The Xi-Trump meeting in Argentina has brought China-US trade war into a halt, but uncertainties still abound in its future course. If the US chooses to keep with its containment of China at the crossroads of bilateral ties, the outcome will be regrettable since this choice is based on false grounds.
The trade war is America’s major strategic misjudgment of China.
Being undoubtedly the strongest country in the world, America’s development has benefited from a sound political system that guarantees a long-term balanced and checked progress along a legal route. But hegemony mentality is also a fixed part of its way of thinking. American hegemony is supported by several pillars. First is the economic hegemony, with the dollar maintaining its dominant role as the international currency since the collapse of the Bretton Woods system. Second, military hegemony. America’s military expenditure in 2018 is equivalent to the combined sum of the other nine top spenders. Third, technological hegemony, as the most cutting-edge research congregate in the US and are banned from being exported. Last but not least, diplomacy hegemony. The America-led WTO, the World Bank and the IMF represent mainly American interests while maintaining global order.
US President Donald Trump has quickly delivered his campaign promises: GDP growth rate is expected to exceed 3 percent; the unemployment rate in October was 3.7 percent; inflation is controlled at about 2 percent; tax cuts are taking big strides. However, this cardiotonic to the American society could also be hazardous. Social contradictions are near the tipping point with the $22 trillion debt and other risks rising quickly. Against this backdrop, is the trade war taken as a way to divert domestic attention?
First, the US has treated China as a rival and has been bragging about the “China threat” theory. Hawks believe that China presents the biggest threat to America’s hegemony. They hope China should always be a student following the US, offer US inexpensive but quality products, and stick to the lower end of global industrial chain. But every developing country has the right to develop and ensure its people a better life. Is win-win cooperation, instead of containment of other countries, a better way to promote world peace and development, isn’t it?
Second, the rhetoric that America makes China prosperous is groundless. For example, some Americans believe that they have rebuilt China. But the truth? The 5,000-year-old Chinese civilization has never ceased and created glorious history. China’s reform and opening up has reinvigorated the traditional civilization and created such a miracle of development through several generations’ hard work and painstaking efforts. The achievements have been made from indigenous driving force, by no means a gift from other countries.
China has learned the management experience, advanced technologies, economic institution, etc. from the developed countries, including the US. But learning is by no means steal: to learn is a natural right of every man and every country. Learning is not copying. Given sharp differences in history, culture and situation of development, it is not realistic to copy another country’s systems, culture and thoughts. But hawkish Americans tend to confuse the two concepts, leading to huge cognitive bias that is detrimental to bilateral ties.
Third, international rules and economic rules should be abide by when handling global issues. The US grounded their sanctions on the tariff law of 1930 and the trade law of 1974. It is replacing multilateralism and international rules with unilateralism and domestic rules. On the contrary, issues should be solved through negotiation, discussion and arbitration based on WTO rules.
What’s more, protecting domestic markets with high tariffs will do good to neither part. A large proportion of the sanctioned goods are intermediate and investment products exported from China to the US. The tax imposed on these goods will be borne by American manufacturers and producers. The US has banned hi-tech exports to China, such as AI, 3D printing and robots, which means that the upper end of the industrial chain will be further separated with the middle- and lower-end. Once the chain is broken, all companies will be hurt. The American stock market has already been affected, and the effect is on the way to the lower reach.
Focusing on short-term interests will also damage America’s long-term interests and image. Several dozen oil-exporting countries are considering abandoning dollar settlement. Some countries are working on setting up new payment and settlement systems, some are reducing and selling their holdings of US debts, while others are taking back their gold from the New York Fed. This happens because the US has quit international rules and national credit when handling trade frictions with China and other counties.
The US has built the current international order and been playing a dominant and leading role in keeping the order. It is now abandoning these rules and reconstructing a new international economic order that solely prioritizes American interests.
But the escalated trade war will hardly bring expected results. Chinese economy is highly resistant. In the short run, the trade war may hurt China in some way with influence on its market and industrial chain. In the long run, however, the trade war will force China to speed up reform and unveil more facilitating policies. China’s door will only open wider in this globalized world. On the one hand, China will continue inviting in FDI and quality resources, and on the other hand, will work with more countries through the Belt and Road Initiative. From this perspective, China’s development space is not squeezed, but expanded.
There are two prerequisites for China-US relations returning the normal: first, agree to disagree; second, keeping the relations on the right track is not the goal, but a driving force for long-term development of bilateral ties. In conclusion, non-conflict, non-confrontation, agree to disagree, mutual benefits and win-win result are the essence of China-US relations.
Chen Wenling is chief economist of the China Center for International Economic Exchanges. The author contributed this article to China watch exclusively. The views expressed do not necessarily reflect those of China Watch.
All rights reserved. Copying or sharing of any content for other than personal use is prohibited without prior written permission.
