Imagine the Chinese leadership out of the public eye for nearly two weeks – virtually holed up, immersed in a secret debate. That is exactly what just happened at Beidaihe, the beach resort in eastern Hebei province.
While there might be James Bond-ish conspiracy theories out there for this annual ritual, there are no doubts about the key theme of discussions: The US-China trade war.
The second-largest world economy under President Xi Jinping is deep into the long march towards superpower status. The previous geopolitical and geoeconomic status quo is dead.
Xi has made it abundantly clear that for China to just become a “responsible stakeholder” in the post-Cold War US-controlled liberal international order is not enough.
It did not escape the notice of the senior leadership at Beidaihe of the change of direction by the US. President Donald Trump’s administration is taking a belligerent approach while the US National Security Strategy in December 2017 unmistakably labeled China a “revisionist power,” a strategic rival and for all practical purposes, from the Pentagon’s point of view, a top threat.
Instead, what the Beijing leadership identifies is what we could define, in Chinese culture terminology, as the “three threats.”
A threat to their foreign policy concept for the coming decades, such as the Belt and Road Initiative, and a threat to China’s own integration drive centered on the three strategic zones of the Greater Bay Area, the Beijing-Tianjin-Hebei corridor and the Yangtze river delta. And, of course, a threat to the Chinese stock market.
State media is still grappling on how to deal with it. The People’s Daily has, politely, defined the Trump administration’s strategy as “engagement plus containment.”
China Global Television Network (CGTN) has played the soft power card by addressing a sarcastic letter to Trump. The network thanked him for uniting the rest of the world while forcing China to make its economic environment more seductive to foreign investment. The CGTN video subsequently “disappeared” from YouTube and Twitter.
So, even as the leadership consensus may be this is all about containing China’s irresistible rise, and even considering the fog surrounding major Beijing decisions, it’s still possible to detect some fascinating nuances.
No mercy
For Trump, on the record, “trade wars are good and easy to win.” That reflects his fascination with the World Wrestling Entertainment (WWE) ethos. Trump, in this case, is The Undertaker bent on taking Xi to the woodshed. Xi is no more Mr. Nice Guy, Trump’s former “good friend.”
So, Xi cannot possibly believe that galvanizing the crowd like superhero The Rock will save the day. The WWE is not about “win-win” – that is for losers. Now, it is no holds barred. Trump accuses China of US election interference: “Fools that are so focused on looking only at Russia should start also looking in another direction, China.”
China’s military “adventurism” allows the Pentagon to come up with a Space Force. China is also barred from investing in US industries related to national security.
The US response to the reach of the Belt and Roaf Initiative is to invest in the fuzzy “Indo-Pacific” – by committing a paltry $113 million in energy, infrastructure, and digital commerce. “Made in China 2025” is qualified as an absolute threat to “America First.”
And China is increasingly depicted as “malign” – the buzzword of choice that makes Trump, in this case, fully aligned with the industrial-military-security-think tank complex.
So, how to fight a cage match with no referee? Enter Sun Tzu, China’s legendary military strategist who wrote The Art of War. The first rule is simple: “All warfare is based on deception.” As in Beijing gearing up to negotiate both as a partner and a threat.
‘Outside barbarians’
It will be long, it will be nasty, it will be protracted, going way beyond the talks this week in the US, which importantly do not feature Vice-President Wang “Firefighter” Qishan, a key player and Xi’s trusted consigliere. He is more useful coordinating long-term strategy in Beijing.
Here, a quick flashback to the British Empire is in order. In 1793, during the first diplomatic mission to Beijing, led by Lord Macartney and received by Emperor Qianlong, the Brits quickly identified how the teeming markets of China posed a “threat” to Europe and the contemporary world trade system.
China was self-sufficient at the time and exported to Europe goods such as silk, tea, textiles, porcelain. In fact, all the trimmings of the luxury market in a web of silk routes or an earlier version of the Belt and Road.
But what did they import? Not much, apart from Siberian furs, some exotic food and ingredients for traditional Chinese medicine. Here is Emperor Qianlong comments: “The Celestial Empire possesses all things in prolific abundance and lacks no product within its borders. There is, therefore, no need to import the manufactures of outside barbarians in exchange for our own products.”
We all know how that ended – gunboat diplomacy, the Opium Wars, Beijing being sacked in 1860, “unequal treaties” and the Chinese “century of humiliation.”
All that still features deeply in the Chinese collective unconscious as much as the real roots of the current trade war. Deng Xiaoping’s brilliant strategy was to open China’s special economic zones or SEZs as unbeatable, low-cost production bases for Western and Asian multinationals.
Deng offered the prime platform for the expansion of global capitalism. The inevitable consequence was a stampede of foreign direct investment (FDI), off-shoring and outsourcing.
Now, compare it with key data supplied by China’s General Administration and Customs. In the first six months of this year, no less than 41.58% of China’s exports to the rest of the world came from American, European and Asian multinationals.
