CHINAwatch

Why is a deal on US-China trade war imminent and what will that mean?

Live TV interview with TRT on 25 February, 2019 

US-China trade war may turn out to be a watershed for promising changes

Stephen Olson's piece of 15 February, 2019 in The Diplomat  poses three begging questions about the US-China trade war. 

First, on top of Germany’s existing Industry 4.0 program, "just--released German National Industry Strategy 2030 signals a growing consensus in Germany that in order to respond to China’s challenge, government needs to be more proactive in fostering and supporting critical strategic industries. The strategy calls for, among other things, state investment in important technology firms to prevent them from being acquired by foreign entities." This begs the question why the "Made in China 2025" strategy is singled out as being unfair. 

Second, the now-disallowed "merger between Siemens and the French giant Alstom was explicitly presented as necessary to permit Europe to compete against China’s state-backed national champions. Discussions are now underway as to whether EU antitrust policies need to be relaxed in order to allow greater latitude to meet the challenge posed by Chinese mega-firms. The implications are clear: as concerns over China mount, regulatory frameworks are being rethought, and state-directed industrial policies are gaining ground." "Ironically, the conventional wisdom at the time of China’s entry into the WTO was that China would inevitably become more like the West. But could some countries in the West actually end up becoming more like China?"

Third, the Office of the United States Trade Representative has just completed its annually mandated report to Congress, cataloging a "variety of ways that China’s WTO compliance has fallen short," contrary to "optimistic hopes and aspirations held by the West at the time of China’s WTO accession." "And while there has been widespread global consternation over the unilateral U.S. application of punitive tariffs in response to China’s trade practices, there is also an underlying recognition among major trading nations that many of the United States’ grievances are in fact legitimate and that China needs to be – in one way or the other – held to account."

Beijing is now realizing that its past trade practices need to be reformed to provide greater reciprocity (market access) and a more level-playing field for trading partners. On the other hand, the West is also beginning to appreciate that some of China's trade practices are perhaps to be emulated rather than censored. 

So the trade war may be a timely watershed where both China and the West need to re-examine "the entire terms of engagement between China and the West on trade, investment, and economic integration", as Olsen suggests. As pointed out in my South China Morning Post Op-ed of 24 January, perhaps it is a also a watershed moment for China to practise what it preaches about "building a global community of common destiny", President Trump's "Make America Great Again" unilateralism notwithstanding. 

US-China trade talks good for both sides?

My live TV interview on TRT World of 14 February, 2019

Why US "Freedom of Navigation Operations" in the South China Sea are becoming a "New Normal"

Live TV interview with Press TV on 11 February, 2019

What's so scary about Huawei?

A BBC World Service radio documentary on The Inquiry released on 8 February, 2019. My interview contribution runs from time counter 12:18- 16:48

How US trade war and other efforts to thwart China’s rise have actually accelerated its reform and innovation

Edward Tse's Op-ed in the South China Morning Post of 4 February 2019 points out that -

• "the picture of American firms being victimised in China is exaggerated - In the tech sector, pundits lament that Facebook and Twitter are blocked in China, but neglect to mention Apple, Amazon, Bing, LinkedIn, eBay and Airbnb are not".
• "Last April, Beijing set a timetable for phasing out foreign ownership limits in the automotive industry. It is also easing curbs on sectors such as banking, securities, insurance, agriculture and aircraft manufacturing. Recently, BT Group became the first non-Chinese telecom company in China to get a nationwide operating licence. S&P Global’s Beijing-based wholly-owned subsidiary was also given a green light to enter the Chinese bond rating market".
• "To boost the private sector, Chinese President Xi Jinping met entrepreneurs last November, and China Banking and Insurance Regulatory Commission chief Guo Shuqing followed up with a statement that no less than 50 per cent of new loans should go to private businesses."
• "China is stepping up mixed ownership reform, that is, diversifying the ownership of parts of the state sector. According to the National Development and Reform Commission, 100 more state-owned enterprises will join the mixed-ownership reform programme. Along the way, many “zombie” enterprises will be eliminated."
• "To improve the protection of intellectual property right, China’s top court has started to rule on intellectual property cases since the beginning of this year; laws are also being drafted to ban forced technological transfer."
• "China’s innovation – the fast-evolving consumer demand patterns, rapidly developing government policies and regulations, increasingly prevalent tech-enabled business innovations, and the emergence of bona fide innovative and competitive local companies – has led many foreign multinationals to the realisation that what they have learned in the West won’t give them an advantage in the local market any more. Their success in China is no longer guaranteed if they rely only on what they already know. They will need to learn how to innovate in China, for China, and also in China for the world – and this won’t be easy for many."

China already started to implement reforms and changes that tally China's own development trajectory with demands from the Trump administration. That's why I was realistically optimistic about a measured outcome by the 2 March dealdine for the current US-China trade negotiations. Click here

However, as I pointed out earlier, trade is only a part of an all-out US strategy to push back against a rising China's threat to a US-led order on multiple fronts, including the South China Sea, military and space technology, Taiwan, human rights, and ideology. So, even with a historic, multi-faceted US-China trade deal, rivalry between the two superpowers is likely to carry on for decades to come. 

US-China trade talks - where to go?

Live TV interview on TRT World (Turkish Radio & Television Corporation World Channel) on 1st February, 2019