James Zimmerman: Will the Trump-Xi Meeting Happen?

Note: This episode was recorded on March 15 Australia time (March 14 US time). On March 16 Australia time (March 15 US time), Trump threatened to delay his upcoming visit to China, if China doesn’t help unblock the Strait of Hormuz. In response to this news, James Zimmerman provided the following additional comment: China is unlikely to respond to the threat, and it’s not in their best interest to jump into the fray of the hostilities, which is not their battle. They’ll likely say that if Trump cancels, that is on his own volition and unfortunate as Beijing is able and willing to proceed with the planned Summit. But, overall, my guess is that Trump will proceed with the visit knowing that the US-China relationship is too important to postpone.

Jersey Lee

Welcome to this episode of Pacific Polarity. Today we’re speaking with James Zimmerman. He is a seasoned lawyer with more than three decades of diverse legal experience based in China since 1998 and is currently a partner at the law firm Loeb & Loeb where he advises foreign companies on corporate, transactional regulatory litigation and white collar criminal defense matters. He is also the chairman of the American Chamber of Commerce in China and had previously served in this position four times over the past two decades. He is also the author of the acclaimed nonfiction book, The Peking Express: The Bandits Who Stole a Train, Stunned the West and Broke the Republic of China. James Zimmerman, great to have you on.

James Zimmerman

Thank you so much. It’s great to be here. I appreciate the opportunity.

Jersey Lee

As I understand, you’ve been involved in the preparations surrounding Trump’s upcoming visit to China. To the extent that you can share, how have these preparations progressed and what can we expect from the visit?

James Zimmerman

This might actually be overstating our role, but we, the chamber and its members, are very much engaged with different departments in the U.S. administration, just providing our suggestions and input on the upcoming presidential visits. And we’re doing so because we want to make sure that the business communities, American business community’s agenda is part of that discussion. We are making sure that we’re having conversations with the administrations to let them know that we’re supportive. We’re here. And we’ve got ideas on what we want to see in terms of deliverables, outcome. And so, I mean, that’s why we’ve been making ourselves available.

I was in Washington, D.C. two weeks ago meeting with a number of the teams that are participating in the presidential summit and to make ourselves available and to be supportive in any way we can.

Jersey Lee

What might be some of the expectations from the business community that you represent?

James Zimmerman

Well, I think the best way I’d characterize it is the expectations are generally low. We’re not expecting a grand bargain. We’re not expecting significant deliverables, although I do know that there is some discussions at this point to try to come up with some purchases that may result from the discussions. But overall, I think the goal of the summit is to continue to maintain a stable relationship between the United States and China. And the goal of this summit is not to reach a whole new bargain, a whole new agreement, the key issue is maintaining the stability in the relationships, which I feel is very, very important from the business community’s perspective. So long as the parties continue to talk and the relationship is stable, I think that’s something that’s very important for not just the business community, but the global economy as well, because if the bilateral relationship is stable, that supports stability across the globe and is good for the global economy.

Jersey Lee

There’s been quite a number of reports that have noted issues with the preparation process, or at least, as you say, playing down expectations for the visit. There’s reports that there might not be a corporate delegation from America, and some other reports suggest that the preparation process has been a bit rushed, which is why there’s low expectations for outcomes. What do you think of such reporting?

James Zimmerman

Well, I think that there is some truth to the fact that, yeah, this has all been late discussions and we’re trying to put something together without a whole lot of planning time. But keep in mind, too, the delegation that Trump led to Saudi Arabia that was all put together at the last minute where CEOs got on board. And I think that there is some discussions that he will be bringing forward to China maybe 20, maybe 30 CEOs that have an interest in ongoing trade and investment in China.

I think the expectations and the reporting in general is accurate. I think they’re trying to put something together where we’re going to have some business that will be participating in some way, but the actual outcomes and the actual purchases is something that’s left for observation.

Jersey Lee

So it sounds like this is something that’s common in Trump’s visits, instead of specific to this upcoming visit to China. Is that what you’re saying?

James Zimmerman

Yeah, I mean, I think it would be—There are things specific to the U.S.-China relationship that we’re trying to put together, but the last-minute planning is nothing new with this administration, they seem to be doing things quite often at the last minute. Even when I was in Washington, when I met with the Chinese embassy the DCM (Deputy Chief of Mission) there had said to me that, wow, we haven’t heard what the plan is, and it’s so hard to have outcomes, so we have to play down expectations because we just don’t have a whole lot of time. That’s the situation here, but we may be surprised, there are some last minute preparations that will, may pull things together, so Trump brings along a real solid group with him, but we’ll have to see what happens.

The fact that Secretary of Treasury percent is meeting with Vice Premier He Lifeng in Paris as we speak, a lot of those discussions in Paris are planning the logistics and planning some of the outcomes that will come out of this meeting. So in the next few days, we may be hearing more information.

Jersey Lee

Beyond the usual conversation over trade and investment, which lots of people have talked about, some reporting suggests that the US might push China to reduce purchases of oil from Russia and Iran, or to push China to exert pressure on Iran to keep the Strait of Hormuz open. Meanwhile, there are suggestions that China may in turn push the U.S. to weaken its support for Taiwan or to significantly weaken export controls. Do you think any of these proposals might find a receptive counterpart here, or are they just thought bubbles, trial balloons?

