organisation, overpowered global trade with its huge factories producing cheap but high-quality goods, picked up hundreds of billions of dollars via NYSE/Nasdaq listings, packed American universities with bright students, infused technological skills via hi-tech joint ventures and US-trained techies, reverse engineered and bootstrapped indigenous innovation with a ferocious, single-minded focus that is China’s unique strength.

Trump is Making China Great Again!

By circa 2025, when Donald J Trump became America’s boomerang President, China was his chief competitor and adversary. Ironically, America had made China great.

What has Trump done in the first two months of his second term? Like his fellow Republican Nixon, he has given China an unexpected opportunity to soar and become even greater, all over again.

How? Do refer to my earlier piece where I have explained that MAGA stands for Make America Go Alone.

By turning on allies, constructing high tariff walls, un-harnessing Europe and Ukraine, deconstructing the North Atlantic Treaty Organisation (NATO), and aligning with Russia and North Korea against the G6 cohort, Trump has isolated America, creating a vacuum in contemporary geopolitics. A vacuum that China is fully able and tempted to fill.

Xi Jinping: Strong, Silent, Strategic

There is one global leader who has remained eloquently silent, refusing to react tit for tat against Trump’s daily provocation. That’s President Xi Jinping.

While his minions have played the bad cop—the foreign ministry spokesperson, for instance, saying, “if it’s a war that the US wants, be it a tariff war, or trade war, or any other type of war, we’re ready to fight until the end. Intimidation does not scare us”—Xi has quietly chosen to speak through tough actions. China has hiked its military budget by over seven percent. It is conducting visible and menacing naval drills along with Russia, navigating around Taiwan and Japan. To ring-fence against high American tariffs, China is running up its highest budget deficit of four percent to stimulate domestic demand.

Xi has also smoked the peace pipe with tech titans like Alibaba’s Jack Ma and others who were once outlawed as pariahs for accumulating and flaunting wealth.

In short, he is focusing heavily on his domestic base, giving it greater stability and heft in a world made fragile and rickety by Trump’s whimsical politics.

While Trump has used blunt, across-the-board tariffs, Xi has responded astutely, using strategic and calibrated retaliation. He has imposed tariffs on soyabean, corn, and pork, designed to hurt farmers in Iowa and Wisconsin, American states that are critical to sustaining Trump’s popularity.

He has hinted at – but not yet effected – restricting exports of rare earth metals, clamping down on American corporations like Boeing, Apple, Intel and Qualcomm, increasing non-dollar trades with the European Union and BRICS, stepping up infrastructure investments in Asia, Africa, and Latin America to shrink America’s already dwindling footprint, and normalising relations with India to send a message that it’s willing to be flexible with a fraught neighbour as long as that whittles down America’s influence.

With China dominating over half of the global shipbuilding capacity, while America has fallen to nearly zero, Xi knows that he is holding several aces.

So, the world is witnessing a cruel twist of fate. Its strongest leader is behaving like a weak bully, throwing tantrums, and rapidly eviscerating his stack on the roulette table. The world’s second strongest leader is resolutely building goodwill and gathering all the chips.      

Ironically, if Nixon’s outreach transformed China into a strong economy, Trump’s withdrawal from an America-dominated global order is giving China the second breath to become an equal superpower. Now who would have thought that possible!?

Postscript: There’s a lurking danger to the above narrative. Will China use this geopolitical vacuum to annex Taiwan? Or will it behave with the restraint and wisdom of a great power, leash its adventurous temptation, and bat instead for a fair and peaceful world?