donald trump promised to come to blows with china on the day he is inaugurated . like much of what is said on the campaign trail, rhetoric may turn out to be bluster. but it also might presage deal-making between the world<u+2019>s two largest powers. investors will want to know what president-elect trump sees as a winning negotiating strategy. a full-blown trade war with china would surely rock global markets. america<u+2019>s biggest companies , such as apple, intel and boeing use china as a supplier, manufacturer and customer. china is among the biggest buyers of u.s. agricultural goods and a potential major destination for exported natural gas. a unilateral imposition of tariffs will result in quick retaliation from china, such as a swift one-off depreciation of the yuan against the dollar and blocking u.s. companies from market access. all those are hypotheticals. if his track record as a businessman is a guide, he is likely to test china with an unorthodox opening move, the kind markets are unlikely to expect. a quietly achieved diplomatic agreement isn<u+2019>t his style. but the self-styled dealmaker<u+2019>s endgame is likely to be some sort of agreement that makes the u.s. look like an economic winner, at least on paper. this raises the question: what does china have to give? it probably can<u+2019>t deliver a stronger currency . markets are already pushing the yuan weaker on fundamental economic conditions. a global concerted effort by central banks to push around the yuan, similar to the plaza accords that strengthened the yen in the 1980s, seems unlikely. <u+201c>voluntary<u+201d> export quotas<u+2014>like what japan agreed to for its auto industry under u.s. pressure in the 1980s<u+2014>would be a way out on contentious products, such as steel. the problem is, even if both sides agreed, the wto frowns on such arrangements. a workaround would be necessary. there are other chips to trade. beijing allowing u.s. companies greater market access and to be treated on a level playing field inside china has long been on the u.s. wish list. it is the subject of an elusive bilateral investment treaty , with china maintaining a hefty list of industries it wants off-limits. reaching such a treaty would be a first step, though its value would be in effective enforcement. mr. trump<u+2019>s ambitions for building infrastructure could present common ground. beijing has wanted to invest in u.s. infrastructure but national security concerns have been an obstacle. a deal to allow $100 billion of chinese infrastructure spending in the u.s. might suit both sides. airports, high speed rail and even walls with mexico come to mind. it would help china export its industrial overcapacity and let mr. trump point to a dollar amount that he could claim he is wresting back from beijing. other areas trump might want will be hard to achieve. chinese subsidies , which incentivize local production over imports, are part of the fabric of china<u+2019>s economy. state-owned banks lend to state-owned companies, many of which have oligopolistic positions that block the private sector in industries such as telecommunications and financial services. these will be hard to change. presuming beijing isn<u+2019>t a pushover, what would it want in return? china craves status at an international level. the u.s. could join its asian infrastructure investment bank. pulling back from harping on the yuan would be a concession in itself. some wins might not be economic. mr. trump could make assurances that it would give beijing a wide berth in the south china sea. hard-line national security advisers might object, but that<u+2019>s part of deal making. judging by how markets have reacted since the election, there<u+2019>s little fear that major tensions are just around the corner. some think trump will engage with mexico first. that just gives investors more time to prepare. whatever the timing, the u.s.-china economic relationship is very much on the table. write to alex frangos at alex.frangos@wsj.com
trump<u+2019>s art of the deal with china  - wsj
alex frangos