James Zimmerman

No, I don’t think there’s going to be any progress in either direction on the more sensitive topics. Those things take a lot of time to work through, and I think the parties, both the U.S. and China, are more interested in keeping the general stability of the relationship and not throwing a monkey wrench in either direction that’s going to cause any kind of complications. If the U.S. was to pressure China to reduce its purchases of oil or if China was to put pressure on the U.S. to weaken its support for Taiwan, I think you’re opening up a whole week of discussions, a month of discussions, and it just complicates things. And I don’t think either party really wants to go down that path. I think it’s more of, let’s just continue to stabilize the relationship, let’s talk in general terms, and let’s keep things at a very simple pace right now. And I think that’s the direction we’re going in.

There’s been a lot of issues that have come up in the past few months that could very easily have derailed the pending truce that’s between the U.S. and China since the presidents met in South Korea back in October, a lot of things have happened, not just Iran, but Venezuela and so forth. But there’s been quite a bit of discipline on both sides to not overreact, to destabilize the relationship. So it’s the same theme. It’s like, let’s not complicate things with very difficult requests at this time. Let’s just keep the relationship stable. So I don’t think you’re going to find that a lot of proposals that are going to be made.

Now, there might be, I mean, both sides may take the opportunity to lecture one another on things that they find to be troubling. And I’m sure that Xi Jinping is going to raise questions about both Venezuela and Iran and so forth. And then Trump himself might raise questions about the things that are troubling him as well. But I don’t think those are going to be conversations that are going to result in any grand bargain, so to speak. They’re just too complicated and just not enough time.

Jersey Lee

On the topic of the ongoing war in Iran, do you think that’s affecting either side’s thinking towards the meeting? Maybe not to the extent of derailing it, but just thinking about how much importance, how much salience they want to put into this meeting. Because various analysts have made the case that this meeting might be bad optics for both Trump and Xi, but for different reasons, given the current geopolitical context.

James Zimmerman

Yeah, I mean, that’s a concern on both sides. I know that, in communications with people within the Chinese government, they were very concerned, and they continue to be concerned about the optics of providing Trump with a platform, with the opportunity to meet Xi while this war with Iran is going on. So there are concerns on the Chinese side. And quite frankly, right after the war began, there was questions on whether Beijing was going to cancel the summit, there was a real concern about that, but that did not happen. In fact, Foreign Minister Wang Yi himself, I think it was earlier this week, had said he welcomed Trump to come to Beijing for discussions, so neither side has raised questions about this to derail the process. But there is certainly a bit of discomfort in both Beijing and Washington about certain things that either side is doing. And I know that on the Chinese side, they do have concerns, not just with Iran, but Venezuela, weapon sales to Taiwan, there’s a whole laundry list. And I’m sure that Trump is going to get an earful while he is in Beijing.

But whether that derails the relationship, I don’t think China wants to push it to the point where it’s going to cause a disruption in the relationship and then go back to situation like we had last year, with effectively a trade war going on, both sides lobbying tariffs back and forth, and sanctions back and forth. And I don’t think they want to move in that direction again, so both sides have shown quite a bit of restraint. And even though these geopolitical tensions are real and serious and significant, but there has not been a movement towards basically canceling the meeting.

But we have to see what happens because we still have two weeks to go. China and Xi Jinping may feel that, well, what’s going on in Iran is not going to be ending soon. And so we don’t want to appear to validate what the Trump administration is doing. So there is always a potential that the meeting will be canceled by the Chinese side. But we’ll have to see what happens. And I think that, at least on the Chinese side, they’re hoping that the situation will move in a direction of trying to resolve itself, or at least for the parties to open up a dialogue, so that the war either ends or it’s resolved in some way with a ceasefire. But we’ll have to see what happens. Xi Jinping may at the last minute cancel the trip, but I think that would be contrary to China’s interest. They really want to maintain a stable relationship with the U.S., whether they agree with what Trump is doing or not, so that’s something we’ll have to see what happens in the next couple of weeks.

Jersey Lee

Quickly following up on that, do you think that, assuming that the visit goes through, do you think that that would be indicative of both Washington and Beijing placing trade policy, trade concerns, trade relations above basically all other concerns and prioritizing that?

And I suppose on the topic of whether Beijing might potentially cancel at the last minute, do you think that China might use this as kind of a leverage or even a threat to affect how Washington conducts the war in Iran?

James Zimmerman

I do think that, as I said, I think that Xi Jinping is going to really put the pressure on Trump when he shows up. And so he’s going to use it as an opportunity to express his concerns, express his dislike for some of the actions by the Trump administration. That’s a given. He is really—I would anticipate that he raises concerns and his dislike for certain things. But that will also be part of the media, where Xi publicly is going to be—there’ll be public reports where he talks about how he is not happy about some of the things that the U.S. has done. But overall, I think it’s not so much placing the trade and commercial relationship over other issues. It’s really placing stability in the general relationship over a lot of other things like the geopolitical tensions.

