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US-China Relations - 2. page

Apple Daily: China’s Vice Premier Liu He and His Negotiation Position

Major Hong Kong newspaper Apple Daily recently published an analysis which senior Chinese journalist Lu Yue authored on China’s Vice Premier Liu He and his position on trade. Liu is currently the Special Envoy of President Xi Jinping and China’s Chief Negotiator for trade negotiations with the United States. Liu was a two-time student (1994 and 2002) at the Harvard Kennedy School, where he obtained his Master’s degree in Public Administration. Liu was also Xi’s economic adviser for ten years when Xi was the government official in Fujian Province. This background gives Liu the unquestionable justification to take the lead position in the on-going US-China trade negotiation. In the Chinese leadership domain, he is regarded as “half a Standing Committee Member” of the Communist Party’s Politburo.

In the current “trade war” with the United States, China’s top leadership did not step out and make any direct comment on any tactics. The ones making noise are the Ministry of Foreign Affairs, the Ministry of Commerce, Customs, and the Chinese media. A careful examination reveals that not all of these entities are in the domain that reports to Liu. Liu is essentially against taking on a full-blown trade war with the U.S. because it might result in a loss that could trigger a total collapse of the Chinese economy. Liu built his judgment on three factors: First is the fact that China did not fulfill the promises it made to the World Trade Organization (WTO). Second, China can sustain the trade war only to US$150 billion, which is the total amount that China imports from the U.S. The third factor is that the United States can find a substitute elsewhere for all goods that the U.S. imports from China, while most of the goods that China imports from the U.S. are critical at the life-line level. This is especially so in the high-tech product category. China, as an information society, may cease to function if the U.S. expands its export ban on ZTE to all Chinese buyers. It would be a better situation for China to accept Trump’s conditions and then use those as a driver to push much needed internal reforms.

Liu’s current negotiation strategy is “overall compromise coupled with partial discussions.” He is extremely good at working out convincing details in the numbers, which was the reason his 15-minute meeting with Trump got extended to 45 minutes. As an example, Liu offered US$60 billion worth of agricultural purchases when the U.S “ask price” was US$30 billion. China’s refusal to commit to $200 billion in trade deficit reduction was largely a PR show.

Source: Apple Daily, May 31, 2018

Xinhua: We Must Keep the Alarm on after the ZTE Shock

Xinhua published an article on its WeChat Official Account discussing the lesson learned from the ZTE incident after the U.S. Department of Commerce issued the notice on May 25, 2018, regarding the lifting of the ban on ZTE’s sales. Below is an excerpt from the article:

ZTE escaped the disaster, but the Americans almost stripped it alive by taking off one layer of its skin. The hard-earned money that ZTE made over the past few years was all made for the Americans. The lesson is very, very painful. The lesson is at least three-fold:

First, Chinese companies cannot have the slightest mentality of taking chances. In particular, in some countries, politicians have already made Chinese companies their special targets. If they try to take all kinds of chances, sometimes they don’t even know how they became dead.

Second, there is no line that the United States won’t cross today. To be fair, ZTE committed some wrongdoings, but were they absolutely worth the death penalty? However, the United States killed it with one strike. Its intention is self-evident. This also helped the world to poke through an illusion. In the past, it was always thought that the United States would not be unreasonable to the point of wiping the opponent out, similar to the practice of “trade terrorism.” However, the reality is cruel. There is nothing that the United States will care not to break. Fair trade? Fundamental principles? Everything can be thrown out of the window.

Third, it is still the word: core technology, core technology, and core technology.

Although ZTE escaped the disaster, it is believed that the psychological shock brought to the Chinese people is still quite far-reaching. We must be clear-headed. In many areas, we have indeed achieved amazing results. We must also know that, in some areas, we still have a big gap.

Especially in the area of core technology, Chinese leaders warned that core technology is the country’s most important device. If a house is built on someone else’s foundation, it may not be able to survive storms. The core technology under other people’s control is our biggest hidden danger.

The last point in particular means we must keep the alarm on!

This point, we must remember that knowing shame is akin to courage!

We must also thank the Americans for reminding us of this point!

Source: Xinhua, May 26, 2018

Duowei News: How Should China React to the Trump Administration’s Recent Trade Restrictions?

On May 29, ten days after China and the U.S. agreed to hold off on starting a trade war, the White House announced that it will “impose a 25 percent tariff on US$50 billion of goods imported from China containing industrially significant technology, including those related to the ‘Made in China 2025’ program. The final list of covered imports will be announced by June 15, 2018, and tariffs will be imposed on those imports shortly thereafter.” Duowei News published a commentary article on the same day. The article stated that the statement that the White House made certainly proved that those China hardliners were not happy about the last joint statement to hold off on the trade war. It demonstrated the unpredictability of Trump’s political style and that there are conflicts between China and the U.S. that are difficult to resolve. The article suggested that, first of all, China should maintain its strategic strength and be mentally prepared for the difficulties and risks facing China – U.S. relations. It stated that unlike Japan, who the U.S. forced to sign the “Plaza Accord” 30 years ago, which led to the long-term stagnation of its economy, China has more chips and strengths to play in this game. Secondly, China should clearly recognize the gap between China and the U.S. in both hard power and soft power. According to the article, China needs to take ZTE as a big lesson where ZTE, the No.2 player in the telecommunication industry in China and a tycoon in the telecommunication industry in the world, was forced into an idle state because of its over-reliance on U.S. technology. The article concluded, “When a country like the U.S., which surpasses China by dozens of years in its core technology, still holds such a strong sense of crisis against China, how can China not remain clear-headed?”

