Xi’s wider fight with US Is only just beginning after trade deal

  • China
  • Friday, 17 Jan 2020

Chinese leader Xi Jinping wants US President Donald Trump to take steps to "enhance mutual trust and cooperation between us” after agreeing to a new trade deal between the two countries. - Bloomberg

BEIJING: In a letter read out during Wednesday’s trade deal signing at the White House, Chinese leader Xi Jinping asked US President Donald Trump to take steps to "enhance mutual trust and cooperation between us.”

That won’t be easy: Apart from the trade agreement, the US and China are butting heads on everything from technology to human rights to territorial disputes.

Just this week, Secretary of State Michael Pompeo told executives in Silicon Valley the U.S. is "facing a challenge from China that demands every fiber of your innovative skill and your innovative spirit.”

A return to acrimony could have major consequences for China, and for Xi. In the short term, renewed tensions with the U.S. risk weakening an already fragile economic situation, while investment restrictions could hamper plans to secure technologies essential to driving growth. For Xi, a perceived failure to manage U.S. ties could also dent support for a third term in office at a key Communist Party meeting in 2022.

"This is China’s most important bilateral relationship by a country mile, and Xi Jinping has made it clear that he’s in charge from the beginning,” said Trey McArver, co-founder of Beijing-based research firm Trivium China. "He’s under pressure to do a good job because if he doesn’t it opens him up to criticism that he’s not a good statesman and not a good steward of the nation.”

Early on, Xi himself defined the terms of a successful relationship. Even before taking the top job in 2012, he called for a "new type of great power relations” that would see the two powers respect each other’s "core interests” and abandon a "zero-sum” mentality.

Just days before Trump took office in 2017 after campaigning on an "America First” platform, Xi sought to claim the mantle as a defender of free trade by preaching "openness” and "economic liberalization” at the World Economic Forum in Switzerland. Later that year, he declared that China was "approaching the center of the world stage” as he outlined a road map for turning the country into a leading global power by 2050.

Trump, however, sought to thwart those plans. His move to raise tariffs has disrupted China’s export-led economic model, accelerating a shift in global supply chains as lower-cost manufacturers look for cheaper places to set up shop. It also opened the door for his administration to blacklist Huawei Technologies Co. and other burgeoning Chinese tech companies that still rely on US firms for vital components.

"If you go back five, six, seven years, in 2019 they say China was going to catch us as the world’s largest economy,” Trump told supporters at a rally last month.

"Guess what? They’re way behind. They’re way behind.”

For Xi, the phase-one deal reached on Wednesday helps stop the bleeding on the trade war. And while he’s struck an optimistic tone along with other Chinese officials, the text of the deal itself speaks to the wide gap between the world’s biggest economies.

Its limited scope, highlighted by whopping agricultural and energy purchases, defers tougher issues like Beijing’s controversial state subsidies, industrial policies and state-owned enterprises.

Compromise on state-owned enterprises will prove difficult because they are an "organic component of China’s political and economic governance,” said Wang Peng, associate research fellow at Renmin University’s Chongyang Institute for Financial Studies.

In other words, they are a crucial lever for keeping Xi and the Communist Party in power. Opening certain parts of the economy to foreign competition could spark instability as the government seeks to maintain economic growth and employment. And more than leaders before him, Xi has sought total control over any potential threats to power, from corrupt officials to ethnic Uighurs to even a free-market think tank. - Bloomberg

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China , US , Tough Trade Rules


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