Tick-tock, tick-tock, tick-tock … Nearly three weeks have passed since the United States and China agreed on a 90-day ceasefire in the trade conflict at the Group of 20 summit earlier this month.
But the euphoria in Buenos Aires has been replaced by the stark reality of trying to hammer out a deal to defuse the threat of a new economic Cold War.
So far, there have been moves to bring down taxes on cars imported into the world’s second-largest economy but the crucial sticking points of intellectual property violations, cyber theft and Beijing’s state-backed model still remain.
Solving these problems will probably take more than 90 days and involve delicate diplomacy.
To illustrate the magnitude of the challenge, the World Bank has now waded into the forced “technology transfers” row.
“While continuing the dialogue with the US administration, China could intensify its efforts to address trading partners’ concerns over technology transfer and reciprocity in investment conditions,” it said in an economic report released on Thursday.
Another area of friction is the latest eruption over cyber theft. Again on Thursday, the US-led “Five Eyes” intelligence network of the United Kingdom, Australia, Canada and New Zealand accused President Xi Jinping’s government of flouting global rules to become the world’s “dominate” economy.
“China’s goal, simply put, is to replace the US as the world’s leading superpower and they’re breaking the law to get there,” Christoper Wray, the director of the Federal Bureau of Investigation, said. “Healthy competition is good for the global economy. Criminal conduct is not. Rampant theft is not. Cheating is not.
“The Chinese government’s not pulling any punches. They want what we have so they can get the upper hand on us. And they’re highly strategic in their approach – they’re playing the long game.”
Those views were echoed in London, Canberra, Ottawa and Wellington in a synchronized attack against online espionage, an accusation Beijing has vehemently denied.
Within hours, China’s Foreign Ministry fired a verbal broadside, calling for Washington to withdraw its allegations after branding the claims “slanderous.”
“We urge the US to immediately correct its erroneous actions and cease its slanderous smears relating to internet security,” the ministry said in a statement.
“The US side, making unwarranted criticisms of China in the name of so-called ‘cyber stealing,’ is blaming others while oneself [sic] is to be blamed, and is self-deception. China absolutely cannot accept this,” it said.
Adding to rising tensions just weeks before trade talks are due to resume is a proposed new US law to allow unmonitored access in Tibet, which was reported by Asia Times.
The official English-language newspaper, China Daily, insisted that this was yet another “flashpoint” in what could only be described as a rocky relationship.
“With Washington favoring a confrontational approach aimed at maintaining its hegemony rather than a cooperative one for the common good, Beijing will have to be prepared to stand its ground and respond as necessary to safeguard its core interests,” an editorial said.
How this will play out when trade discussions resume next month is the trillion-dollar question.
China’s team will probably be spearheaded by Vice-Premier Liu He, a close economic confidant of Xi.
But finding a compromise to a myriad of issues is looking more complicated by the day.
The picture has also become more confused now that Beijing is grappling with a slowing economy, as well as“fierce divisions” on the pace of further “reforms.”
Moreover, the lack of a clear direction has suggested dissent from within the ruling Communist Party leadership “since the summer,” Jean-Pierre Cabestan, a political science professor at the Hong Kong Baptist University, told AFP.
“[There are] fierce divisions [in the leadership on] how to handle the trade war with the US and how to relaunch reforms, and whether to relaunch reforms or not,” he said. “I don’t think they’ve settled the disputes.”
In a highly predictable speech on Monday to celebrate the 40th anniversary of China’s economic awakening, Xi vowed again to push ahead with “opening up,” while warning that “no one is in a position to dictate to the Chinese people what should or should not be done.”
While his address was short on detail, the nuts and bolts of economic policy have started to emerge after the annual Central Economic Work Conference wrapped up on Friday.
According to the official statement, more monetary and fiscal support will be rolled out, including tax cuts.
Data released by the National Bureau of Statistics has painted a harrowing picture in the past month with manufacturing activity declining and consumer spending shrinking. Moreover, new car sales have stalled while tighter credit restrictions have squeezed an already cooling property market.
“As Xi takes charge of practically all major policy areas, discomfort in the upper echelons of the Party over the trade war and the economy cannot but imply discomfort with the direction he was leading China,” Steve Tsang, head of the China Institute at the School of Oriental and African Studies in London, said.
The depth of that “discomfort” surfaced in the autumn at the Chinese Economists 50 Forum in Beijing.
Exasperated by the glacier-like pace of realigning the economy, the gathering turned into a hothouse of debate.
“What we learned from the past 40 years is that we must insist on a market-oriented and law-based direction of reform,” Wu Jinglian, the influential pro-market economist, told a stellar cast of high-flyers, including Vice-Premier Liu.
He also stressed that not a minute should be wasted in pushing through these policies. Tick-tock, tick-tock, tick-tock …