What about the relative bargaining position of the two economic superpowers? Views on the distribution of strengths and weaknesses between America and China also differ.
According to , the American negotiating team has underestimated China’s resilience. True, growth is slower than in the past, but (i) this is not due to American actions on trade and (ii) Beijing still has ample political and economic space at its disposal to pursue its long-term development strategy – differently from Washington.
While exports to the US fell by 3% on an annual basis in December and January, exports to the rest of the world continued to expand. Lower reserve requirements for Chinese banks will also foster credit growth and investment, which is already much higher than in the US (44 % versus 21% of GDP), despite the fact that American capital stock is older and in greater need of replacement. Furthermore, current US growth rates are mostly driven by short-term factors, such as tax cuts, whose positive effect will shortly fade away, exposing the structural weaknesses of the American economy and its trade deficit vis-a-vis more than 100 countries, beside China.
This last point is also highlighted by : the American trade deficit is not limited to transactions with China (although it represented two thirds of the total in 2017), and even if China wisely agreed to reduce its current bilateral surplus by increasing its purchases of US products, this would merely shift the distribution of an overall unchanged US trade deficit. On top of that, the critical issue between the two countries is not their trade imbalance but the forced technology transfer from American to Chinese companies, in spite of Xi Jinping’s reassurances to former US president Barack Obama in 2015. Addressing this long-lasting breach of WTO rules should represent the top priority for the American administration.
, however, convey a substantially different picture of China’s strength and stability. President Xi Jinping recently summoned hundreds of Communist officials to warn them about the risks faced by the People’s Republic of China and to demand their engagement in preventing the unfolding of social unrest. Economic concerns are not limited to the consequences of the trade war, as they include rising local debt and the pursuit of incompatible goals, such as ensuring high and stable employment while deleveraging and tackling inefficient businesses. As a consequence, security and policing have become a prominent feature of Chinese policy directives.
This fear is also due to 2019’s peculiar density in the Chinese symbolic calendar. A century ago, patriotic student protests took place on May 4th. Thirty years ago, the iconic demonstrations in Tiananmen Square started at the beginning of June, representing the biggest challenge ever to the Communist regime.
Mao Zedong is believed to have once said: “There is great chaos under heaven; the situation is excellent.” Seventy years after founding the People’s Republic of China, no doubt he would appreciate the efforts of Presidents Trump and Xi to celebrate the solemn anniversary according to his taste.
According to , the American negotiating team has underestimated China’s resilience. True, growth is slower than in the past, but (i) this is not due to American actions on trade and (ii) Beijing still has ample political and economic space at its disposal to pursue its long-term development strategy – differently from Washington.
While exports to the US fell by 3% on an annual basis in December and January, exports to the rest of the world continued to expand. Lower reserve requirements for Chinese banks will also foster credit growth and investment, which is already much higher than in the US (44 % versus 21% of GDP), despite the fact that American capital stock is older and in greater need of replacement. Furthermore, current US growth rates are mostly driven by short-term factors, such as tax cuts, whose positive effect will shortly fade away, exposing the structural weaknesses of the American economy and its trade deficit vis-a-vis more than 100 countries, beside China.
This last point is also highlighted by : the American trade deficit is not limited to transactions with China (although it represented two thirds of the total in 2017), and even if China wisely agreed to reduce its current bilateral surplus by increasing its purchases of US products, this would merely shift the distribution of an overall unchanged US trade deficit. On top of that, the critical issue between the two countries is not their trade imbalance but the forced technology transfer from American to Chinese companies, in spite of Xi Jinping’s reassurances to former US president Barack Obama in 2015. Addressing this long-lasting breach of WTO rules should represent the top priority for the American administration.
, however, convey a substantially different picture of China’s strength and stability. President Xi Jinping recently summoned hundreds of Communist officials to warn them about the risks faced by the People’s Republic of China and to demand their engagement in preventing the unfolding of social unrest. Economic concerns are not limited to the consequences of the trade war, as they include rising local debt and the pursuit of incompatible goals, such as ensuring high and stable employment while deleveraging and tackling inefficient businesses. As a consequence, security and policing have become a prominent feature of Chinese policy directives.
This fear is also due to 2019’s peculiar density in the Chinese symbolic calendar. A century ago, patriotic student protests took place on May 4th. Thirty years ago, the iconic demonstrations in Tiananmen Square started at the beginning of June, representing the biggest challenge ever to the Communist regime.
Mao Zedong is believed to have once said: “There is great chaos under heaven; the situation is excellent.” Seventy years after founding the People’s Republic of China, no doubt he would appreciate the efforts of Presidents Trump and Xi to celebrate the solemn anniversary according to his taste.
