The following article by Simon Denyer and Jonathan O’Connell was published on the Washington Post website December 26, 2016:
BEIJING — Donald Trump calls China an “enemy” of the United States, a threat and an international pariah whose modus operandi is to lie, cheat and steal — but for at least eight years his hotel chain has been trying to do business here.
Although negotiations have yet to bear fruit, Trump Hotels has made confident predictions this year about opening 20 or 30 luxury hotels in China. It is an ambition that would involve the company in direct negotiations with a Communist Party that the president-elect professes to fundamentally distrust.
On Dec. 12, Trump tweeted that he would do “no new deals” during his time in the White House. It is not clear what that means for Trump Hotels as a company, and both the Trump Organization and the Trump transition team declined to comment for this article.
If Trump Hotels goes ahead with its efforts to expand to China, or even if it only lays plans to do so after his term in office, it could hugely complicate one of the most important foreign policy relationships Trump will have to negotiate during his presidency. And the suspicion that Trump as president might be trying to badger China or butter it up to promote his business there risks coloring perceptions of his every move in regard to Beijing — even those that are completely aboveboard.
“It’s very hard for foreign politicians to do business in China,” said Liu Xuemei, vice president of New World Development’s Huamei Real Estate Development. “If you want to do politics, don’t try doing business in China.”
Liu said it isn’t hard to throw up a building in China; the difficulty lies in all the procedures involved in buying land and getting permission to build on it.
“It’s a lot of trouble,” she said. “If your relationship with China isn’t good, there’s no way your papers and permits will be approved. The Chinese government is hard to deal with, so buildings are hard to build.”
The complications for Trump of mixing business and politics were thrown into sharp relief Dec. 2 when he accepted a congratulatory phone call from Taiwan’s President Tsai Ing-wen, a move that infuriated the Chinese government in Beijing and overturned decades of diplomatic protocol.
A representative of the Trump Organization made a business trip to Taiwan in October, according to media reports linked to the woman’s Facebook page. And the Taiwan News and other media outlets reported last month that someone professing to represent the company had held talks with the mayor of Taoyuan in September about an airport development project.
The Trump Organization said after Trump’s phone call with Tsai that it had no plans for expansion in Taiwan and that there had been no authorized visits to push for a development project.
Trump’s business interests up to now have pointed in the other direction, with the money to be made in mainland China dwarfing any potential business deals with Taiwan.
Trump’s interest in China dates to late 2005, when he began applying for trademarks there for the “Trump” brand for a variety of businesses, including hotels and real estate. Even that was hard, and it took him a decade to get his name trademarked for hotel and real estate services, a victory he won about the time of the presidential election.
In 2008, Trump Hotels was reported by the South China Morning Post to have joined forces with one of China’s largest property developers, Evergrande Real Estate, and the Hong Kong-based Orient Property Group to bid on the development of a landmark office tower in the southern city of Guangzhou. The deal fell apart a month later when Evergrande pulled out, according to NPR.
In 2012, the Trump Hotel Collection opened an office in Shanghai with 10 employees, its first in Asia.
“The Trump development team has identified Greater China as our top priority among high-potential emerging markets,” Todd G. Wynne-Parry, a senior vice president of global hotel development and acquisitions, said in a news release the following year, while Chief Operating Officer Jim Petrus said the group aimed to open 30 hotels by 2020.
The term Greater China usually refers to mainland China, Hong Kong and Taiwan.
Just before the U.S. election, in October, Trump Hotels chief executive Eric Danziger was quoted in Chinese news media as telling an Asia Pacific hospitality conference in Hong Kong that the group was still aiming to open Trump hotels in 20 to 30 cities in China and Scion hotels in more cities — but this time without specifying a target date. “There will definitely be Trump hotels in big Chinese cities like Beijing and Shanghai,” he was quoted as saying.
But if Danziger is right, those projects could either fall apart or become a liability if Trump doesn’t keep the U.S.-China relationship on an even keel.
“State-owned real estate companies play a big role in the Chinese real estate industry, and private firms also take their cues from government hints,” said Liao Jun, vice president of Vanke Oriental Properties. “If U.S.-China relations go bad, it will be impossible for him to hope to do business in China.”