So I don’t think Xi Jinping would be sacrificing his interest in the Middle East or in Latin America over this, I think he’s going to express his concerns when he meets. But he also realizes the big picture at 40,000 feet is maintaining a stable relationship, because last year, that trade war back and forth, it caused a lot of tension in the relationship. But again, I do expect that Beijing is going to express its concerns to Trump when he gets to town and use it as a platform to basically say, we’re not happy about this; but at the same time, we also don’t want to disrupt our relationship in general. Anyways, we’ll have to see how the messaging works out, but I don’t see this as placing commercial and trade interests over everything else.

Jersey Lee

I suppose what my question was getting at was, whether Beijing might use the meeting itself as leverage; it’s like, if you don’t draw down the war in Iran, or start negotiations with Iran, or at least indicate serious interest in having negotiations—because right now there doesn’t appear to be serious interest on the part of the U.S. to have negotiations at all—would Beijing say, okay, if you don’t even attempt to engage in negotiations, then the meeting is off. Do you think that’s possible?

James Zimmerman

Well, I do think that optics matters. Part of it is that I don’t think Beijing wants to have this meeting appear to be like a vote of confidence for what Trump is doing. And that’s a concern. And that was why a lot of folks were saying that the meeting may be canceled, because a meeting in itself may appear to give Trump some credibility as to what he’s been doing. So I do know that they are very seriously concerned about the optics of having him just come to town.

But I do feel that they’ve kind of turned it around. And I think that’s why they’re going to use it as an opportunity, to try to get some leverage, some concessions, at least some subtle pressure that you need to resolve this; if you don’t resolve it, this may impact our relationship. So there’s that kind of messaging that can come. But we’ll just have to see how it comes out. I mean, it’s very uncertain how the Chinese government are going to play this. I think the last thing Beijing wants is to show some support for what Trump is doing. I think that overall Beijing is going to play this to whatever advantage that they’re hoping to get out of it, so they look at this as an opportunity and not just something that is necessary. Hopefully Trump is going to be prepared when he comes to town. But I think both sides overall, from a long-term perspective, want to make sure that the relationship remains stable, that’s the key, and they want to put some guardrails in so that we don’t have any policy shocks on either side, because that doesn’t help anyone on either side.

Jersey Lee

You have long been a critic of the current administration’s trade policy, particularly tariffs. However, given the number of concessions that the US has managed to wrest from weaker counterparts using the sort of tariffs, like investment commitments, agreements, to drug pricing, etc., do you think that tariffs, however misguided they may be as an economic or trade policy, has given the US significant leverage? Obviously, it wasn’t effective against China, but it may have been effective against the European Union, against India, etc. And now that the Supreme Court has struck down the IEEPA tariffs, does the Chinese government think that this has handed them greater leverage during the upcoming Trump-Xi meeting, and how might they use it?

James Zimmerman

Well, I mean, first of all, I’m a critic, not just of the current administration, I’m a critic of Democratic administrations, on both sides of the aisle. So I don’t believe that the use of tariffs works. It may work in the short term, but in the long term, it doesn’t because of, one, any costs driven by tariffs ultimately come from the consumer or paid by the consumer. Secondly, any time you tariff, impose tariffs on a country, they will find a way to reciprocate, which means is that it becomes a wash between the two countries and it really doesn’t have, it’s not effective, and tariffs also have a tendency to really be disruptive in trade negotiations, so there’s better ways of negotiating concerns. I mean, if market access is the concerns, talk about market access. The strategy of hitting a country with tariffs and then hoping to negotiate really doesn’t work in the long run. And you kid yourself if you think it does.

And the same thing with sanctions, with export controls and sanctions. They have to be rational. They have to be based on a legal reason; if you’re going to impose export controls based on, say, national security concerns, they really need to be rational. If you overreact, then it becomes overbroad application. And what happens is somebody else is going to fill the gap. Your competitors in Europe or other parts of the world are going to fill the gap. And also sanctions just drives self-sufficiency. So a country like China says, fine, we’re not going to buy X from you. We’re going to just make it ourselves and we’re going to put a lot of money into investing ways to replace the technology or whatever that is subject to export control. So the controls have to be rational. They have to have a legal basis to be workable, and you have to have the support of allies. I mean, if you’re the only one applying, say, overbroad export controls, then your competitors in Germany, France, the UK are going to fill the gap. That leads to a situation where the export controls really have no teeth, no power. So I’m not a big fan of using export controls or tariffs because in the long term, they don’t work.

Now, what does work is dialogue. It’s slow. It takes time. It takes a lot of oversight. And that’s why you have global organizations like the World Trade Organization. You have international tools to try to make sure that behavior is followed in a way that is not restrictive of trade or to counter any subsidies that might be distorting market access or distorting trade relations.

So I am a critic of U.S. trade policy, but I’m a critic of all parties, not just the current administration. But yeah, the whole thing with the tariffs is it doesn’t work. The Supreme Court comes in and says you can’t use those. And now the U.S. government has a huge payback to the consumers, where did we get with that? He used a provision that really is limited to emergency issues, and it was overreaching, overreacting. So anyways, we’ll have to see what happens on this.

