China’s thoughts on trade clearer after talks

It is obvious the two-day vice-ministerial level trade consultations between China and the US produced no significant progress. In separate statements released after the talks, both sides only stressed they “exchanged views” and “conducted constructive and frank” talks, but neither side mentioned any accomplishment, nor did they say whether or when there would be a next round of talks. The result is in line with expectations.

Neither Washington nor Beijing wants the trade war to go on indefinitely. Otherwise, they would not have held this round of talks. The vice-ministerial level contact seemed to serve to test each other’s firepower. The US side wanted to know if the pressure exerted on China worked and if China caved in. The Chinese side wanted to know if the US’ tough stance had softened. In fact, both sides seemed to stick to their original position.

The US requests are unfair and go against WTO rules. They undermine China’s economic sovereignty and threaten the prospects of China’s economy, so China will definitely not cave in. China will stand by its right to comprehensively develop its economy and technology. If Washington fails to recognize this, we can only push it to realize this through retaliatory measures in the trade war.

It is very likely that the US will eventually give up its core request for China not to develop, but China should also prove that its development cannot be contained. China can send Washington two signals.

First, China’s economy can resist US pressure and maintain steady growth as well as competitive momentum amid the trade war. China’s technological progress can proceed through self-innovation without relying on exchanges with the US.

Second, the US is now heading into the late cycle of economic expansion. Several analyses show that the downward pressure on the US economy next year is likely to be greater than this year, and the impact of the trade war on the US will eventually take hold. By then, the White House will not have as much confidence as it does now and will realize that it is unrealistic to contain China’s rise through an economic clash.

An escalation in the US-China trade war is becoming obvious. But, so far, neither side shows signs of extending the trade war to other areas. We hope that both sides can stick to the “rule” and keep the trade issue within limits. If they open new battlefronts simply because neither side achieves an upper hand in the trade war, their costs will rise significantly even if both have the means and capability to hit the other side’s soft spot. If both sides can avoid that worst-case scenario, it can at least make up for the loss of mutual trust from the trade war.