There is no evidence corporate US – represented by multinational companies – is willing to sacrifice low production costs to “bring those jobs back.” Multinational companies also prize a devalued yuan because that keeps those low production costs down.
Additionally, any Trump attack on “Made in China 2025” does not alter the fact that the world’s second-largest economy is relentlessly climbing up the manufacturing ladder. Eventually, it will overtake the US in technological innovation.
As Zhigang Tao, director of the Institute for China and Global Development at Hong Kong University, pointed out, Beijing handed American capital the proverbial offer you can’t refuse – access to the Chinese market in exchange of technological transfer.
“[In fact,] this technology-for-market-access strategy has worked extremely well, as evidenced by China’s rise in key industries including high-speed rail, aviation, automobiles and wind turbines,” Tao said.
So, the next step should be an extension of the Tesla-in-Shanghai model.
Class struggle?
Seducing American capital to invest in China under more lenient rules may be only one aspect of a Sun Tzu maneuver for Beijing to defuse the trade war. Beidaihe certainly evaluated what might happen if this all goes wrong and becomes a hot trade war.
A Hurricane Tariff would have the potential to devastate China’s employment and financial landscape and provoke high inflation and even a recession. Xi cannot possibly risk losing his de facto power base, which is not the Chinese proletariat, but the rising middle class on a frenetic consumption and global tourism binge.
Add to that, the relentless working-class anger, already in full effect, according to the University of Utah’s Minqi Li. After all “Socialism with Chinese Characteristics” is hardly Marx.
Proverbial Western myopia has been riffing about a China collapse for years. Yes, there is a possible debt bomb. Yes, China’s dependency on foreign sources of oil and gas is a recurrent nightmare. And yes, US-China relations are now unmistakably in Cold War territory, even without considering the South China Sea and Taiwan.
But underestimating a rising power capable of planning a concerted global strategy in detail up to 2049 is foolish. Xi and Trump will have the chance to have a serious face-off on Nov. 30 at the G20 summit in Argentina.
Trump may even bill it as a “win”, as in his summits with Russian President Vladimir Putin and North Korean leader Kim Jong Un. Sun Tzu, though, is waiting in the wings.
Trump is just another brainless puppet like all other puppets before him 🙂
Franklin Roosevelt, can the USA be broke? No, USA prints its dollars thru the thin air and pays everything with that dollars painted thru the thin air. So how can BRI be broke? As China funds the BRI with RMB printed like the USD. You are showing the Americans are uneducated, with a mindset belonging to the past, stalled in the old days of colonialism, constrained by the zero-sum cold war mentality.
The West (Europeans and their offshoots like the American, Aussie, etc.) is where is now, because of those hundreds of millions of people all over the world who were robbed and murdered, those who become victims of their very madness of colonialism and orientalism, of the crusades and the slave and Opium trades. Cathedrals and palaces, museums and theatres, train stations – all had been constructed on horrid foundations of bones and blood, and amalgamated by tears.
The West squandered all the wealth they obtained thru stealing, looting and murdering hundreds of millions of people all over the world in the scrabbling of a dog-eat-dog play rough over the monopoly to plunder the rest of the world in two World Wars, one on the edge of Armageddon, and on the verge of another Armageddon. It proves the West is incapable of bringing peace and prosperity to the mankind because of their flawed culture, civilization and religion. The chaos and suffering of the world in the last few hundreds of years under the dominance the West proves they are a failure.
Any money spent in Africa is better letting the West to have, because the Africans can not start wars that will destroy this globe like the haunted and sick West.
Jeff Voeks, Donald Trump relied on Chinese in HK to rescue him from falling into bankruptcy twice before. Those bailed him out said Donald Trump likes to sue a lot but not much brain or gut. Those HK tycoons tested his gut before engaging him in business by betting on one million dollars a par on a golf game, but Donald Trump declined. Donald Trump is not a big shot to play big game with China, in fact the Trump administration stuffed with people with small minds for small games but with a big mouth loose cannon.
On the other hand there is no pain no gain, if the American expect to gain without pain, then the American indeed are in decline, they are lazy, greedy, soft and expecting unearned rewards.
The last thread by Jeff Voeks says it all———-Donald John Trump will break the Chinese——–I am sorry if I offend anyone BUT since Xi became President for Life I now call him "KING" Xi. The funny thing about Xi was this BLUNDER of being President for Life has caused the dude to go slip sliding away with this trade fight with Trump——it was a bad move and it will cost him dearly. The disease of arrogance can be terminal——–Trump is not like the weak, coward Obama——–Trump is not DUMB like George Walker Bush (who will go down in History if History is told honestly as the worst US President.)———Trump is not Bill Clinton who sold out America with these horrible trade deals and Trump is not George Herbet Bush who if he had won a second term was the US Global Master and when he lost to Clinton in 1992 passed along the Global playbook to Clinton. Here is the deal——–Donald John Trump is the US President and his mission is to slow down the Chinese train——–and YES he will succeed——-MONEY talks and BULLSHIT walks———-just look at the Chinese stockmarket———it is in a bear market and it has been years since it hit all time highs. I will say this——-in the end the Americans will stand aside as the Chinese will become top dog are the two World Powers will just co-exist BUT that ain’t going to happen till at least 2032!!