I think that in the meeting between Trump and Xi, I think both sides need to realize that they need to take a step back, and be careful about how they use the tools in their toolbox. And that goes for the Chinese side as well. They are starting to use the export controls on rare earth metals now. Sure, that may give China some leverage, but it is a temporary. Because what you do is, if you control or if you monopolize the supply, all you do is drive those on the receiving end. And that could be Australia, that could be the US or Europe. But all you do is drive them in a direction of self-sufficiency or finding alternatives. For those that remember the oil embargoes back in the 70s, the organization called OPEC, the Organization of Petroleum Exporting Countries, they imposed production controls, supply controls on the supply of oil, and that created a lot of shocks. But the learning experience on that from those that were on the receiving end is to find alternatives, to not be subject to those kind of monopolistic controls again. So anyway, if the Chinese understand history and they know that if they are overreaching, if they are overbroad in the way they apply the export controls to rare metals, then it’s going to be a very short-term strategy for one. And two, they’re just going to drive the US and Europe and Japan and other countries around the world to find their own sources and to become self-sufficient. And then China loses that leverage.

So it is not something that—I don’t believe the Chinese have the confidence that the U.S. may think they have. When I was in Washington, there were people in the administration that were saying, oh, China has weaponized this export control. My first reaction was, well, they learned from the U.S. the use of export controls. But I also came back and said, I really don’t think the Chinese feel that they have a weapon because they realize that it is a very short term, very temporary bit of leverage. That will not work in the long run. They have leverage right now for the rare earth metals. But in time, those on the receiving end, including U.S., Europe, Australia and so forth, are just going to move in a direction where they’re going to find alternatives and they’re going to move towards self-sufficiency.

Jersey Lee

Obviously you have broadly been an outspoken critic of the Trump administration’s policies, particularly on China. We have seen the ways that the Trump administration retaliates against some of its critics, which is quite different from how past administrations have gone about. Do you feel that your criticism may be hurting or limiting AmCham China or the broader American business community in China that you represent? Do you feel that that might limit their engagement with the Trump administration, particularly in this lead up to the upcoming Trump-Xi meeting?

James Zimmerman

No, I mean, again, keep in mind, I am a critic of U.S. trade policy when it comes to overreaching on the tools in the toolbox, and I was a critic of both Trump, Biden, Obama, the Bush administration and so forth, and our criticism is fact based. It’s based on facts. I mean, if any administration, if any government official doesn’t want to listen to the facts, then at the end of the day, they are missing out on the importance of the real impact of what they’re doing.

I don’t think that it closes or forecloses the chamber or myself to have the dialogue. I was in D.C. two weeks ago and met with members of the administration, people that are what we could call politicos, meaning they were political appointees of the Trump administration, met with several Republican members of Congress, and they understand that the American business community needs a voice, has a voice, and yes, we will raise criticisms, but we try to be fact based, so that we can lobby and educate our lawmakers on why whatever policies they’re initiating, either they won’t work or that they’re going to not be effective in the long term. So, yeah, when you say I’m outspoken critic, it’s really something that is nonpartisan, if not bipartisan. We’re trying to be fact-based and that’s the important thing. And again, we have access, we continue to have access. We’re in communication with the ambassador. We’re in communication with multiple layers within the administration. And they listen, and they’re appreciative of our viewpoint. So I don’t see that this in any way impacts our ability to be a voice within those discussions.

Jersey Lee

There’s talk of a “China cycle”, where foreign firms enters China, establishes the industry ecosystem around them, and eventually a Chinese competitor emerges that is able to be competitive and perhaps even out-compete them, not just in China, but globally as well, perhaps with help by the government. How have American businesses thought about this, particularly those among the losing end of this process? Because I suppose the hawkishness of the U.S. government towards China over the past decade may be explained by the fact that some U.S. companies came out of this process disappointed and perhaps even bitter towards China, so didn’t really bother to lobby for more trade and engagement with China. What do you think of this possibility?

James Zimmerman

Well, let me address your first question on this, and I would not call this simply a China cycle. I mean, this is a cycle that happens any place in the world, and it happens not just to, say, American businesses, but any company: European, Australian, Japanese, and so forth. If you move production to a country, you have to protect your core technology. I mean, this is putting my lawyer hat on. One of the things that we tell any company is, you really need to take steps to protect your processes, protect your technology, and even if you have partners—because the thing is, you don’t want to build your competitors. You don’t want—because quite frankly, it’s very easy for companies that you work with to become competitors. And it’s a natural thing. If you don’t protect your technology, nobody else is going to do it for you.

Part of the reason you have lawyers is, where you see company after company after company, either going to China or going to Vietnam or going to wherever, where they drop their guard. I can tell you, after three decades of working in China, we still get U.S. companies that say, oh, don’t put this in the agreement, we trust these guys, they’re good to work with, they’re going to respect us. And I’m like, you know, you got to be careful. It’s your core technology, your future, your relevance in 10, 15, 20 years. You’re actually releasing it to the world, so you need protection. Never say, yeah, yeah, yeah, we trust these guys. It doesn’t matter if it’s China, Saudi Arabia, wherever. You have to take steps to protect your technology. So it is something that, again, it’s not a China cycle. It’s a global cycle. It even is an issue within the U.S. If somebody across town from where you do business has access to your core technology, they’re going to use it. So you have to be very careful. That’s why you have intellectual property laws, to ensure that your core technology is protected. And it’s most important when you go globally, because then you go into different legal systems and different ways of looking at technology.

