With the United States and China increasing tariffs on each others’ exports since the start of the trade war this spring, the meeting between the countries’ leaders on Dec. 1 in Argentina at the G-20 Summit was a highly anticipated event.
As a result of talks between U.S. President Donald Trump and Chinese President Xi Jinping, the United States agreed to a 90-day halt on further tariff increases in exchange for promises that Beijing would take action on U.S. trade demands. The two leaders agreed to hold further negotiations to work out a lasting trade deal.
The U.S. government and investigators have long called out China and its communist government for taking advantage of favorable trade mechanics and the peculiarities of its authoritarian political system to develop an unfair edge over other countries. This includes heavy protectionism and government subsidies in key enterprises, suppression of workers’ rights, and widespread, systematic theft and coercive acquisition of foreign intellectual property.
When China announced the Made in China 2025 plan, it was very clear that this would be a very hard pill to swallow for the world, especially the West. (Image: Chris via flickr CC BY-SA 2.0)
America’s trade deficit with China is estimated at around US$500 billion a year. So far, the Trump administration has levied tariffs on over US$200 billion worth of Chinese exports. Washington has announced plans to increase existing 10 percent tariffs to 25 percent, and possibly include all Chinese exports to the United States in future tariffs.
As of Dec. 11, Trump has said that significant progress was being made in regard to China. At the same time, he still retains the option of raising tariffs, and a U.S. official has reiterated that March 1 — the 90-day mark from the date of the Xi-Trump meeting — would be the “hard deadline” for negotiating a trade deal acceptable to Washington.
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The “cease-fire” comes at a critical juncture for the leaders of the world’s two most powerful countries. In the United States, Trump presides over a highly polarized political and cultural climate, one in which he is under tremendous pressure to deliver results if he is to win re-election in 2020.
For the People’s Republic of China, while President Xi is outwardly promoted as a leader second only to communist dictator Mao Zedong in prestige, the true extent of his power remains in question. Officials drag their feet on mandates from Beijing, and opposition from factional groups and vested interests in the Communist Party threaten to undermine Xi’s very position.
How both leaders deal with the conflicts in the Sino-U.S. relationship could have decisive results on the future of their administrations.
Domestic crisis
The 2018 midterm elections saw Trump’s Republican Party lose its majority in the House of Representatives, and some states have flipped or nearly flipped to the Democrats, including Texas, formerly a secure bastion of red voters.
Meanwhile, the Trump administration has earned some measure of bipartisan support from moderate Democrat for its policies on China, which many politicians agree are better for American workers and business.
In China, the trade disputes have exacerbated growing economic and social problems. Protests over rank corruption and other abuses of power are a daily occurrence. Traditional sources of government revenue, notably an overheated real estate market, are drying up, resulting in debt-laden state authorities finding themselves unable to pay civil servants. The employment rate, obscured up by censorship, is feared to be as high as 20 percent. Beijing’s vast foreign reserves are in decline, further adding to the atmosphere of crisis.
The Chinese government has been placing stricter controls on the country’s massive reserves of foreign currency as the economy suffers setbacks. (Image: Faungg / Flickr)
As a result of the Communist Party’s tendency to try to maintain control over the economy, private companies are being coerced into dubious mergers with struggling state-owned enterprises. A controversial tax and welfare reform set to take effect on Jan. 1 looks to burden Chinese workers and businesses with even more fees.
Countertariffs ordered by the Chinese government against U.S. farmers have had negative repercussions on Chinese consumers. Prices of soybeans have shot up as the Chinese are unable to fully replace the U.S. supply with product from Argentina and Brazil.
And after the Chinese government imposed tariffs on American pork, Chinese companies imported pork from its neighbor Russia, which has been suffering from endemic outbreaks of the deadly African swine fever. In August 2018, the first case of the disease appeared in northeast China, and have spread to all parts of the country. Hundreds of thousands of pigs have been culled.
