Trade War with China

Thanks to several posters for explaining the details of how treasury bonds work. I should probably stick to counting ships...

plawolf said:

Both America and China are far too important to each other for economic insulation to be effective.

Neither could effectively hedge against the losses from a trade war, and the costs of such a trade war will be huge for both economies and people’s because trade is a two way street.

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The argument that "it doesn't make sense, therefore it won't happen" doesn't inspire confidence. It assumes not only rational actors with perfect information, but it does not account for many differing motives, ideologies, and institutional structures involved.

China must be prepared for an irrational United States acting out its worst impulses under the influence of decision-makers whose visions of what is sensible, desirable, and achievable may be very different from our own. I have already spoken of the contingent that would be only too happy to see a crisis in America's ability to borrow as an excuse to dismantle the non-military aspects of the US federal government. And of course Trump personally, as with other American presidents, and indeed rulers everywhere, draws strength from confrontation with adversaries.

The bottom line is that America believes that it is the greatest nation on earth and that it has the right and the power to run the world. Any limitations on American power or flaws in American society are therefore signs of a treasonous fifth column in American society or "cheating" by other nations. The interlocking mythologies that sustain America's messianic vision of itself will not dissipate with Trump's departure. The growing tension between America's idea of itself and the realities of domestic political dysfunction, the ongoing decline of the white middle class, increasing global multipolarity and the looming Chinese Dragon will tend towards increasingly spectacular, even violent collisions, and there will be a powerful impulse to continued escalation in order to Make America Great Again, i.e. to validate America's messianic vision of itself.

The US President is a belligerent and inexperienced leader who tries to test the waters & show he is willing to start a trade war with China. But he is so indecisive & unpredictable & do not have strong & experienced advisors (he sacked a good number & other have resigned). What he has is "yes-men" and aggressive people like Bolton in the White House. Trump is making a great & serious mistake if he thinks that China will succumb to his tariff threats. He must now be thinking and probably worried about the Tariffs' retaliation by China - hard ones for America. Possibly he will seek to negotiate to avoid a trade war. The US Congress & various US States that will be effected by China's impending tariffs will be worried & will pressure this President to be realistic rather than to try and antagonise China. He would be a real dotard if he remains stubborn - after all it was President Trump who initiated this serious problems and must find ways to solve them.

now I read
Wrong for U.S. to target China's manufacturing upgrade
Xinhua| 2018-04-07 21:25:21

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The U.S. 301 Section investigation report aims to check the rise of China's manufacturing sector, economists have pointed out.

The United States issued the 301 Section investigation report last month, accusing China of forced technology transfer for U.S. companies via requirements for joint-ventures and shareholding shares as well as imposing concrete restrictions and interventions on U.S. firms in China.

"It's groundless to say China is forcing technology transfer," said Zhu Baoliang, chief economist with the State Information Center, adding that technology transfers are voluntary actions of enterprises and the Chinese government has no restrictive rules.

Zhang Yalin, a member of the National Manufacturing Strategy Advisory Committee (NMSAC), pointed out that China has opened up most of its general manufacturing sector and has a mechanism to review fair market competition.

"Foreign firms enjoy obvious benefits from joint-ventures. They can access the Chinese market and enter the global supply chain with reduced costs and better competitiveness," Zhang said.

The U.S. report hinted at the Made in China 2025 plan, with its proposed tariff list covering the same manufacturing sectors as the plan.

Made in China 2025 is a plan to modernize the manufacturing sector with development targets for ten subsectors including information technology and robotics.

The plan is in line with the new wave of global industrialization.

"If such a plan is used as reason for trade friction, it is essentially an attempt to deprive China of its right to development. That is hegemony," said Huang Qunhui of the Chinese Academy of Social Sciences.

Qu Xianming, also member of the NMSAC, said Made in China 2025 is market-oriented without links to government policy or investment, and none of the targets and requirements are binding.

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We could be witnessing history again like how Google thought it was bigger than China and ended up being a cautionary tale for the corporate world not to screw with China. This time it's at a country level and it's the US in Google's position. Why isn't the US stock market skyrocketing after every announcement to slap tariffs? Isn't China burdening the US economy? Why not end trade completely instead of dancing with tariffs? Trump doesn't even dare mention it. It shouldn't hurt the US at all if what they say is true. We're hearing how US businesses are prevented from penetrating China's market. Then the US stock market wouldn't be diving every time tariffs are announced because they make no money because they're not selling anything in the Chinese market meaning no loss to even affect the US stock market. "Don't believe your lying eyes."