Now, some people say, oh, when we go to China, they force us to give up our technology. And I’m like, well, I don’t think that’s true. They basically say, yeah, maybe you should license it or whatever, but you need to push back. You need to say this is our core technology. Once the cat is out of the bag in whatever country it is, then you potentially might lose it. So that is something companies should be aware of. Some companies should be concerned about that. If they don’t protect themselves and then later are complaining about somebody stealing their technology, they have nobody to blame but themselves. You can’t call up the U.S. Embassy and say, hey, they took our technology. Well, how did they take it? How did they get it? Did you protect yourself? Did you make available the tools? Why did you even bring that technology to this market if it was so easily replicated? American business is aware of that. And those that are succeeding in China realize that they need to protect their technology. And unfortunately, those that let their guard down may be learning a very harsh lesson. So that’s an issue.

The second question you have is on the hawkishness of the US government towards China. I don’t know if the companies did not lobby on this, what was happening—we saw this in various congressional hearings—people walk in and they say, yeah my technology was stolen, and it’s all “bad China bad China”. But I mean, the question should be, what did you do to protect your technology? What did you do to protect your brands? What did you do to ensure that you were not going to lose your technology? I don’t think a lot of the American companies have thought about that side of things after the fact, but if somebody is going to steal from you, they will. And if you go into any market, it’s not just China, but any market in the world unprepared, you may lose your key technology, your markets, and then they end up competing against you. It’s a story that has been going on for a long time. That’s why it’s important to listen to the lawyers. And some lawyers may say, hey, look, we can protect your technology as much as we can, but we can’t do it all. So maybe a decision is whether to even go into the market or not, because you feel that you will be unprotected. And that’s a strategic decision to make.

But anyway, I do feel that a lot of American companies that are today very bitter about being on the receiving end, on the losing end with respect to their technology, I think if you really dig deep into this and you really analyze what the companies did, you realize is that they’ve made a lot of mistakes, but that’s why listening to lawyers is important. And not to be saying things like, oh, I trust these guys, or they’re the ones that are going to help us grow the market in China. You have to realize that your technology, if that is what makes you relevant in the next 20 years, then you need to guard it. You need to guard it, protect it, otherwise you’re going to lose it.

Jersey Lee

Obviously, this is a global issue and a global phenomenon, but I think it would be fair to say that the Chinese have been much more effective and much quicker at adapting technology. So I suppose what explains why China is better at doing this than almost any other country?

James Zimmerman

China, I mean, the Chinese people are very, very resourceful, very brilliant people, very creative, and the investments in education, the investments in Chinese people traveling around the world and being educated at different universities. And they have really done a phenomenal job over the last three decades on ramping up their skills, and we gave, I would say foreign companies gave them the opportunities to fill a gap on manufacturing and they did, but now we can’t expect them, we can’t expect China to totally stand down, they’re going to continue on a path.

Where we can counter China in a way is, if there are unfair subsidies or if there’s a process where the government, in government procurement, is favoring Chinese producers over foreign producers, there are tools that we can use to make sure that foreign companies are allowed to compete. But you’re not going to be able to stifle innovation. You’re not going to be able to force the Chinese people back into a time where it was more labor-intensive production. That’s not going to happen. So we need to be forward-looking. We need to realize the Chinese are—when you say they’re, from a technological educational perspective, they want to be an innovation-based economy, and yes, they’re moving in that direction to be an innovation-based economy, we, the foreign business community, the rest of the world must embrace that. But we need to emphasize and reemphasize the fairness part of it. And that is, subsidies cannot be used in a way that is unfair and drives out the foreign business.

And two, the playing field must be equal for both foreign companies and Chinese companies. They need to compete. And that’s something that I think the leadership in China has not really fully understood because they’re focused on driving the champions around the world, but they have to be careful with how they do that, because if it’s done in a way that’s unfair, that is only driving the foreign governments to basically push back. And I think the overcapacity issue is kind of an example where you have all these EVs being produced, where the government has provided significant subsidies to drive that industry sector, and then all of a sudden you have just overproduction. So what do they do? They have to sell these globally because you can buy an EV in China at probably half the cost you can get it anywhere else in the world. And that is at a loss for the companies, because they’re not making any money on it. But the point is, the subsidies that went into the EVs and other industries, like steel, is having a negative reaction in other parts of the world. But that is an issue of government subsidies. It’s not so much an issue of, hey, we need to restrain innovation. We’re not going to do that. The U.S. has to welcome China as an innovation-based economy. But the Chinese on their side needs to be careful about playing the subsidy card, about being careful about using government procurement policies to support Chinese companies over foreign companies.

