Mitt Romney Doesn’t Scare Billionaires in China
China tends to like Republicans in the White House because it’s clear what they want: free trade, low taxes and strong national security. Democrats are more capricious and delve into messy issues like human rights and the environment.
In the case of Republican presidential nominee Mitt Romney, though, you would be forgiven for thinking officials in Beijing are losing sleep. He favors a more combative posture, including a bigger U.S. naval presence in Asia, stepped-up arms sales to Taiwan and labeling China a currency manipulator. Romney’s running mate, Paul Ryan, complains that China treats U.S. President Barack Obama “like a doormat.”
But China isn’t fazed. Sure, its media lash out from time to time, dismissing Romney’s ideas as “pugnacious” and an “outdated manifestation of a Cold War mentality.” His clumsy trip to Europe spawned countless ugly American cartoons in Asia. Mostly, though, China views a potential Romney presidency with a big shrug. Here are five reasons why.
One, Robert Zoellick. The former World Bank president is a Romney adviser and a natural choice for a top Cabinet position, perhaps even secretary of State. He’s a respected champion of free trade and, by all appearances, an avid Sinophile. Zoellick would surely steer Romney away from alienating an economy that could surpass the U.S.’s by the time his boss might be wrapping up a second term.
Zoellick would counsel Romney that, yes, China holds down its currency, but so does the U.S. An obvious element of Federal Reserve Chairman Ben Bernanke’s quantitative-easing efforts is a weaker dollar. Really, if any country should label another a manipulator, it is Japan in its dealings with America. The bottom line is that Zoellick will keep businessman Romney focused on doing business with his country’s main customer.
Two, China knows it is ascendant. There’s a reason China is tossing its weight around in the South China Sea, much to Obama’s consternation: It understands that a militarily and financially strapped America isn’t the force it once was. Look no further than European officials tripping over themselves to get at China’s $3.2 trillion of currency reserves. They aren’t going hat-in-hand to Washington.
China has huge challenges, not to mention its own leadership transition. First and foremost is sustaining growth when the rest of the world, which China has relied on to absorb its exports, is struggling with debt and economic stagnation. This may well aggravate the social tensions that have been papered over by China’s breakneck expansion. Yet that’s also the point: China has so much going on at home that it will have little time to fret over machinations in the Oval Office.
Three, the Romney-Ryan vision would be positive for China, mostly by way of contrast. China’s leaders may be communists, but they are also devoted Keynesians. If anything, China has gone too far with the idea that public spending can drive growth in the absence of consumer demand. The state overwhelms all else.
Yet America might make a more serious mistake if austerity enthusiasts Romney and Ryan get their way. Although it would be a short-term negative for Chinese growth if the U.S. aggressively tightened fiscal policy, the exercise might yield long-term benefits. It isn’t too hard to imagine the U.S. falling further behind on education league tables and America’s infrastructure crumbling while the White House obsesses over events in Iran and Russia rather than China.
Four, Chinese billionaires understand a guy who has had a Swiss bank account. Thanks to rampant corruption and zero transparency, many Communist Party bigwigs are enriching themselves and their families. Few things matter more to these plutocrats than finding ways to spirit their money out of China into opaque tax jurisdictions overseas.
The Bo Xilai scandal threw a spotlight on the murky mechanisms by which the ruling elite gets rich and hides that wealth from China’s 1.3 billion people. It also showed how the woeful lack of disclosure in the West enables politicians to do so, as well. It is unlikely that Romney, an investor in Cayman Islands funds, would clamp down on these practices. The man from Bain Capital will have no difficulty doing business with China’s capitalist communists.
Five, U.S. leaders are full of hot air. Presidents often come to office pledging to crack down on China -- Bill Clinton and George W. Bush were two such examples. Then reality sets in about just how much U.S. foreign policy runs through China -- everything from North Korea’s provocations and Iran’s nuclear ambitions to climate change and intellectual-property rights.
Obama’s team faced a changing world. Although the U.S. built a huge and dynamic economy, China holds the mortgage. Its $1.2 trillion of U.S. Treasury holdings gives China unprecedented leverage over America. That’s why, for better or worse, Hillary Clinton in her first trip to China as secretary of State in 2009 spent more time hawking U.S. debt than carping about China’s political prisoners.
China will come up often as Romney and Obama duke it out between now and the Nov. 6 election. Officials in Beijing won’t like it and the rhetoric may get ugly; China tends to sound like North Korea when it overreacts to the things U.S. politicians say. But if you think China is quaking over the prospect of a President Romney, think again.
(William Pesek is a Bloomberg View columnist. The opinions expressed are his own.)
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