Friday, May 14, 2021

Trump is trying to consolidate his anti-Chinese heritage. Will Biden take it apart?

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This is the web version of Eastworld, Fortune’s Asian business and technology-focused newsletter. Subscribe here to get future editions to your inbox.

Well, it’s been a hectic week in Washington. And yet, in the midst of the chaos, President Donald Trump found time on Tuesday to sign a executive order banning transactions with eight other Chinese apps, including Alipay, the payment platform owned by Chinese billionaire Jack Ma’s Ant Group, and three apps owned by Chinese tech giant Tencent Holdings.

The order is the latest volley in the outgoing administration’s ongoing campaign to use national security powers to counter Chinese tech companies. He alleges that the apps “allow China to track the locations of federal employees and contractors and create personal information records.”

The measure will only take effect 45 days, one month after Trump’s last day in office. Like Bloomberg points out, “It will be up to President-elect Joe Biden to decide whether or not to apply the policy.”

Tuesday’s edict – which follows similar bans imposed last August on Chinese social media apps TikTok and WeChat, and a slew of tech blacklists aimed at Chinese tech giants like Huawei Technologies – will not inflict of significant pain to the companies it selects because none of them have significant exposure to the US market.

But the move could create serious headaches for American companies by restricting their transactions in China.

Alipay, for example, was only downloaded about 200,000 times in the United States last year, according to Sensor Tower, but claims more than one billion users and 80 million merchants in China. Many global companies say it will be impossible for them to do business in China if it is banned from AliPay and its main rival, Tencent’s WeChatPay.

But too bad. The main purpose of the order, as Reuters Notes, is to “consolidate Trump’s legacy against China” in his last days in power.

This legacy, deserved or not, is sure to complicate the Biden administration’s efforts to reset US-China relations. Biden aides have said the new president will not make any immediate changes to Trump’s Chinese policy and will make a conscious decision about what to keep, change or reject.

As we have often noted in this space, hostility towards China is one of the few – if not the only – truly bipartisan sentiments in Washington. Biden will find it difficult to lift Trump’s sanctions and renegotiate his “phase one” trade deal without upsetting Democratic friends and Republican enemies.

Biden promises, however, that he will work with other Western democracies to strengthen American influence in his relations with China. It would be a departure from Trump “Go-it-alone” approach. At the center of this change is a proposal to create a “Summit of Democracies” to articulate an alternative to Chinese authoritarianism. But as Bob Davis and Lingling Wei point out in this thoughtful analysis in wednesday the Wall Street newspaper, building a “grand alliance” to counter China poses major challenges.

“Given the attractiveness of the vast Chinese market,” they write, “Mr. Biden could face a difficult time convincing his allies to sign up for a united front against Beijing … US allies say they cannot be sure of America’s long-term commitment to a international alliance, given four years of unilateral approach.

Concrete example: China and the European Union agreed last week on a sweep investment treaty designed to create new lucrative business opportunities for both sides, concluding seven years of tortured negotiations. EU leaders signed the deal despite heated internal debates over China’s record on human rights and forced labor, and a last minute call of Biden’s National Security Advisor Jake Sullivan to wait until they have had a chance to discuss it with the new administration.

The EU-China agreement has remained intact despite the Stop Wednesday in Hong Kong, 53 pro-democracy activists accused of national security. The EU is still eager to close the deal, Bernd Lange, head of the European Parliament’s trade committee, told the China Morning Post.

Financial Times Columnist Gideon Rachman denounced the investment treaty as “a considerable kick in the teeth for Joe Biden. ”

Europeans “laugh at themselves if they think they can be blind to the increasingly aggressive nature of Xi Jinping’s China,” Rachman said. “If an authoritarian nation, like China, replaces America as the dominant world power, then democracies around the world will feel the consequences.”

More Eastworld news below.

Clay chandler
clay.chandler@fortune.com

This edition of Eastworld was curated and produced by Grady McGregor. Reach it atgrady.mcgregor@fortune.com.

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