By Zhou Xiaoming
Washington launched a round of aggressive assault against China this July. Days after the additional 25 percent tariffs hit $34 billion of Chinese products starting on July 6, the White House worsened the tensions by threatening to slap an additional 10-percent tariff on $200 billion worth of Chinese goods. Western media disclosed that new punitive tariffs are under preparation as well.
The US at the same time released a message last week, saying “they are available if China wants to sit down and negotiate,” which sounds so weird as it does not match its deeds.
China turns a cold face to Washington’s “ardor”. A key reason is White House’s repeated betrayal of words, and more importantly, the preconditions set by the US to reopen talks are unacceptable for China.
US Treasury Secretary Steven Mnuchin required China to “make structural changes”, while Larry Kudlow, director of the White House National Economic Council, asking China to “change direction”. By saying so, they are actually pressuring China to accept terms of surrender.
But the principle is by no means used to transact, and there is no way for China to make compromises on major agendas concerning its national destiny.
An expanded opening up is not a “cure-all” remedy to stop the trade war between China and the US. It is a one-sided wish that China can exchange for US’ abjuration of trade fight with easier market access.
It is true that an opener market, an important precondition to build China into a great modern country, will help ease the trade frictions as foreign companies will benefit more from China’s development. An opener market will push domestic companies to improve their technologies and efficiency as well.
But its effects should not be exaggerated since a market access going beyond its development level will result in exactly opposite consequences.
Many African countries, for instance, did not set any threshold for foreign investment access, but such a high-level opening up did not bring them economic prosperity or technology advancement.
All in all, the extent to which the opening up will be expanded should be based on China’s ability and resources. The possible risks to national security, the impact on national industries as well as the government’s ability to deal with financial risks should be taken into full account when deciding the timing and intensity of opening up.
Taking the financial sector as an example, the politicians and business circle of developed world has been pressuring China to comprehensively open its market, but Martin Wolf, associate editor at the Financial Times, holds that the priority of China’s financial market is to better risk management instead of widening the market access.
China is now not mature enough for an all-round opening up. Given the reality that Chinese economy, though big in size, still lags behind the developed world, it is hard for Chinese market to be accessed as “equal” as what the developed world expects.
Even a 100-percent opening up of Chinese market cannot satisfy the US’ ravenous appetite since the ultimate goal of all the challenges it provoked is to contain China’s rise. The super power will never give up its efforts unless its aim is realized.
So what China needs is to follow up its own steps on the way to widen market access in disregard of the feelings and appeals of the US.
It is struggle rather than surrender that can bring China development opportunities. Some vote down the fight back with the US in a worry that such a decision may put China’s development in danger.
It is true that an escalated and long-lasting trade war will discourage China’s economic course of medium-to-high growth. But the US is the instigator who is deliberately destroying China’s development pace.
Taking China as a “major enemy”, the US seems resolute to battle China out by not only creating economic troubles, but also offending its red lines on Taiwan and South China Sea issues.
A surrender to such a hostile US cannot arise the latter’s compassion, but consolidate its misjudgment that China is so weak to be easily bullied. This conclusion is also agreed by the EU, Canada, Mexico and other victims of the trade war.
If China backs down, its development opportunities will be buried by the US, leaving a severely restrained room for further growth. So a fight back at the bullying behavior is its only way out to secure future progress.
The struggle may also provide China a more favorable global economic and trade stage as well as more dynamic national economy and business groups.
A trade war not comes with a hundred shortcomings without a benefit if more elements are taken into consideration.
Superficially, China will be hit more since its exports to the US stand at four times of the reversible flow, but it is hard to say which side will lose more when taking account of the over $50 billion of annual US trade surplus in service against China, and the nearly $200 billion sales of the American companies operating in China.
The US discard of its leading position in multilateral trading system will give rise to China’s influence, which will allow it to have a chance to reshape the system and increase its leadership. China, as a result, can establish a closer economic bond with the rest of the world except the US.
All in all, we must throw away all the illusions, and fight against the trade bullying without any hesitation.
But instead of a reckless duel, flexible strategies must be used to give a fatal blow, and war of attrition like the one between the US and the Soviet Union should be avoided, so that China can be the final winner that repulses the aggressor at less costs.
(By Zhou Xiaoming, a trade research fellow, and former Deputy Permanent Representative at Permanent Mission of China to the UN Office in Geneva)