The US set itself up for pain. Maybe someday the Chinese will have to thank Americans for being paranoid for policies that insulated China from this very thing from having catastrophic affect on China. Every US ally has to get the US's okay to trade in anything hi-tech being bought by China or any other country. Why does that happen? Because that's the deal made to be under the technological and economic umbrella of the US. Since China couldn't be dependent on the US for these things, China instead became independent from the US having a say by making these things for themselves. Basically anything commercial that can used militarily falls under the dual-use ban on selling to China. That left the US with only to sell what China can make itself and at a cheaper cost. The trade imbalance is the US's own making. No one in the US buys Chinese products because it's cheap bad quality crap. Chinese companies with their own products where they only profit when sold to consumers have little presence in the US. China's biggest companies in value on par with US corporations make most of their money from the domestic market. American users and consumers contribute zilch to them therefore the only party affected by Trump's tariffs are US companies outsourcing their products to be made by China exploiting cheap labor. They pay the tariff because they have to ship their products back to the US to be sold to US consumers to make money. China is not making that money. The reason why outsourcing corporations say it's getting more expensive to make their products in China is because of labor costs are rising. Labor cost are rising because these foreign outsourcers have to raise wages to attract and compete for workers. That means domestic companies are paying more than what foreign corporations are paying. If domestic jobs that pay more weren't plentiful, wage costs wouldn't be rising.

Don't believe that China has more to lose than the US. The US government and media have created a prejudice against Chinese products where Chinese companies don't sell in the US. So what tariffs do Chinese pay? If any... hardly an affect on the Chinese economy. US companies though face punishment multifold. Not only do American outsourcers have to pay Trump's tariff because it's their products they want shipped to the US, US companies are paying China's tariff because they're shipping their products to be sold to Chinese consumers. If US companies accept the situation, profits go down because costs go up... bad for the company. US companies choose to move production to escape Trumps tariffs, it costs to move production and then become a target for Chinese tariffs. If Americans make them, costs skyrocket just to pay American high wages. Those products can't compete internationally because no one will be buying them. Americans will be buying foreign versions who will still be outsourcing. Trump will slap tariffs on them and those countries will slap back.

The other end of stupid argue that the US joining TPP would've punished China correctly without harming the US with a gangbang of countries against China. How? Most the member countries have China as their number one customer. Slap tariffs on China means China won't be buying their products where they enjoy the money they make over China. Is this the same school of thought that countries will be lining up blindly following the US into any war? The US still isn't attacking North Korea even with all allies on the US's side. Where are the US's allies in joining slapping tariffs on China along with the US? They're sitting back because the US is slapping tariffs on them. There goes the false notion allies will blindly follow the US. Remember Democratic Rep. Chuck Schumer argued long before Trump for the US to slap China with a 40% tariff across the board on everything from China. Trump so far isn't anywhere close to that yet no criticism from the anti-China pundits back then who are against Trump's tariffs today. They're on TV today crying how Trump is destroying the American heartland with these tariffs on China.

Trump argues that these tariffs will punish China for intellectual property theft. How? The pain of tariffs that hardly have any real consequences on China's economy like stated above will make the Chinese yield? The US's paranoia over selling China hi-tech which would've increased China buying American by estimates in tune of a couple hundred billion dollars a year combined with the US's campaign to get consumers around the world from buying actual Chinese products have only served to make China even more independent. China's market alone is on par with what US corporations can do internationally. China's large population of new eager consumers the rest of the world vies to sell to but doesn't need is enough to compete and spur advanced technological development the West is concerned over.

The worst case scenario for China is the status quo remains because Trump could end trade relations with China and it does little economically to China because the US has already long been isolating China to independence. The US frivolously uses trade as a weapon that they forget economics is the only punishment to keep countries obeying treaties and agreements. China can start selling advanced weapons to the US's enemies like they already do against China. What are they going to do? Punish China with tariffs? Arrogance brought them to this. Are they going to arrogantly think the world will follow the US into starting a war which will be the only option they have left to stop China? What they wish for will be in reality their worst nightmare.

taxiya said:

Under international law as it has been understood for centuries
This is the foundation and let's deciphor it word by word.

International law is Treaties signed by states. Anything else is just somebody's wish. For example, UN charter is international law upon member states when they sign up. It is not law over Switzerland for example as a non member. Switzerland may choose to adhere to UN charter on its own, but not oblidged to. No court can force that on Switzerland.

So what international law is it in this claim above? Without seeing a signature by PRC, it is nothing. And no court in the world except the kangaru courts will and can claim a jurisdiction.