Jersey Lee

So this month, we saw China release trade figures for January and February, and they featured a stunning jump in exports by over 20% from the prior year. This shows that the China Shock 2.0 isn’t ending anytime soon, and talk of Chinese overcapacity, as you say, won’t either. It would also indicate that if Trump’s strategy on Liberation Day was to fight China, as some have suggested, that has not been successful so far. You talked a bit about the topic of overcapacity. How do you see this conversation developing and how much further can Chinese exports surge?

James Zimmerman

I do think that there needs to be attention to the overcapacity issue and not just with EVs, but other sectors like steel, and China needs to reflect on that and realizes that it’s driving champions with government subsidies and it does cause shock around the world.

You brought up a point about how the tariffs have not had much of an impact, and that’s true. Because the cost of all those tariffs, even though China’s exports continue to go up, the cost of all those tariffs are really coming out of U.S. consumers, not out of the Chinese. And I think part of the reason we’re in the middle of this truce right now is, there is a very silent recognition that Liberation Day is just not working for China. It may have worked for other countries around the world that got slapped with tariffs and then they said, oh, we give up, we’ll work out a deal. But the reality is China’s like, no, we’re not going to cave into that.

But overcapacity is a big, big issue. And that’s something that if China is not going to correct it, then the countries where they’re exporting to will, and that can be in the form of various trade remedies, like dumping laws or countervailing duty investigations and so forth. Because when you’re dumping low-cost production around the world, it does really impact the domestic producers. But there’s tools to counter that. And that’s something that China needs to take a look at. And I don’t think that they have taken a serious look at how the government subsidies has really made or exacerbated the trade imbalance. And so, it’s not a good thing that we’ve seen a surge in exports. It really is a reflection of overcapacity of subsidies and so forth. And unfortunately, the subsidies from five years ago are now coming to a realization. So we’ve lost time, China has lost time in correcting it. But this is definitely going to be an issue that is going to impact the relations.

Part of it, too, is who’s going to pay for... I mean, if you impose tariffs on low-cost EVs that are made but with overcapacity, or in an environment where overcapacity is allowed, are the Chinese companies paying, putting a bill on that? No, it’s the consumers in those countries, but there really needs to have a serious discussion on this because it is an issue.

And I think you’re going to see more exports surging, but I think eventually it’s going to slow down because, on the China side, they’re realizing that they need to get a handle on it. When you see the surge of exports in the last two months, it’s really a reflection of policies that may be more than 12 to 24 months old. So this is something that, as a result of policies years ago, is now why we’re seeing the surge. That’s why the Liberation Day tariffs aren’t going to have much of an impact, because it’s really getting to the subsidy issues that the Chinese need to correct. Because correcting the subsidies issues now is going to affect trade two years from now.

Jersey Lee

I read a Wall Street Journal article you had written back in 2015, and it was striking that you had noted even then that China was shifting its economy towards services and domestic consumption. Over a decade later, it seems the shift is still very much a work in progress, and it’s rather doubtful how much headway has been made. In fact, data from this January and February shows the slowest consumption growth outside of COVID. Why has this been the case? And what do American businesses think of the lack of progress in boosting consumption?

James Zimmerman

Part of the problem is—yeah, that was 10 years ago, that was an issue—but the Chinese government has not been listening to a lot of its own economists or international economists that have made it very clear that Beijing must move in a direction to support domestic consumption, because that’s a big issue. They have, in some ways: when you see people traveling during the holidays, all the high speed trains are packed, the airlines are packed, flights are packed, there has been some increase in consumption, but overall there needs to be more. And it also needs to be directed at the purchase of goods. And so, yeah, it’s been since I had that article—and quite frankly, I applaud your effort in digging up an article I wrote 10, 11 years ago—But I think back then we were very much hoping that the government move in a direction of encouraging more consumption, because the more consumption also helps drive a need for purchasing American goods and services. And also there was indeed a shift towards services, but China has been slower in that regard.

But U.S. firms are ramping up and doing much better with services in China. We’re seeing, in fact, with the American Chamber of Commerce’s business climate survey for 2025, one of the bright spots in profitability was an uptick in profitability for services. And so that still remains important. China, I think, wants to do the same. They want to drive their services sector as well. But yeah, there’s a big issue with consumption.

The chamber was watching two sessions, Lianghui, hoping to see more policies that may come out of the two sessions that might be driving consumption, but there was very little that came out of the two sessions that really gave us any indication that we would see any kind of stimulus or any plan to move forward with consumption.

I think part of the reason they’re very slow to drive consumption is also concerns about—I mean, you’ve got the real estate market, which is a real burden in itself, and that was one of the areas that was driving some consumption. They’re trying to get their arms around the real estate sector. But unfortunately, as we’ve got a problem with unemployment, we’ve got a lot of issues that have to be addressed. But at some point, the government’s going to have to do something to really drive domestic consumption, and we’ll have to see how that plays out this year. The American business is concerned about the economy. In our 2025 business climate survey, one of the key challenges, the top challenge, was the diminishing Chinese economy, and that goes to issues concerning consumption and so forth. But we’re placing some reliance on the Chinese government to do a better job at driving consumption. Well, we’ll just have to see how this year plays out.