And any Trump hotels that have been opened by that point would face serious pressures.
“People with money and status in China care deeply about their reputation,” Liu said. “If China is engaged in a trade war or exchanging hostile words with Trump, you can forget about doing business in China after staying at a Trump hotel.”
Why has it proved so difficult for Trump Hotels to get a foothold in China? For one thing, the Chinese luxury hotel market that Trump executives have been so eager to enter is enduring a downturn sparked by the government’s campaign against corruption, according to real estate executives who track the market. Some hotels have even moved to shed their star ratings so officials can continue to stay at them, they say.
The Trump brand is not a “street name” in China, said Daniel Voellm, a Hong Kong-based managing partner of HVS, a hotel industry consulting and research firm. “To my knowledge, most of what he does is branding rather than actual development.”
Vanke’s Liao agreed. “I have been in the real estate market for decades, but I didn’t know about Trump until I went to Las Vegas two years ago, and the tour guide pointed out a golden shining Trump hotel,” he said. “My understanding is that in terms of international brands, people trust hotels like Marriott and Sheraton more in China — they still think of Trump Hotels as a bit sketchy and unheard of.”
Trump’s brand may be better known in China now, but ethics advisers for past presidents say trading on his position, particularly with foreign partners or clients, would raise serious questions about conflict of interest and possibly violations of the emoluments clause of the Constitution barring gifts or profits from foreign leaders.
Along with his “no new deals” pledge, Trump has said that he will put his businesses in the hands of his adult sons, Don Jr. and Eric.
Trump Hotels also appears to have run into the practical problems of doing business here. In 2013, it signed a memorandum of understanding with State Grid Corp. of China — an electricity company and the country’s largest state-owned enterprise — for an urban complex in Beijing including high-end hotels, serviced apartments, office space and other commercial uses, according to a person close to the deal.
That deal, for branding and management, was potentially worth between $100 million and $150 million over 15 years, Robby Qiu, a former director of Trump’s Greater China office, told the Agence France-Presse news agency.
But negotiations were put on hold after Chinese authorities opened a corruption investigation into State Grid, AFP reported. In a report issued in June 2015, China’s National Audit Office accused the company of applying for a permit to build a research and development center on the land, not a commercial venture. There is no suggestion that Trump or his companies were implicated in the inquiry.
State Grid declined to comment. At the site in the Guomao district, workers said building had continued until about six months ago and has since largely stopped.
Trump has consistently berated China on Twitter. In his 2011 book “Time to Get Tough,” he called China’s leaders “our enemy” and accused them of “ruining our way of life.”
“We shouldn’t entertain Communists and beg for a few tiny contracts,” he wrote.
But the deal with State Grid is not his company’s only dealing with a state-owned company in China that is intimately linked to the Communist Party.
In New York, records show that the state-owned Industrial and Commercial Bank of China is among the largest office tenants in Trump Tower, where it occupies the 20th floor.
The deal has been worth more than $1.5 million annually to Trump’s firm, according to the data firm CoStar Group, and it will expire in 2018, according to Bloomberg News — raising the prospect of the Trump Organization negotiating an extension with the Chinese bankers while Trump is in office. Tian Terence Deng, a spokesman for the bank, declined to comment.
In Congress, Democrats are already taking aim at Trump’s perceived conflicts of interest in his business dealing with China.
Rep. Elijah E. Cummings (D-Md.), speaking at a Dec. 14 forum at the Capitol on ethical issues raised by the incoming administration, said that it didn’t matter to him if Trump wanted to keep his name on businesses such as “The Celebrity Apprentice” but that dealings with foreign countries were another matter.
“I care about government officials in Bahrain, China, Turkey, Argentina, Singapore and elsewhere who may buy up entire floors of hotel rooms, pay higher rents at Trump Tower, lower interest rates on loans, speed up permits for development projects or take all kinds of other inappropriate actions to ingratiate themselves with the new administration,” Cummings said.
Yet there is one potential silver lining, some business leaders privately say. Perhaps Trump’s interest in doing business in China will prevent him starting a trade war with Beijing that could wreak havoc on both nations’ economies.
O’Connell reported from Washington. Luna Lin and Congcong Zhang in Beijing contributed to this report.
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