The above claim also stated "understood", not "signed and ratified". That is BS. Whose understanding? As I understand, Invasion of China to protect Opium traders was a war crime and damage should be paid by the UK government today. Also as I understand, all those western countries that colonized Africa, South America and Asia own a huge astronomical debt that should be paid first before anyone there can talk about the "bond from ROC". Does my understanding carry weight? Surely not in the eyes of these ROC bond holders. But a lot of weight in the Chinese eyes. In the end, it is just understanding.

P.S. since these holders bought bonds from ROC, they may need to talk first to the US government why the US did not clear that issue with ROC on Taiwan before 1979.

These kind of news like Fox always use some "according to my understanding" rubbish. The other example is the "international law" in the SCS "arbitration" farce when they skipped the real international law on the sea (UNCLOS) whose chapter granted China to exempt from arbitration on territorial matter.

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Granted that the writer used the wrong terminology and the U.S..created its own mess.after the CCP victory. However according.to the writer China did repay the UK as.part of the process of returning HK.
So I guess that does demonstrate that China does.accept some responsibility for repayment if discussed in a proper manner.

B.I.B. said:

Granted that the writer used the wrong terminology and the U.S..created its own mess.after the CCP victory. However according.to the writer China did repay the UK as.part of the process of returning HK.
So I guess that does demonstrate that China does.accept some responsibility for repayment if discussed in a proper manner.

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You really need to check the source of news articles, especially American ones these days.

China and Britain signed an agreement today settling all outstanding historical property claims and opening the way for China to issue bonds on the London capital market, the British Embassy said on Friday.

An embassy spokeswoman said that under the agreement, China would pay Britain $:23.5 million, or $37 million, and Britain would pay China $3.8 million to settle the claims.

China was previously barred from issuing bonds on the London market because of its refusal to honor debts incurred by governments before the 1949 Communist Revolution.

The New China News Agency said Britain was the first Western European country to reach such an agreement with China, which has signed similar accords with Canada and the United States.

China had been barred from the American capital markets because of pending legal action by holders of bonds issued before 1949. But the Supreme Court in March rejected a petition by holders of railway bonds issued in 1911 by the ruling Qing dynasty. Two weeks ago, China announced it would borrow money for the first time since 1949 in the American capital market.

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1) China paid the British by signing an agreement to do so, it was not simply ‘understood’, and part of a negotiated settlement where the British got something they wanted in return for China getting something else.

2) the orignal bond value was $25m, and that was what the ROC issued, and not all of it would have been bought by America. How they managed to inflated that to 780bn is a question I doubt even they could answer in any logically or mathematical valid way. I suspect the only source of that 780bn amount is that it is close to the 800bn debt the US owed China in 2011, when this trash piece was first written.

3) China has signed similar agreements with the US government settling all similar historical claims, making the bonds void in any case.

B.I.B. said:

Granted that the writer used the wrong terminology and the U.S..created its own mess.after the CCP victory. However according.to the writer China did repay the UK as.part of the process of returning HK.
So I guess that does demonstrate that China does.accept some responsibility for repayment if discussed in a proper manner.

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I am not sure if the writer can be trusted at all after his "commonly understood".

Also, I am not aware of the supposed "repay the UK for Hongkong". I followed BBC closely during the handover. I have never seen BBC saying that, nor any other UK media. I doubt the Fox writer knows better than the British. Very suspicious claim.

Even we entertain ourselves for a moment. What would that repayment be for? The new territory adjecent to the Hongkong island was a 99 year lease and will be returned without any condition if we stick to the validity of the agreement. The UK argued that the Hongkong island was permanently seeded by Qing government to UK, and UK therefor refused to return it without something. However, when PRC was established on Oct 1 1949, it has declared all "unfair" treaties void that includes the treaty with UK by Qing. UK established full diplomatic relationship with PRC in 1972 (exchanging Ambassadors, recogonized PRC on 1950 There was NO mention of UK's rejection of China's nullification of treaty about Hongkong. There was no renounciation of the stance from China either. These matters must be part of the agreement signed by the two sides which will not be a secret. If one want to verify, one can check the British government's archive (I believe there is website for it). So once again, the Fox author is BSing again as it seems that is the only thing he is able to do.

B.I.B. said:

So I guess that does demonstrate that China does.accept some responsibility for repayment if discussed in a proper manner.

