If you think the Sino-American negotiations over trade, technology, and related issues appear to be back on, don't hold your breath. Beijing has settled in with a long term strategy

If you think the Sino-American negotiations over trade, technology, and related issues appear to be back on, don't hold your breath. Beijing has settled in with a long term strategy

Those now hoping for an eventual trade deal between China and the United States should not hold their breath.

Contrary to what US President Donald Trump seems to think, the Chinese have not reached their wits’ end, and will not suddenly accede to his demands.

A successful negotiation usually requires that each side understand the other’s perspective. One can question the wisdom of China’s approach to the dispute thus far, but without a deeper apprehension of the country’s short- and long-term thinking, little progress will be made.

Trump’s supporters insist that he should be taken seriously, not literally. Chinese leaders seem to agree. They have shrugged off the Trump administration’s excessive and unreasonable demands, but harbor little doubts about its intent: to keep China down. That objective has little to do with specific business concerns, and may even derive from “civilizational” – if not racist – hostility. The Chinese thus have had to adjust their strategic calculus, both in the short and long run.

Beyond the latest “truce” between Trump and Chinese President Xi Jinping, China’s overall approach to the trade dispute is to play it cool. The Chinese have realized with hindsight that appearing too eager for a deal made them look weak and vulnerable during the earlier stages of the conflict. They now know that if you give Trump an inch, he will try to take a mile. After China offered major concessions in the last round of talks in May, the US threatened to impose still more tariffs on Chinese exports; and even with the new truce, existing tariffs remain in place.

The Chinese government would hate nothing more than to resemble the court of the Qing Dynasty in its decline. Hence, its current wait-and-see strategy is premised on two judgments. First, the Chinese have concluded that Trump’s flailing truculence will continue to wreak havoc on the US economy, potentially forcing him to back off in the run-up to the 2020 US presidential election.

Second, the Chinese know that Trump’s recent declaration of victory over Mexico was an act of theater in response to growing market jitters; the latest US-Mexico deal was based almost entirely on previously concluded agreements and fictitious Mexican concessions that exist only in Trump’s Twitter account. At any rate, China is not going to rush to make concessions when market unease could force a change in the US position at any moment.

More to the point, given Chinese leaders’ doubt that the Trump administration’s real interest is in making a deal, rather than in undercutting China’s economy, they will have prepared for another breakdown in the negotiations. To manage the economic costs of the trade war, China has already activated a number of compensatory levers, many of which are not available to the US. These include fiscal and monetary stimulus, measures to encourage more lending, and a strengthening of the Chinese financial system. And this, in turn, has allowed for a weakening of the renminbi to offset the competitive disadvantage stemming from tariffs.

In the emerging Chinese view, any leverage or advantage the US has over China in trade is far exceeded by the Chinese people’s willingness to withstand the pressure. They will make the sacrifices necessary to maintain national pride and avoid the appearance of subservience to the West. This patriotic impetus has been fueled further by studying the US-Japanese trade conflict of the 1980s.

“Know your enemy and know yourself,” wrote Sun Tzu in The Art of War, “and you won’t lose a single battle out of a hundred.” Over the years, Chinese leaders have heeded this advice, going to great lengths to understand the internal political dynamics of the US. They know that Trump is tapping into deep-seated domestic fears of China, and that this must be met with strategic realignment, rather than mere tactical management.

Accordingly, the Chinese have accepted that preparing for a protracted trade war will require more than just domestic economic policies and an attitude of self-reliance. China also needs to make new friends and appease former foes, which is why it is mending fences with Japan and – thanks to Trump – Russia. Xi’s Belt and Road Initiative (BRI) of investment and infrastructure projects across Eurasia would not be possible without the Kremlin’s implicit consent. As a sign of China and Russia’s deepening cooperation, a Russian gas pipeline originally heading to Japan has now been rerouted to China.

At the same time, China is taking advantage of doubts about Western liberalism by pushing a new worldview of its own. The West’s vulnerability has been exposed by its slow economic recovery since the 2008 financial crisis, declining life expectancy among some cohorts, stagnant standards of living, and the breakdown of traditional alliances. In exporting an alternative agenda, China is unapologetically advocating increased state intervention to improve livelihoods, as well as a value system that ranks collective welfare above individual desires. It is also making efforts to bypass or otherwise mitigate the effects of the exclusionary military alliances that underpin the Western-led order.

Still, China cannot simply write off economic and trade relations with the US. At some point, it will need to contribute to the global trading system in equal measure to what it has gained from that system. This may mean importing more and getting serious about intellectual-property protection. But in the near term, it is unrealistic to expect China to change its laws or abandon its development model, as the Trump administration is demanding.

The US, for its part, should consider the Chinese perspective. China, a 5,000-year-old civilization, knows that those desperate for a deal will end up losing in the end, while those who remain patient and aloof will come out on top. That stance will guide China’s strategy, both in the near term and in the years to come.


Keyu Jin, a professor of economics at the London School of Economics, is a World Economic Forum Young Global Leader. Copyright: Project Syndicate, 2019, published here with permission.

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

We welcome your comments below. If you are not already registered, please register to comment.

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.

