23 May 2019 — Oriental Review
Judging by the reaction of official Chinese media outlets, Beijing is expecting neither a speedy nor a peaceful resolution to its economic conflict with Washington. Even America has noticed a change in tone to Beijing’s official media position: “China vows ‘people’s war’ as trade fight takes nationalist turn”, writes the US business news agency Bloomberg. It is worth noting that the “people’s war” being written about in the editorial of the Chinese state-owned foreign policy publication Global Times is not just a departure from the low-key, diplomatic rhetoric used previously, but also an actual recognition of the fact that, like it or not, the conflict with America is shifting (or has already shifted) away from being purely economic.
The editor-in-chief of Global Times, Hu Xijin, who is so well-informed on the state of China–US relations that he is sometimes referred to as the “Chinese oracle” on US social media, tweeted the essence of the changed political and social discourse: “China’s decision to raise tariffs and US stocks’ fall have inspired Chinese society. Being tough on the US, achieving peace through fighting are consensus of majority Chinese. The US is planning new tariffs. China–US confrontation has reached a peak since the trade war started.”
It is worth mentioning that, the day before, Hu Xijin hinted that Chinese experts were actively discussing specific options for dumping the country’s portfolio of US bonds. This sparked a mild panic in the US financial media, which quickly concluded that either China wasn’t brave enough for such a step or the use of such a radical measure would ultimately play into the hands of Donald Trump, albeit while exacting a heavy toll on ordinary Americans. “If China sells its U.S. bonds, Trump will benefit. A sell-off would result in a weaker dollar, which would help reduce the U.S. trade deficit with China”, writes Bloomberg. It is an extremely optimistic assessment that pays little regard for how much such a move by China would undermine US financial markets and how much the Chinese demarche would hinder the build up of US national debt required to maintain US economic stability.
Peter Schiff, the CEO of investment fund Euro Pacific Capital, believes that the logical continuation of the current conflict does not bode well for the US economy and that many in America are refusing to face the truth. “The ignorance of the true nature of Sino–U.S. relations is staggering. China has been subsidizing the U.S. economy for decades by lending us money and supplying us with manufactured goods. When China withdraws the supports, our credit based service sector economy will implode!” writes Schiff on Twitter.
One should not assume that it would be a painless process for China, however. Quite the opposite. For decades, the Chinese economy has been growing, among other things, thanks to the country’s preferential access to US technologies, capital and markets, and its disconnection from the US system (if it comes to total embargoes and dollar sanctions) could not but cause significant damage to China that would have to be offset with difficult, long-term reforms. No wonder Beijing officials are pointing out that the conflict between the US and China is being described on Chinese social media as a conflict between two books – The Art of the Deal by Donald Trump and a collection of speeches by Mao Zedong entitled On Protracted War. Roughly speaking, China’s leaders are making a public bet that the pain threshold of the Chinese system as a whole and of Chinese citizens in particular is much higher than that of their American opponents. Also, that they will be able to withstand the kind of difficulties that would simply break the US political system and US society.
China’s strategy is to endure what the US cannot. This has not gone unnoticed in the White House, but Donald Trump and his team have interpreted the information in a rather specific way, narrowing it down to Beijing’s supposed bet that the next US president in 2020 will be the democrat, and former President Barack Obama’s vice president, Joe Biden. Trump has openly stated that China is abandoning previously reached agreements because it expects to be able to negotiate with Biden or “one of the very weak Democrats”. Pro-Trump media outlets have already started publishing stories that show Biden’s son has links with Chinese business. The US tabloid New York Post writes that, immediately after the then US vice-president visited China, the firm owned by Hunter Biden, Joe Biden’s son, received a contract worth $1.5 billion with a Chinese state-owned bank. This is allegedly the reason why Biden himself is taking such a soft line on the economic war with China.
Regardless of how true these accusations actually are, it’s probably safe to bet that Trump, his entourage, some US security officials and even some of the pro-system politicians from both the Republican and Democratic parties intend to push China all the way. They believe that the question of whether the US will retain its status as a global hegemon in the 21st century is being decided right now.
Here you can trust the opinion of Trump’s chief campaign strategist, Stephen Bannon, who told CNBC that there’s “no chance” the US president would back down in the China trade war. If there was reason to believe a month ago that Trump would agree to some kind of truce and certain (albeit temporary) concessions on issues important to the United States, it is more than likely now that he is actually going to try and escalate the situation until the negative consequences become unbearable both for China and for the US itself.