What China Can Gain from Trump’s Trade War

Sep 26, 2018 Keyu Jin

An unintended outcome of US President Donald Trump's trade war is that China will reduce its reliance on foreign trade and imported technologies. The end result could be a China that is stronger, more resilient, and possibly less willing to acquiesce to US-designed rules.

BEIJING – The world’s two largest economies – China and the United States – are engaged in a full-blown trade war, and what US President Donald Trump hoped would be a blitzkrieg has turned out more like trench combat. Many fear that this is only the beginning of a long conflict that could include weapons – and casualties – far outside the realm of trade.

Since China joined the World Trade Organization in 2001, the US has taken issue with China’s large current-account surplus and the undervalued renminbi. But over the last ten years, that surplus has pretty much disappeared, and the renminbi has largely been appreciating. Now, the US has shifted its attention to China’s inadequate protection of intellectual-property rights and its policy of appropriating foreign technology in exchange for market access.

Yet, in China’s view, what the US is really reacting to is not only the specifics of its trade policy, but also its overall development model and its aspirations to become a major global power – aspirations that are not out of reach. In fact, the Chinese believe, Trump’s trade war effectively proves that China has become a real and present threat to American hegemony.

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j. von Hettlingen Sep 27, 2018

Keyu Jin sees Trump’s trade war with China as a blessing in disguise, because Xi Jinping sees the urgency to open the Chinese market to foreign investors in the service sector: banking, securities, insurance, payments, and ratings services. Reforming the banking sector would eliminate restrictions on foreign participation. Structural reforms would allow the economy to move from trade and manufacturing toward domestic consumption.
The problem is that China has a debt-fuelled economy. While local governments are addicted to government loans to boost growth and meet their targets, Chinese households tend to save more than their spendthrift peers in the West. Potentially tax cuts and higher interest rates would boost incomes and encourage consumer spending. It remains to be seen whether ordinary Chinese will be persuaded to loosen their purse strings.
The author says, the trade war with the US would trigger a shift from export-led growth to a “trade-neutral” model. Yet, China’s phenomenal export success relies on government subsidies. Beijing has been accused of using WTO-prohibited tax breaks to encourage Chinese companies to boost exports, while imposing tax and tariff penalties to limit purchases of foreign products in China. Would the new model be able to generate as much revenues?
China's $34 trillion pile of public and private debt is a time bomb for the global economy. The leadership is seeking to limit its debt growth and rein in the lending boom. Meanwhile, China is looking “increasingly inward” – seeing its citizens and businesses as resources. Its strategy for future growth is “to adopt and advance new technologies. Many companies have already redoubled their efforts to increase their value-added and innovation capacity.”
The author says, “whether Trump’s trade war is about containing China or just about punishing it for its trade practices, the unintended consequence is that China is now fortifying itself for a new era of political and economic challenges.” It is nothing new that the two countries are fierce rivals – China seeks to dominate the high-tech industries of the future. Trade disputes may be one of the many schemes to impede one’s competitors, before they thrive and pose a threat. As Industry 4.0 unfolds, China wants move faster than the others, when computers are connected and communicate with one another to ultimately make decisions without human involvement.
Although China’s long-term strategy is to reduce “its reliance on foreign trade and imported technologies,” which will allow China to be “stronger, more resilient, and possibly less willing to acquiesce to US-designed rules,” it will still depend on US core technology for some time.
Many doubt whether China would beat America and take the lead in semiconductor manufacturing, which is the dividend from over 50 years of research and development. China is investing heavily in R&D itself, but the huge gap in technology would require generations of arduous efforts to overcome. Besides the US is a market-driven economy, while China’s is more state-driven, which does not necessarily inspire innovation and creativity.
- Mario Iacobacci Oct 1, 2018
  
  there are so many problems with this piece that i hardly know where to start. But foremost, I will say that it ignores China`'s state-controlled media, which has ensured a diet a hyper-nationalist fodder that the millenials, as much as everyone else, is happy to lap up. I am beginning to see the outlines of an argument that even a liberal US would want to constrain its trade with emerging superpowers that want to impose their own rules ... superpowers that have no more respect for WTO than the current US administration
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Robert Wolff Sep 26, 2018

China is on a roll and beating the US at its own game - 'World Dominance through Capitalism'.

China equates the US Trade War against China with the trade war levied on China by England, which was the beginning of its "One Hundred Years of Shame": https://en.wikipedia.org/wiki/Century_of_humiliation

My guess is that as US allies pull away from the US economic policies, in seeking economic gains through commercial alliances with China and Russia, American shame will rise - which is always the motive for military confrontation. Needless to say, the US is in internal schism between Globalism and Anti-Globalism - winning US international capitalists versus the US middle class - and that internal schism will grow into a more heated domestic conflict between the US middle class and our internationalist financial upper class (traitors to American survival).

The US international financial class is embarrassing Trump in their refusal to repatriate their overseas investments in China back to the US - their patriotic failure - that will eventually become the real flash point for a much more serious US domestic brouhaha that will end up defeating the US from within.

Trump is just a symptom. Once American Pride vs. Shame takes over American politics, as it has Chinese politics, and we lose the Trade War with China, the stage will be set for the first Sino-American War. Russia will support China and North Korea, just like it did in the Korean and Vietnam wars. The imminent unification of North and South Korea could put South Korea in the Sino-Russian camp.

The more Trump is humiliated, along with his middle class base, the more certain the military conflict between the US and China becomes; and China's convulsive reaction to this trade war could be as powerful as Israel's reaction would be to another impending Holocaust: "Never Again!"

"Bombs Away!"
- Ariel Tejera Sep 27, 2018
  
  To confront China, you assume that the U.S. will keep its strength and its focus, and will not start new costly inconsequential quarrels, and will also keep strong support from traditional allies. Mmm ... maybe.
  
  Instead, the "Patriotism" promoted by Trump & Bannon may actually cause a war anywhere, in a world without international cohesion, and with increasing "Identity first" stances.
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