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That is right. Everybody should do so. The issue is an agreement or treaty signed by both parties concerned. If a government (PRC) replace another one (ROC), it is a succession of institution/state. The successive state is a new entity. Any other state will need to enter a fresh new relationship with the new state. The new state can claim to be the successor of the one it replaced, in this case PRC replacing ROC. That succession claim will naturally bring in question of both property and debt inheretences. If the successive state renounce some former obligation to another state. The other state has three options, a) not to recognize the new state, b) negotiate a compromize and settle it once for all, c) invade the new state to collect the debt. As neither a) and c) are the cases here, b) was the only way that US (UK or any other states) and China reached their mutural recogonition.

The conclusion is, China (PRC) does accept responsibility according to a treaty it sign up, but nothing else.

The author from FOX failed to show any such agreements or treaties to back its article. That is problem that I have with him.

P.S. the principle applies to the US treasure bonds too.

Hear hear

China should fight the trade war as it did the Korean War
Source:Global Times Published: 2018/4/7 23:18:40

Tensions over a pending trade war between China and the US are quickly escalating with both Washington and Beijing mobilizing at home. There have been no negotiations and the differences are widening in how each side sees the conflict. The probability for a trade war is increasing.

The Trump administration persists with the idea that the US is suffering losses. Trump tweeted on Thursday, calling China "a great economic power" and said it is unfair to the US for the WTO to treat China as a developing country. Larry Kudlow, Trump's top economic advisor, supported that notion, saying China is no longer a third-world country and should be held to the same standards as other economic powers.

At the same time, the US continues to accuse China of stealing US intellectual properties. Washington's plan to attack China's growing capacity for innovation by instigating a trade war has become clear. The US action has reinforced a notion in China that this is no ordinary trade war but a strategic move to counter China's rise and perpetuate the overall advantage of the US.

In such a case, the nature of a China-US trade war has changed, making it difficult for both sides to settle disputes through the same model adopted by the US and Japan in the past. Both China and the US believe their moves will affect their countries' future and their status in the world economies. Both sides may exert their utmost power to fight a trade war at all cost.

We are not absolutely sure whether Washington thinks this way. But information from the US side has pushed Chinese to believe it to be so. The trade war's beginnings are founded in multiple reports from Washington labeling China as its strategic competitor while emphasizing a major power strategic game. There is no reason why Chinese should not prepare for the worst.

As a rising power, China has always been gentle. China is also an active advocate for constructive China-US relations. But signals from Washington that the US is changing its strategy toward China have raised the alarm. This trade war was initiated by the US in an especially brutal way and the price it demands is unbearable for China. The US has given China no choice but to launch a comprehensive resistance.

A strategic resolution is being established in China, which is to fight the Trump administration's trade aggression in the same way the country fought US troops during the Korean War (1950-53). The Korean War caused China much losses but it forced the US to sign on an armistice, damaging Washington's strategic arrogance and winning many years of strategic respect for Beijing. We should fight today's trade war with the same strategic spirit that fears no sacrifice or loss, and force the US to burn the very stick that it wields at China.

China's participation in the Korea War was due to US military's approach to the Yalu River, which is the Chinese border. Today's trade war is also due to US acts that are hurting China's core interests. A sense of crisis that we have no place to retreat is uniting the Chinese society. We know there will be sacrifices but we understand better that there is no limit to the greed of hegemony. If we don't build our trade defense today, we will never know what we will lose tomorrow.

We must point out that the balance of power has changed from six decades ago. Today's trade war will be fought between two relatively equal powers. The absolute advantage is Washington's bluff. Beijing is capable of hurting Washington in every trade battle, making the US suffer the same losses as China suffers.

We have sufficient evidence to believe that this trade war will hurt the US equally. "Chinese hiding in tunnels from US bombing" is not how this trade war will be fought. China has enough ammunition to fight this trade war. The pain brought by this trade war could stimulate China's economic transformation and it may become an opportunity for China to further catch up with the US in overall national strength.

We will let the US re-evaluate how China's system mobilizes its people to counter challenges from an external economic power. We will return whatever pressure that comes from the US in this trade war. Let the two systems engage in this trade war competition. When the fight begins, we will see which one is more capable of persisting.

plawolf said:

You really need to check the source of news articles, especially American ones these days.

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2) the orignal bond value was $25m, and that was what the ROC issued, and not all of it would have been bought by America. How they managed to inflated that to 780bn is a question I doubt even they could answer in any logically or mathematical valid way. I suspect the only source of that 780bn amount is that it is close to the 800bn debt the US owed China in 2011, when this trash piece was first written.

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$780 billion? Calculating for interest, the amount today would be only a fraction of $780 million, forget about $780 billion.

He must have the same, or even worse, math skills of Trump calculating the U.S. trade deficit with China.