China Faces New “Long March” as Trade War Intensifies, Xi Jinping Says

President Xi Jinping  has called for the Chinese people to begin a modern “long march,” invoking a time of hardship from the country’s history as it braces for a protracted trade war with the United States, in an attempt to rally the nation as trade tensions with the United States escalate. China’s currency is weakening. It  has been an important barometer for progress in U.S.-Chinese trade talks, and right now it’s signaling that things aren’t going well

Mr. Xi’s call, made on Monday, referred to the Long March, a grueling 4,000-mile, one-year journey undertaken by Communist Party forces in 1934 as they fled the Nationalist army under Chiang Kai-shek. From there, they regrouped and eventually took control of China in 1949, making the Long March one of the party’s foundational legends.

Mr Xi was accompanied by his top trade negotiator Liu He as he made the remarks at the historic site of the start of Mao Zedong’s Long March.

The comments appear intended to stir the spirit of the Chinese people as the Trump administration continues to press China on trade. But they also seem to acknowledge that the Chinese public could face difficult times ahead. The tariffs come as Beijing tries to lift the economy out of a slowdown, and as a variety of unrelated factors raise the prices of basic food items like pork and fruit for the average Chinese shopper.

The trade war shows little sign of letting up. In the latest move, the Trump administration is considering placing a Chinese company called Hikvision on a list that would limit its ability to procure American technology like chips and software to meet its needs. The company, which provides equipment for China’s growing surveillance state, said in a statement on Wednesday that it “has never in the past done any business that requires us to violate human rights.”

Chinese consumers also have more immediate concerns. Even as the economic slowdown appeared to be stabilizing, certain living costs have risen steeply.

A vicious African swine fever that swept across China has led to more than a million pigs being culled, driving up the price of pork. A steep increase in the price of vegetables and fruit has led many people to complain online that they no longer have “fruit freedom” — the ability to buy as much fruit as they like.

For months before the trade talks broke down, the Chinese state media had been more subdued, at times even delaying news of the worsening tensions. When Mr Trump first indicated that he would increase tariffs to 25 per cent from 10 per cent on US$200 billion (S$276 billion) in Chinese goods – and the stock markets swooned in response – there was hardly any mention of the threat in China, where the internet and other media are censored.

But after talks broke down between both sides, Chinese state media outlets changed their tone, saying that while China was prepared to resolve differences through negotiations, if the United States chose to fight, “we will fight to the end.”

Different messages for different audiences

China’s domestic media is rallying the country’s population with messages of standing firm against American “bullying, while Chinese government-aligned experts are stressing to an overseas audience that the U.S. will need to negotiate.

Now, there have been no announcements about the next round of talks.Throughout this current lull, China’s state-run newspapers and television channels have taken an increasingly anti-American tone. Still, the country’s expert class is emphasizing what the U.S. has to gain from cooperating with Beijing. Two speakers addressing foreign reporters at a small press event organized by the government’s main information office accentuated the positives..

“My personal view is that, from the perspective of U.S. businesses, if the trade war continues, it will … have a negative impact on what was a good relationship between U.S. and Chinese businesses,” said Li Yong, deputy director of the expert committee at the China Association of International Trade, which falls under the Commerce Ministry’s direct leadership. “At the end of the day, the image and influence U.S. businesses have developed over the long term will (be affected). It’s a pity.”

The other speaker, Zhang Yansheng, head researcher at the China Center for International Economic Exchanges, also emphasized that Beijing would like to keep negotiating with the U.S. It could even be a years-long process that cycles through negotiation and fights, he said.

Analysts generally agree that, right now, Beijing still depends heavily on the U.S. as an export market. Last year, China was the largest supplier of goods to the U.S. at $539.5 billion, according to USTR..

China is trying to transform its economy into one driven by consumption rather than manufacturing. The country hosted its first import expo last fall in an effort to bill itself and its hundreds of millions of consumers as a buyer of the world’s products.

“China needs the U.S. more than the U.S. needs China,” said Jacob Shapiro, director of analysis at online publication Geopolitical Futures.

China’s currency is sending a warning signal about the trade war

A weaker yuan has been a source of friction between China and the U.S. for years. Trump, in the past, had accused China of intentionally weakening its currency, hurting the U.S. as a result. If China does allow its currency to weaken, its exports would become more attractive, but strategists say Beijing would then worry about capital flight and it would probably not want to risk that.

Sources:

New York Times, May 21, 2019

https://www.cnbc.com/2019/05/23/chinese-experts-latest-message-as-trade-talks-stall-us-needs-china.html?recirc=taboolainternal

The StraitsTimes, May 22, 2019

China’s currency is sending a warning signal about the trade war, CNBC, May 17, 2019

 

Posted: May 24, 2019 (Herb Cochran)

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