And that might be a topic within the discussion between Xi and Trump, but the world needs to have a conversation with China that it needs to do more to drive that and also to drive inbound sales of goods from around the world. That still remains an issue.

Jersey Lee

In that article, you had also noted discriminatory practices against foreign firms, something that you’ve brought up several times during this conversation. Would you say that compared to a decade ago, the situation has improved?

James Zimmerman

No, I think it’s about stayed the same. I mean, there’s different things that have improved. Others have not. But in the American Chamber of Commerce’s business climate survey, the discriminatory or regulatory practices is still an issue. It’s a big issue with government procurement, where there is a tendency to favor domestic champions over foreign companies. I would say that overall in the past 10 years, the situation has remained the same. And so attention must be given to addressing whatever discriminatory practices, specifically those with procurement. We have, however, in areas of, say, intellectual property protection, we see that American companies are, for the most part, treated just like Chinese companies. There’s ways we’ve seen improvements, but there’s also ways where there could be more improvement, and it’s a work in progress. And again, government procurement is one of those, and hopefully they’ll move in a direction to take corrective action.

Jersey Lee

You had worked on several high-profile and politically sensitive cases of foreign individuals detained and prosecuted under China’s broad and ambiguous national security and state secrecy laws and regulations, including the 2014 detaining of Canadian citizen Kevin Garratt and his wife under espionage charges. Since then, we’ve seen more high-profile cases of what’s been referred to as hostage diplomacy. For example, the detaining of the “two Michaels” in the wake of Huawei Princess Meng Wanzhou’s detention by China [Canada] and the detaining of Australian citizen Cheng Lei on espionage charges. To the extent that you can share, what were your reflections from the Garratt case, and how has China’s approach towards hostage diplomacy evolved?

James Zimmerman

I cannot comment on specific client cases, but what I can say is, the American business community, the foreign business community in general, has made it very clear to the Chinese government that there are certain red lines, and the detention of people in business is a red line. When the Chinese government moves in a direction of detaining people or ordering exit bans, it does not give the business community the confidence that it wants. Part of it is because there’s a lack of transparency around any of these detentions. Part of it is certain aspects of the criminal justice system are highly politicized, and it’s not considered to be a very fair process. So it raises a lot of concerns. But we have emphasized to the Chinese side, it is a red line and it is still there, it’s still an issue, it’s still a concern. And it does raise a lot of concerns within the business community. And I think the Chinese government understands that. I think today they are more apt to be a lot more careful about exercising that authority, even if they make a claim or legitimately can claim that they have a legal basis to detain someone, when they do that without any degree of transparency, or due process, it really disrupts business confidence. That is still a concern. But in our conversations with the Chinese government, we emphasize this is a red line; if you exercise this, if you use this as a tool in your toolbox, it’s not going to be positive or looked upon as positive by the foreign business community. And I think they get that. I think they’re very cautious about it, but it’s still an issue that we are very concerned about.

Jersey Lee

Moving back to the broader relationship between U.S. and China, at the recently concluded two sessions, Chinese Foreign Minister Wang Yi spoke of putting U.S.-China relations on a sustainable trajectory this year. I have to say this sounds quite, perhaps highly optimistic, given all that has happened over not just the past year but the past decade. Do you see any realistic prospect for a sustainable trajectory? And what might a sustainable U.S.-China relationship look like? And how will we get there?

James Zimmerman

Business thrives when there is predictability. Business thrives when there’s clarity on what the rules are. Business thrives when there’s guardrails, where they keep the relationship from going off track. And so the only way to have the clarity, predictability, and the guardrails is through a dialogue. And that’s what’s important. And I think that’s something that Wang Yi feels, is that we’ve got that ability to be talking with one another. I also think the additional evidence that we’re on the right track is, we’ve got APEC, and the U.S. State Department and other agencies are very, very engaged in the APEC dialogues. And so we have a year between now and November where there’s going to be a lot of discussions in the context of APEC, which in my view, in the chamber’s view is, the more we talk, the more we continue to talk, then the relationship will be sustainable, and it’ll be positive, it’ll be constructive. I think that this is a good year.

When you take a look at the last 10 years, part of that was because of covid, part of it was because of all the tariffs and geopolitical tensions and so forth, the parties stopped talking with one another. Back in the first Trump administration, we gave up on the JCCT, which is the Joint Commission on Commerce and Trade. We suspended a lot of dialogue, but now we’re restarting dialogue, and that’s important.

Jersey Lee

Around the turn of the millennium, you had been involved in providing advice to China on drafting changes to its contract law and had engaged with their policymakers in other areas as well. As China has grown more confident, now specifically talking of the “four confidences”, has China become less open to such outside help? What does it mean for foreigners in China as well as for other countries in their engagement with China? And I suppose to even take this even broader, what are your overall reflections on the changes in China over the past three decades? In what ways has engagement with China worked out well for the U.S., and in what ways has it failed to perhaps meet expectations?

