President Donald Trump’s economic heavy hitters including US Treasury Secretary Steve Mnuchin, along with US Trade Representative Robert Lighthizer, Commerce Secretary Wilbur Ross, White House trade adviser Peter Navarro, and National Economic Council head Larry Kudlow, have just wrapped up meetings held in Beijing this week.
The currently dysfunctional US-China trade and economic relationship was long in the making and is the handiwork of successive administrations – with an assist from many an American CEO. This long-term situation indicates that shuttle diplomacy and a magic formula of sanctions and tariffs on the US side, or “market opening measures” on the Chinese side, won’t fix things – no matter how this week’s talks were spun.
An American businessman who has spent several decades in the People’s Republic of China, speaking on condition of anonymity to Asia Times, offered his perspective on the current difficulties between the PRC and the United States, and the prospects for resolving them.
A 15-year fight?
“China and the US are in Round 1, bobbing and weaving around, in a 15-round, 15-year fight,” he said. “This a major reason term limits for [President Xi Jinping] were abandoned. China sees this as a 15-rounder with the US: Why change boxers in the middle of the fight?
“So far, Xi has proven – or propaganda has persuaded – that he is the ‘Great Han Hope.’ At best, Trump has six rounds left before we change boxers. The CPC [Communist Party of China] is betting that:
- “Trump will not be able to mobilize support for taking on China for more than another round or two [because of midterm elections this year and presidential elections two years later]; and
- “The next US fighter who will succeed Trump in Round 7 (at the latest) will be no match for the battle-hardened ‘Great Han Hope’ … and in any event, he will be undermined by a weary American public seeking a reset with China.
“By the very nature and mission of the CPC, there is nothing in their self-view, national view or worldview that will allow an acceptable behavioral change. The very nature of China, plus the addition of a CPC regime, is driving what is becoming a permanent state of contention with the US. America will never have the ‘normal’ relationship with China that it is has with most other nations.
‘It tears at America’s psyche that our relationship with one nation should be different from our relationship with all the rest. The CPC has accepted this reality. The US has not’
“It tears at America’s psyche that our relationship with one nation should be different from our relationship with all the rest. The CPC has accepted this reality. The US has not. So far, the CPC has taken full advantage – to their decisive competitive advantage.
“This is not Chinese skulduggery but America’s inability to understand China … or in reverse, our ability to misunderstand China by assigning our own cultural expectations on what they should be, or will be, with our understanding, patience, largesse and engagement.
“There is nothing the CPC can do, by its very nature, to materially ‘open up’ China to American business that would be considered an acceptable outcome to the US. China’s learning to live with high import duties for Chinese goods entering the US, and restrictions on Chinese investment in the US would be an acceptable ‘present’ condition.
“American understanding of who the CPC is, how they manage China and their objective to eventually displace American capitalism and global influence, is really the precursor to arriving at an acceptable outcome with the CPC.”
The businessman noted that PRC capitulation to Trump on trade is highly unlikely: The leadership is buoyed by the Chinese population’s economic experiences.
The Chinese ‘snowflake’ generation
He explained: “If one is aged 50 to 70, they lived during China’s most tumultuous period of post-1949 destructive movements… Most of these people, including China’s current leadership, literally ate grass…. They will do it again if they have to, before giving in to a trade war.
“If one is age 40 or below, and particularly 30 and below, one has only known increasing abundance and consumerism. The Great Leap Forward, Cultural Revolution and Tiananmen Massacre have been blacked out in China.
“[This generation] needs to be constantly adored, fed, clothed, entertained and sent on overseas tours when they are not at their nominal state-owned-enterprise jobs. The CPC takes credit for their good life – as indeed it should. These younger folks have no idea what trade is. Nor do they care. For many, ‘Trade War’ could be a Shanghai rock band.
“Will there be a Chinese generation clash in the midst of trade war? No.
“The CPC, using its two-tiered monetary system and self-managed foreign-exchange rate, have created a degree of insularity in China’s domestic market from the effects of a trade war. China’s domestic market, and ‘snowflake’ lifestyle, can survive in a somewhat altered, but not grass-eating, state for the next three to five years.”
Forex the Achilles heel
“However, the real damage to China will be internationally where their intake of foreign currency could be reduced,” the source continued.
“China has to take in one dollar for every dollar it spends abroad. If China’s annual foreign-exchange income is reduced, let’s say 20% a year, it means they have 20% less foreign exchange to fund their international ambitions. If the 20% reduction stays in place for five years, let’s say, that is an aggregate loss of 100% of funds available to fuel its overseas programs, investments, acquisitions and so on. This means they are losing ground globally.
“This will set up some interesting psychological situations for the CPC that will force them into making choices … perhaps not the choice they want … or not the choice we want.”
So the outlook is grim over the short term, but not necessarily over the long term – if America has the patience to see that far forward.