China’s plans to dominate the global tech industry via its “Made in China 2025” program have been shorted as U.S. authorities and other governments slap restrictions on prominent companies ZTE and Huawei, which are both linked to the Chinese government.
Political uncertainty
Since taking power in 2013, Chinese President Xi Jinping has faced strong political opposition — not only from dissidents and China watchers who accuse him of harsh human rights abuses — but more seriously, from within the Chinese Communist Party (CCP) itself.
Xi has been pursuing a long-term anti-corruption campaign to stem the power of retired CCP leaders and their entrenched allies in Party politics, notable among them the faction of former Party leader Jiang Zemin. Even after key Jiang allies were taken down and prosecuted by the CCP’s disciplinary agency, the central government continues to instruct authorities at all levels to remove their “pernicious influence.”
In late November, before Xi Jinping negotiated the 90-day truce, a Beijing-linked overseas Chinese publication, Duowei, published a scathing critique of Xi’s “extreme leftism” and went so far as to demand that Xi issue a self-criticism for bringing on the wrath of the United States and causing the decline of the private sector in China.
Duowei, a Beijing-linked overseas Chinese publication, published a scathing online critique of Xi’s “extreme leftism” and demanded that Xi issue a self-criticism. (Image: Screenshot via Apple Daily)
Online versions of the article were soon deleted and revised to say that Xi was in fact clearing out the chaos of “extreme leftism,” but its publication came as a reminder that strong anti-Xi forces are still present in the regime establishment.
According to China analysts, Xi Jinping has been the target of several coups and even assassination attempts during his time in office.
In addition to the anti-corruption campaign, Xi Jinping has pushed through reforms that seek to centralize more power in the hands of the CCP central government in a bid to further reduce the influence of factional influences.
A fight to the finish?
Prior to the Dec.1 talks in Argentina, the Chinese government had taken a hardline stance in the Sino-U.S. trade war by ignoring U.S. demands of brushing them off as unprincipled nonsense.
The meeting between Xi and Trump, however, indicates a turn in Beijing’s stance, or at least that of the Xi leadership.
According to U.S. officials present at the Xi-Trump dinner meeting, including National Economic Council Director Larry Kudlow, Xi was “engaged in a level of detail” that was “unusual for the head of state.” They observed that the Chinese leader had prepared extensive notes and gave meticulous responses to 142 demands made by the U.S. government.
Analysis by the New York-based consultancy group SinoInsider suggests that in leaving the door open to substantial negotiations, Xi Jinping had “crossed the Rubicon”—or had decided to “fight a battle with his back to the water,” which is a translation of a similar Chinese idiom indicating that one has crossed the point of no return.
The analysts at SinoInsider observe that whether Xi will be able to deliver on concrete trade commitments depend on the outcome of factional struggles within the Chinese government. They note that Xi could announce major economic reform plans at an upcoming conference of the CCP Central Committee, the Fourth Plenum of the 19th Party Congress.
But any significant reforms by Xi to help solve China’s economic problems — such as lowering corporate taxes or, as Washington demands, opening up on trade — would necessarily strike at the vested interests of Party elites and even go against the authoritarian instincts of the political system.
If no Fourth Plenum meeting is scheduled, it would mean that “the factional struggle is extremely intense and Xi is in grave danger,” a Dec. 5 SinoInsider analysis reads.
According to SinoInsider, the Trump administration has been cautiously affirming positive signals from Xi while maintaining pressure on Beijing to strike, in Trump’s words via Twitter, a “real deal” on trade.
“For instance, Trump praising Xi and their relationship on Twitter after the G20 gives ‘face’ to Xi and affords him some ‘protection’ from being attacked by political rivals for failing to de-escalate Sino-U.S. tensions,” according to SinoInsider.
“The Trump administration should account for the complexities of the CCP factional struggle in evaluating Xi Jinping’s reform intent,” the analysts wrote.
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