James Zimmerman

One thing to keep in mind is three decades ago, China did not have a lot of the processes in place for drafting laws, and this is not just a contract law, but the anti-monopoly law and even the marriage law. And there was laws after laws after laws where they were looking for guidance and they look to not just the American business community, but to the business community, the legal community in Europe. And so they were seeking input from all over the world to assist with the drafting process. With the anti-monopoly law, it was a 10-year process. It was long. And they were trying to figure out what would work best for China, they were looking at draft laws from Germany, from the U.S., and so forth. Another example, as I remember, with the Social Security law, they were looking for feedback and came to AmCham and said, put us in touch with experts on Social Security, how do we go about drafting that law? So they were looking for expertise from all over the world, and I think that took place on the Social Security law around 2015, 2016.

But anyway, the Chinese have been very good about seeking input and they still do that. But today they have more processes where the law drafting process, the rulemaking process has built in public notice, where they open things up for public comment. Back when we did the contract law, there was no public comment process. They simply called up AmCham and said, hey, have someone review this and let us know what you think. But today they have the institutional capacity to issue public notices. Anyone can participate in that, where there is public notice on the rules. And they realize how important it is to have public buy-in and public input. Because if you have input and buy-in, it makes for a better law. You’ve got the public saying, yeah, this is what we want to see. So they understand the importance of public buy-in now. And the law drafting process cannot solely be behind closed doors. But anyway, they still rely on the foreign business community. It’s not less. It’s probably more. But they also rely on their own people, which is important.

So we’ve accomplished in three decades a lot in that law and rule drafting process. And there is indeed more public participation, more transparency, more of a process that was not there three decades ago. But again, it doesn’t mean that, with all these processes, it doesn’t mean that the foreign business community is left out. It means is that there is more of a process involved. AmCham gets all the public notices and decides if they’re going to provide input or not. Because there’s so—I mean, every day they may be issuing a public notice on some rule or some regulation or some law that’s being revised—And so AmCham can only be involved so much in whatever law or regulations are on the table. But we do, we are involved.

I don’t think it’s that they’re less open to outside help. They’re very receptive. And we also find that they’re receptive when we prepare our white paper every year and we have dozens of meetings with government agencies going over our white paper, which is full of suggestions. And we still feel that the government agencies are very receptive to receiving the white paper, to receiving our suggestions. So that interest is still there for the white papers. They’re very interested in the business climate survey. So, yeah, I don’t see that they’re less interested. But what I do see is that we have institutions that did not have the capacity three decades ago. But today they do, and so we’re supporting their law in rule drafting processes under the current procedures that they have set up.

I do think this is exactly what we want. We wanted the Chinese to develop the institutions where there is public participation and public buy-in. We wanted that. We wanted laws and procedures for the courts to review the administrative litigation or administrative issues and so forth.

I don’t think we feel left out. They’ve developed the institutions. They’ve developed the laws. And then now our role is, we’re involved as much as we feel we want to be involved in any processes. So the changes have all been very, very positive.

In short, there is much room for improvement, and so AmCham and other organizations are very, very much interested in remaining engaged, and so, yeah, we’re still involved. I would characterize the whole process as having evolved, but it is evolved in a way that is very positive for China. And we’re actually pleased that they have built in more of the public participation, more of the public buy-in than they had three decades ago. So we’re not really, we don’t feel left out, we feel that they have accomplished and have matured in a way that will benefit China as a whole in the long run.

Jersey Lee

What are your reflections on U.S. engagement with China and how that has played out?

James Zimmerman

I think the engagement has been what I would call evolving. I believe there was stronger engagement under the Bush administration, leading up to 2008, there was a strong level of engagement through JCCT and S&ED (U.S.–China Strategic and Economic Dialogue). And then with the Obama administration, there was significant engagement where they talked about and hashed out the bilateral investment treaty. So, yeah, there was a lot of different time periods where engagement was very strong.

But then we had the last 10 years where we experimented with decoupling. And now I think the engagement is moving away from that. When I was in Washington two weeks ago, everyone we spoke to, they said decoupling didn’t work. And so we’re now in almost what I would call a new era of engagement between the U.S. and China. It may not be the same as what we saw in 2008. It may not be the same as what we saw in 2015 and 2016. But we are engaged. And we’re hoping to move away from all the tariffs and back and forth of last year, was just a reminder that that stuff doesn’t work. And so I think we’re now in an environment where the U.S. government realizes that getting into a tense situation with the Chinese government is nobody’s best interest.

And so my view is we’re now in a time where engagement is at a very positive level, even though it is simply to maintain the truce. But the key thing is we’re talking, we’re having dialogues, we’re going to work together to try to resolve issues. And so that is where we stand right now. So I am positive about this year, but we have to see what happens in December, because by December, we will have gotten through the engagement on APEC. There’ll be the G20 meetings and so forth. And so we have to see what happens in the relationship between now and December. There is a lot of opportunity for further engagement. And so this meeting, two weeks from now, the presidential summit, even though the outcomes are not going to be any grand bargain, it is a step in the right direction to continue to move in a path of constructive and positive engagement between the two parties, of the two largest economies in the world.

Jersey Lee

Great to talk to you, Mr Zimmerman, and we look forward to a year of successful engagement and we hope that you can continue to play a positive role in that.

James Zimmerman

OK, very good. Thank you so much.

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