President Trump will break China , and this is all on China they could have been a peaceful country but china has chosen the path of pain.So be it.
Ahson Aftab , We will have to agree to disagree. To retort or comment anymore since you are not responding to my questions becomes nonsensical.
Franklin Roosevelt I’d bet my money on Russia/ China/ Iran coalition any day. The West has nothing much to offer the east now. Other than Intel, MS, Apple, Boeing and LM/ GE and a handful of corporations left who can make a buck, Western (US in particular) industry lies in tatters. Once these BRI/ NSTC projects come together, they will transform the region. At least these eastern powers are doing something. I don’t see the West doing anything other than bikering and losing to these three countries, everywhere. China’s $4.5 trillion soverign fund, its 7% annual growth etc etc, even in these tough times….and Russia and Iran’s massive natural resources and geo-political clout almost guarantee a result in their favor. Won’t happen overnight, but it will. China will gradually find new markets to whatever its lost in the US, and as far as those BRI loans go, there’s always the ‘takeover’ and manage the assets option. What China has invested in these countries is money outta its own pocket, so it will probably like to manage these assets to recoup. However, it’s far from certain that the BRI will fail.. It has potential, just by shear weight of population/ momentum and location of the client countries like Turkey, Iran and Pak etc. It’s wishful thinking that an investment of billions in infrastructure will somehow result in failure.
Ahson Aftab , China is not a superpower. It is a regional power. I haven’t seen the PLA patrolling three large oceans at the same time? They can only project power in some parts of Asia. And just how many ships does China’s navy have? The same is true for India. They too are a regional power. Russia is a gas filling station with nukes and a small navy. Their air force is comparable to the US but navies determine the outcome in conventional wars. It always has and to date still does. Putin has played a bad poker hand tactically that any card shark would envy. His strategies not so much. His dumping of the dollar for gold has cost his reserves to be cut in half. Not smart. He is overextended in the Middle East. Not smart. He needs China more than China needs him. Not smart. His economy is in the dumper. The oligarchs can’t be happy suffering under US sanctions and the W. Europe also in sync with the US on sanctions. Iran is a regional power. It should not be trifled with in the Middle East. It is a real power in that region. Trump IMHO has shot himself and the US in the foot by antagonizing Iran and placing sanctions on them. Cooler heads in the US need to prevail otherwise the Middle East may combust in the not too distant future. Iran is a basket case of an economy in that 80% of its exports are oil and nat gas. The economy is another giant filling station that is not diversified. What happens when the price of oil depreciates? Like all nations dependent upon one commodity for revenue it will suffer bigly. China is not insular. The US is more insular than China. You need to brush up on what China exports and imports vis-a-vis the US. Russia is not important economically. They are smaller than Italy as to GDP. If not for nukes and regional power status no one would care about Mother Russia. India could be a rival of China’s down the road. At this time IMHO, Japan is the threat to China should Trump or the US retrench due to economic doldrums. TBD. We agree that the world has changed from 25 years ago. Since neither of us have a crystal ball we don’t know what will happen by 2043. As to China’s outstanding loans, when a banker calls in bad loans they must write-off a portion of the principal. Venezuela’s debt owed to China is for all tense and purposes gone. Can China absorb the loss. Yes. Can they absorb the losses of Pakistan, Kenya, Italy, Greece, etc. should a debt crises across the globe ensue? No.
Richard Truong I do care because China is TBTF IMHO at this time.
Vivimos en un mundo de mentira, y todo puede suceder… El proyecto de los chinos, sale todo rodado, como si lo hubiesen pensado para triunfar y además, se lo merecen por méritos propios. Lo que existe, es un hecho del pasado, malo, terrible, genocidio a cambio de dinero que va a parar a las manos de los dueños del Mundo, mientras la ciudadanía muere por carencias, Etc. Yo quiero el cambio, lo necesitamos y, esperemos que, los próximos movimientos, sean para una vida más humana y decente… Vfg
We live in a world of lies, and everything can happen … The project of the Chinese, everything rolled, as if they had thought to succeed and also, they deserve it for their own merits. What exists, is a fact of the past, bad, terible, genocide in exchange for money that goes to the hands of the owners of the World, while the citizenship dies of deficiencies, Etc. I want the change, we need it and, hopefully, the next movations, are for a more humanly decent life … Vfg
WuKong Sun Well said comrade, 0.5RMB for you