Source: Duowei News, May 29, 2018

Duowei: China’s Rise May Be Entering a Bottleneck Period; Two High-Level Officials Disclosed “Internal and External Problems”

Recently, the “2018 China Enterprise Credit Development Forum and the 9th Public Welfare Ceremony for Integrity” were held in Beijing.

He Zhen, former Deputy Chairman of the NPC Financial and Economic Committee, said in a speech at the forum that China’s local debt is estimated to be about 40 trillion yuan ($6.24 trillion). Although the scale is still within the acceptable range, none of the local governments want to repay their debts. “Now, if you want someone to repay these debts, he will say that we don’t even have the money to pay wages; we are having big financial difficulties. What are we going to do? Therefore, regarding those debts that are owed at present, before any mention is made about paying down the principal, they can’t even pay the interest that is due.”

He believes that China has issued too much currency. The data shows that, at the end of 2017, M2 was 167.68 trillion yuan , ($26.158 trillion), which is 25 percent of what China’s GDP was that year and is higher than any other country in the world.

At another conference, Li Ruogu, President of the China Export-Import Bank, expressed his views on China’s external situation. He specifically mentioned that the U.S.’s judgment about China has undergone a fundamental change. Sino-U.S. trade friction is essentially a controversy on the direction of China’s development.

Li Ruogu said that Sino-U.S. relations will not continue along the path they have taken over the past 40 years. Specifically, in the United States, no matter what party or class, most of them advocate a tough attitude towards China. This allows the U.S. to move beyond the partisan line on its China strategy and operate quickly and effectively.

Source: Duowei News, May 22, 2018

China’s Vice Premier’s Statement on Trade Negotiation Differed from Joint Statement the White House Issued

In an article Xinhua published on May 20, Liu He, the Vice Premier of China, told the media that the biggest achievement made during the trade negotiation between China and the U.S. was that both parties reached consensus on not engaging in a trade war and on not imposing tariffs on imports. However, a news article Duowei published reported that Liu He’s statement differed from the joint statement that the White House issued. It said that even though China and the U.S. reached an agreement during the trade negotiation, the joint statement didn’t clearly mention that both sides would give up imposing tariffs.

1. Duowei, May 19, 2018
2. Xinhua, May 20, 2018

Duowei: Trump’s Miscalculation in the ZTE Crisis

Duowei News, a Pro-Beijing Chinese media in the U.S., published an article commenting on U.S. President Trump’s change of attitude toward the Chinese tech company ZTE Corporation. Below is an excerpt from the article:

On May 13, Trump said on Twitter that he is working together with Chinese President Xi Jinping to resolve the plight of China’s ZTE Corporation. In response, the Chinese Ministry of Foreign Affairs answered on May 14, saying that China appreciates the positive attitude of the U.S. on the issue of ZTE Corporation and is maintaining close communication with the U.S. on the implementation of specific details. Indeed, this tweet suddenly showed an appearance of goodwill toward ZTE. However, if we review the entire ZTE event, we can see that this “play” performed by Trump has ulterior motives. The ZTE incident itself is not a trade issue, but it was forced to wear a trade war hat because of the timing of the U.S. review.

The Chinese Ministry of Foreign Affairs “appreciated” this (Trump’s reversal of ZTE’s punishment). Trump could use it to tout his ability to “be able to make friends with China and protect the interests of the United States at the same time.” However, Trump’s “miscalculation” lies in the structural contradiction between China and the United States. Whoever laughs until the end is the one who laughs the best. The so-called “China-U.S. trade war” continues to this day. The issue of trade between China and the United States is no longer the core issue. The prominent structural contradictions will be the biggest crux of Sino-U.S. relations for a considerable period of time into the future. This “war” is a protracted war. It not only requires strength but also patience. From the first severe punishment to the sudden change in the attitude of the United States, it will not be so important whether it will eventually bring about the rebirth of ZTE. What is important is that this move of the United States completely awakens the Chinese scientific and technological community. Due to the economic take-off and some achievements in the field of science and technology, many people in China have indeed forgotten that there is still a huge gap remaining with the United States. The issue of “China Chip” has exposed China’s problem of independent research and development. It has become a catalyst for China’s scientific and technological research and development.

After the ZTE incident, not only did China’s official media People’s Daily surprisingly express that China had to “increase chip investments at all cost.” Xi Jinping also emphasized in the inspection tour in Hubei at the end of April that “we must speed up major breakthroughs in chip technology.” We must “climb to the peak of semiconductor storage technology in the world.” In his newly published book, “Xi Jinping’s excerpt on the overall national security concept,” he recorded “winning the battle of science and technology” as one of the most important issues.

If Trump thinks that “hitting a slap, then giving a sweet date” is a way to make Chinese companies give in, then he may be wrong. Even if the ZTE problem can be resolved with his help, Chinese companies will certainly continue with the sense of crisis and urgency at this moment. They will no longer be willing to have others control them in the area of core technology because the ZTE event allows them to understand that this can determine the company’s life or death.

Source: Duowei News, May 14, 2018

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