Chen Wenling
The Xi-Trump meeting in Argentina has brought China-US trade war into a halt, but uncertainties still abound in its future course. If the US chooses to keep with its containment of China at the crossroads of bilateral ties, the outcome will be regrettable since this choice is based on false grounds.
The trade war is America’s major strategic misjudgment of China.
Being undoubtedly the strongest country in the world, America’s development has benefited from a sound political system that guarantees a long-term balanced and checked progress along a legal route. But hegemony mentality is also a fixed part of its way of thinking. American hegemony is supported by several pillars. First is the economic hegemony, with the dollar maintaining its dominant role as the international currency since the collapse of the Bretton Woods system. Second, military hegemony. America’s military expenditure in 2018 is equivalent to the combined sum of the other nine top spenders. Third, technological hegemony, as the most cutting-edge research congregate in the US and are banned from being exported. Last but not least, diplomacy hegemony. The America-led WTO, the World Bank and the IMF represent mainly American interests while maintaining global order.
US President Donald Trump has quickly delivered his campaign promises: GDP growth rate is expected to exceed 3 percent; the unemployment rate in October was 3.7 percent; inflation is controlled at about 2 percent; tax cuts are taking big strides. However, this cardiotonic to the American society could also be hazardous. Social contradictions are near the tipping point with the $22 trillion debt and other risks rising quickly. Against this backdrop, is the trade war taken as a way to divert domestic attention?
First, the US has treated China as a rival and has been bragging about the “China threat” theory. Hawks believe that China presents the biggest threat to America’s hegemony. They hope China should always be a student following the US, offer US inexpensive but quality products, and stick to the lower end of global industrial chain. But every developing country has the right to develop and ensure its people a better life. Is win-win cooperation, instead of containment of other countries, a better way to promote world peace and development, isn’t it?
Second, the rhetoric that America makes China prosperous is groundless. For example, some Americans believe that they have rebuilt China. But the truth? The 5,000-year-old Chinese civilization has never ceased and created glorious history. China’s reform and opening up has reinvigorated the traditional civilization and created such a miracle of development through several generations’ hard work and painstaking efforts. The achievements have been made from indigenous driving force, by no means a gift from other countries.
China has learned the management experience, advanced technologies, economic institution, etc. from the developed countries, including the US. But learning is by no means steal: to learn is a natural right of every man and every country. Learning is not copying. Given sharp differences in history, culture and situation of development, it is not realistic to copy another country’s systems, culture and thoughts. But hawkish Americans tend to confuse the two concepts, leading to huge cognitive bias that is detrimental to bilateral ties.
Third, international rules and economic rules should be abide by when handling global issues. The US grounded their sanctions on the tariff law of 1930 and the trade law of 1974. It is replacing multilateralism and international rules with unilateralism and domestic rules. On the contrary, issues should be solved through negotiation, discussion and arbitration based on WTO rules.
What’s more, protecting domestic markets with high tariffs will do good to neither part. A large proportion of the sanctioned goods are intermediate and investment products exported from China to the US. The tax imposed on these goods will be borne by American manufacturers and producers. The US has banned hi-tech exports to China, such as AI, 3D printing and robots, which means that the upper end of the industrial chain will be further separated with the middle- and lower-end. Once the chain is broken, all companies will be hurt. The American stock market has already been affected, and the effect is on the way to the lower reach.
Focusing on short-term interests will also damage America’s long-term interests and image. Several dozen oil-exporting countries are considering abandoning dollar settlement. Some countries are working on setting up new payment and settlement systems, some are reducing and selling their holdings of US debts, while others are taking back their gold from the New York Fed. This happens because the US has quit international rules and national credit when handling trade frictions with China and other counties.
The US has built the current international order and been playing a dominant and leading role in keeping the order. It is now abandoning these rules and reconstructing a new international economic order that solely prioritizes American interests.
But the escalated trade war will hardly bring expected results. Chinese economy is highly resistant. In the short run, the trade war may hurt China in some way with influence on its market and industrial chain. In the long run, however, the trade war will force China to speed up reform and unveil more facilitating policies. China’s door will only open wider in this globalized world. On the one hand, China will continue inviting in FDI and quality resources, and on the other hand, will work with more countries through the Belt and Road Initiative. From this perspective, China’s development space is not squeezed, but expanded.
There are two prerequisites for China-US relations returning the normal: first, agree to disagree; second, keeping the relations on the right track is not the goal, but a driving force for long-term development of bilateral ties. In conclusion, non-conflict, non-confrontation, agree to disagree, mutual benefits and win-win result are the essence of China-US relations.
Chen Wenling is chief economist of the China Center for International Economic Exchanges. The author contributed this article to China watch exclusively. The views expressed do not necessarily reflect those of China Watch.
All rights reserved. Copying or sharing of any content for other than personal use is prohibited without prior written permission.
