As the trade row between the United States and China heats up, a previously dovish senior Chinese government economist has taken the gloves off, quoting Mao Zedong in an interview with SpiegelOnline: “You lead your war, and I lead mine.”
Mei Xinyu, a member of the Commerce Ministry’s Chinese Academy of World Trade and Economic Cooperation, warned that the two economic giants might be on the brink of a “financial war” with a potential outcome that is “beyond our imagination.”
He told the German website that the dispute over tariffs with the US, which he provocatively dismissed as a country that is going “downhill” and has “lost its fighting spirit,” had undeniably escalated into a full-blown trade war.
“We’ve been in a trade war for about two months. US President Donald Trump has imposed punitive tariffs on Chinese imports worth $50 billion and threatens to expand by $200 billion. If this is not a trade war, what else?”
Asked about US Secretary of State Mike Pompeo’s allegations that Beijing is pursuing a “predatory” economic policy, that China’s dealings with intellectual property are “theft of unprecedented proportions” and that its promise to open markets is a “joke,” Mei said, “It shows that the US is no longer on the way up. It goes downhill. An economy that is on the upswing would not have time to comment on others.”
‘The US is no longer on the way up. It goes downhill. An economy that is on the upswing would not have time to comment on others’
On the subject of China subsidizing its own companies, making it difficult for foreign companies to enter the market, and forcing them to transfer technology, Mei said, “I’m sorry for the Americans. Because their reaction shows [that] America has lost its fighting spirit. Every country has the right to promote its own development and wonder what it can learn from other countries.”
Asked about what weapons China will deploy in the conflict, Mei told SpiegelOnline, “China has responded to the first installment of US punitive tariffs by imposing countervailing duties in comparable product categories. Should the US now impose tariffs on imports of another 200 billion, China will extend the conflict to other fields.”
He warned that China could sell its US government bonds (it owns more than $1 trillion worth) and dollar reserves, even if doing so is economically painful.
He said, “The US and China are the largest economies and largest financial markets in the world. But in the US, the financial sector plays a much bigger role than in China. In that sense, the US is vulnerable here, so of course, that’s an option.”
He added, “In good times, our competition is that we try to grow faster than the US. But when times get worse, it’s about who loses faster. That would be a financial war – and what such a financial war between the two largest economies looks like is probably beyond our imagination.”
Asked what role the size of the Chinese economy plays in the trade war with the US, Mei said, “When we had our first trade conflicts with the US in the 1990s, the US economy was 15 times bigger than the Chinese. Today it is 1.5 times bigger. Not that we wanted a trade war back then – we could not afford it. Today we can do that.”
Mei said China was in a much stronger position now that it has reduced its dependence on exports.
“The export share of our gross domestic product has dropped to below 20% since the peak of the early 1990s. At the same time, the share of domestic consumption has grown strongly. This strengthens our position.”
Joe Wong Well said comrade, America is finished. With a TFR of around about 2, controlling the finances of the world they are senile. Not like the CCP whose average age is 60, and China whose TFR is 1.5 and who hold tn’s of US paper.
Xinnie Bear, It never happened. Nothing ever happened. While it was happening it wasn’t happening. It didn’t matter. It was of no interest. The aloofness of the American is cultural and systematic. Even the Empire is collapsing the American has the capacity to masturbate themselves like the king parading in front of the public with his new clothes. But very few people have actually talked about the American senility. You have to hand it to America, it’s a highly successful act of hypnosis.
Mimi Speike, Your ignorance about the USA is appalling. The Fed is a private enterprise, it is not part of the US government, UK monarch is one its shareholders. The Fed prints USD thru the thin air, nowadays it creates USD thru keystroke on the computer in its basement. The Fed charges interest on the USD it creats thru the thin air. The Fed is not accountable to US government, i.e. US government cannot audit its books. Only sky is the limit for the amount of USD it can create.
Xinnie Bear, China will sell the bonds or dollars in the open markets, of course you will not know it is China selling. You just notice the markets become very volatile and trending downwards. Then the American investors and pensioners will find out their portfolios are losing value and their income streams getting dried up, and the US and world financial markets get panic and everybody starts selling the US bonds, dollars and other financial products, suddenly you see USD dropping like a stone.
The Fed needs to raise interest to arrest the selling, the consequence is the US governments and corporations cannot afford the interests to raise funds for their operations and investments, and the US economic machinery seized up and stop functioning, and USA becomes Greece the second. Perhaps US needs to borrow RMB to make its financial machinery functioning again.
The "threat" to sell Treasuries is no threat at all; the Fed can buy an unlimited amount.
Where does the Money come from?
David Bedford
Nobody with an IQ over 90 could think that a $600B deficit is sustainable.
Ouch! That hurts. I just hope that it will not be as painful for other countries who are just standing by the sides.
David Bedford How much will they give us, comrade, 1cent on the dollar ?
the Federal reserve would have to.
This is going to develop into a new form and type of world trade. Even if we all calm down now China would see how its very survival can be threatened if it is dependant on others for like chips. That China would now strive for technology masterly and self reliance is a foregone conclusion. It is not going to be held hostage again. These lessions other leading economic powers are learning too. This could led to a disruption in world growth and trade with grave consequences for the smaller developing nations.
USA is 10,000 miles away on the other side of the Pacific. USA is not an Asian nation, and American is an alien to Asian. American became rich and powerful through imperialism, colonialism, selling opium, religious indoctrination of the conquered, ethnic cleansing, genocide, slavery, racial discrimination, regime change, weapons trade, shock and awe, skillful propaganda, etc.
American is a toxin and a plague to Asian, they are not wanted, not invited and not loved in Asia, go home Yankee.
trade war is not a joke mr sam
If this US provocation continues the Middle Kingdom will offload all off our US treasury gilts….. anyone out there intersting in buying them ?