Moreover, the businessman noted that the US has plenty of tools – economic, diplomatic and military – to shift Chinese behavior. Not to mention its unmatched soft power – the sheer attractiveness of the American system that has many successful Chinese keen to move their assets and offspring (ideally, with a Green Card) to the United States.
well, I think you could say Chinese blend of authoritarianism and economic success is a challenge to US imperialist capitalism model.
usa model is an interventionist predatory everything-even-if-it’s-immoral-is-legalized-for-the-sake-profit model. There’s nothing attractive at all about usa model.
Yes US model is predatory. A major element of the US predator is the USDollar as reserve currency which allows the US to " pay " for imports by just issuing worthless fiat USD without giving up goods and services in exchange. the US is freeloading and scrounging off the backs of exporting countries like Germany and China.
The USD as reserve currency has allowed the US to overspend especially on its millitary which is wreaking havoc, killings, and destruction around the world.
The spending/investment – savings gap is the trade deficit. The US savings is only 2.5% of its GDP and China’s savings is 16% of its GDP.
Why do you need to contain and restrict China? The best way to stay ahead is to compete, and compete. Don’t moralize. US is not a saint. In the past it steals to get ahead. Its still does now except perhaps its people could not read mandarin! Be a man. Compete to survive.
Grant Newsham,
I was quite in tune and synchrony with your writing on the basis that you were on-commenting the view of an unnamed American businessman in China, until you upset me with your ultimate paragraph wherein you alluded to ‘the sheer attractiveness of the American system that has many successful Chinese keen to move assets and offspring to the U.S.’. Well this irked me because (1) one swallow does not make a summer! How many Chinese have migrated and taken up U.S. citizenship? And (2) Chinese cannot own land in China – land belongs only to the State – an individual or others can only have a tenure of occupation or use! If I can own land in America and pass it to my children as inheritance what won’t I want that it being a natural human urge to possess and acquire?
How dare an ‘apple’ in you and the unnamed American businessman profess you can see and think and feel like an ‘orange’?
Anyway why see things only at a ‘shopfloor level’? Seeing only the trees directly in front of you does not entitle you to claim that you have a helicopter view of the entire forest! Also not all ‘forests’ are the same!
Trade is not about capitalism or political ideology per se. Trade is just trade whoever and whatever the type manner and form or characteristics of the traders. One trader could be blind and one could be mute. One could be a priest and the other a criminal!
Taking capitalism on its own the Chinese have demonstrated that they can surpass the Americans in capitalism as a tool for advancing human commercial endeavour.
Taking communism on its own the Chinese have demonstrated that they can surpass the Soviets in communism as a tool for social equity and welfare.
The quality of societal equity, fairness and sharing is not strained by one system or regime as against another? To each his own as what is right or wrong can only be subjective in a human realm.
If you wish to be sensible you can only ‘comment’ as to the dichotomy in trade strategy between a capitalism/democracy matrix against a capitalism/communist matrix. I say ‘commenting’ and not ‘passing judgment’! Obviously an ‘apple’ is in no position to judge an ‘orange’. Otherwise flat nosed Africans and slanty single eyelid Asians would be considered ugly!
In American democracy the countervailing powers are designed upon the division of the executive and legislative and judicial branches. But you and I know that is only a mirage! America is controlled by the Illuminati that is the wealthy elite where 10% owns 90% (give and take) of the wealth!
China is different! The countervailing is simply a duality of public realm and private realm – a Communist Public Sector and a Capitalist Private Sector. It is a totally different set-up, model, design and modality. And I have yet to include unique Chinese traditional characteristics quite apart from ideology like (i) family as the basic unit and filial and familial relationships and not an individual (ii) ‘freedom from’ hunger, homelessness, joblessness, selfishness etc having absolute priority over ‘freedom to’ do what you want or desire of an individual (iii) public ownership of land – individuals and others only having right of tenure of occupancy and use – in short unlike America you cannot be a landed gentry! The failure of capitalism in America is due to the absence of socialism in a democracy. It is more like a law of the jungle but in the form of the richest shall survive or control.
So stop being a smart arse! In a Darwinian sense different nations and peoples like different species have to evolve in their own way to survive to their ambient conditions and circumstances. That is why we Chinese use chopsticks, write in brush stroke hieroglyphics, practise filial piety and worship our ancestors, believe in the Tao and the Qi and the Fungshui and practise Taichi and Kungfu! An ‘orange’ would die it it is forced to evolve or transform into an ‘apple’!
Vincent Cheok
This author & the individual being quoted seem to assume that US advantages are perpetual & unchanging, when practically every trend & indicator points to the opposite.
US softpower – like most forms of softpower – is propped up primarily by hardpower. In that area, the US has not only been stagnating, but under Trump’s regime it’s actively diminishing its own hardpower on every strategic front, be it science education, renewable energy, military modernization, technology application/monetization, internal political cohesion, or regional geopolitics in Eurasia.
From a cynical realist perspective, the PRC would much rather deal with a regime like that of Trump’s, rather than a more progressive leader, for the latter would be equally antagonistic toward the PRC, but a far more capable foe that actually makes an attempt to improve the internal fundamentals (& thus the global competitiveness) of the US, rather than marching backwards.