15 Comments

Comment Filter

Highlight new comments in the last hr(s).

China is great, long live China.

China has proven its superiority by blowing its bubble to greater magnitude, and at a faster pace, than any country or civilisation in history. Yet people think this exponential consumption of finite resources is smart and places China is a strategic position. I would say the difference between China and the USA is that the USA can is still resource rich, and can still feed itself.

How can we argue against 5,000 years of "civilization"?

Depends on what you call civilisation - usual definition it only means living in cities (making Baghdad the oldest?). If you mean country with a series of govt's then China is much smaller with an initial unification by the first Emperor about 2000 years ago and predictably for an empire progressive conquering and colonisation. So Tibet is 'China' in much the same way France has pacific islands.
For duration the Chinese civilisation has lasted long but not quite matching Egypt. What is really impressive are the 2000 years of artistic, scientific and technological innovations.

I am not sure what point you are trying to make here. What do you want people to argue about? Demographics, IP theft, very little welfare, and its everyone out for themselves at any cost. The consequent zero external business morals and to be fair, in most cases a sense of family obligation. And more recently a growing sense of superiority. Albeit with a desire to emulate a western lifestyle.

I used scare quotes to indicate dubiousness.

There's no doubt having a culture where the individual is allowed to think, act & behave pretty much any way they want (including badly) is going to be much harder to hold together than a culture where the multitudes have greater rights than the individual. How we've held it together for the last 2-300 years is beyond me. However, given the choice of living in NZ or China, as representatives of the two above opposites, which would you choose? The winner is NZ based on the 500,000 Chinese that now call NZ home. Most of the Kiwis (Chiwis) living in China are Chinese born immigrants (or their offspring) that come & go as they please. They may be big, they may be rich, they may even be patient (which I doubt) but they're bloody tough to live with.

It seems to me that societies that cherish individualism are best for individuals, at least in the short term. Such societies could probably only emerge from more collective or class stratified societies of the past.

There could be a fatal flaw in the individualist society though. Individualists would tend to only be concerned up to the time of their own demise. We see this in Boomers. Sometimes I think everything is designed so that Boomers can shuffle off this mortal coil having lived their rather privileged lives in luxury right up until the very end. See the sunset of their lives through a cocktail glass while vacationing on a South Pacific island. The status quo is of paramount importance, no one rock the boat please.

ZS, that has to be one on your perceptive comments!

"" a value system that ranks collective welfare above individual desires "". An interesting point. Since the death of religion we do seem to have a culture that values independence above everything else. It has led to an exciting life with rapid adoption of new ideas but we can abandon partners and children, leave parents to rot in old peoples homes and we don't care when neighbours suffer (we don't even know our neighbours let alone their problems). China aiming for a balance between individual rights and individual responsibiities sounds good. But their new social credit system could easily be subverted to simple blind obedience to a capricious leader - rather like medieval feudal life where the 99% were serfs who obeyed their lord - willing to fight to the death one day and then do the same for the other side the next day if it suited the leader.

But if there really was a true valuation placed on collective welfare, they wouldn't have a tragedy of the commons on their hands, would they?

Yes they would. For example a story from a friend of mine who grew up in a Sepik village - the aussie govt introduced cattle - owned by the local families. Now in those days (1970's) the villagers still valued collective welfare - nobody ever starved, they generally looked after one another - it was that horizontal collective welfare we all would enjoy - no locks on doors (in fact no doors or windows). However it was just too easy to take someone else's cow and so they progressively disappearred. Classic tragedy of the commons despite collective welfare. Something to do with the demarkation between individuals, families, clans, tribes, villages, regions, countries, etc. Or maybe the impossibility of establishing a 'true valuation'.

The other advantage that China has is that they are (much like Japan) a monolithic ethno-state. In fact Han Chinese are the most successful sub grouping of humanity, if population size achieved is the measure.

This makes the state far more resilient. Absent an overwhelming ethnic group, a nation needs some kind of "dream" or national narrative to buy into (e.g. America) to assimilate new migrants.

Otherwise when the going gets tough, people tend to act at the expense of their neighbour - they don't feel like they are "one of them". This tribalism is hard wired into homo sapiens and western elites won't be able to eradicate it so easily.

Western elites are, in fact, hastening their decline by ginning up various versions of Us and Them, harmless in small doses, but fatal if widespread; all in an effort to stay Cock of the Dunghill. Tribalism in its multitude of forms always relies on a means of fast ID'ing of Us or Them - and now the careless use of gendered speech, the inadvertent reference to a historic personage who despite being adequate for their times has suddenly been deemed Haram according to the Judges of All, or the inability to keep up with the fast-evolving forms of NewSpeak - can mark one out as One of Them. This, naturally, does wonders for public discourse, politics, conversation and general interaction. So this polarisation is gonna end badly......

Sad but true. A lesson learned by Stalin who found his population were more willing to fight for 'Mother Russia' than for the 'international proletariat' and amended his propaganda appropriately when his mate Hilter invaded.
I wish I could say I would be as willing to seriously risk my life for every drowning child as I know I would for my grandchildren but I know with the latter I would be wasting time estimating the risk. Patriotism and nationalism are only an exploitation of looking after your own.