Luo Yuan, a Rear Admiral and military strategist for the People’s Liberation Army (PLA), gave a speech recently on the Sino-US Trade War, analyzing it from the angle of China’s national strategy, why it happened, and how China should respond to it.

Luo’s speech was in three parts: What is it, why did it happen, and how to deal with it? The following are his main points:

What is it?

The U.S. has recently made six strategy changes: One, “America First” is officially a part of its national security strategy. Two, the U.S. has taken China as its number one threat and main competitor. Three, the Trump administration has adopted a “competition strategy” instead of Obama’s “engagement strategy.” Four, the U.S. has been following the “Indo-Pacific” strategy instead of the “Asia-Pacific Rebalance” strategy. Five, the Trump administration uses “Rebuilding America’s Military” strategy to replace the automatic reduction approach. Six, the U.S. has changed its nuclear weapons strategy.

Therefore, the trade war between China and U.S. is not a simple trade conflict but rather a major strategic issue, due to the U.S. national strategy change.

Why did it happen?

Luo said that he has had many discussions with other Chinese experts and concluded that the entire U.S., from top to bottom, has some strategic worries about China: One, China is likely to surpass the U.S. in GDP output someday. Two, China’s socialist model will surpass the U.S. model which is based on free, capitalist-styled competition. Thus, the Americans are concerned about the ideology and system rules. The Sino-U.S. trade war is the competition for national interest, system structure, and ideology.

How to respond?

One school of thought is for China to go back to the previous taking-a-low-profile approach. However, Luo argued that this won’t work any longer. The U.S. is demanding a full opening up, including the Internet. Luo warned that the communist party won’t be able to protect its ideology if the Internet is fully open.

The second school of though is to fight back. Luo argued that the symmetric counterattack approach (if the U.S. imposes tariffs on US $50 Billion worth of goods and if China imposes tariffs on an equal amount) will not work for China. He advocated the asymmetric counterattack, that is, to attack the enemy’s weak points.

Luo further stated that it may not be easy to find the U.S.’ weak points, but it can start from the U.S.’ strong points. Once China breaks the U.S.’ strong areas, the U.S.’s weak areas will be exposed. Luo listed the five strong areas of the U.S. and China’s counter measures:

• One, a strong military power. China can increase military spending and develop its own killer weapons. The U.S. has 11 aircraft carriers. China does not need to match that number to compete with it. Instead, China can use its missiles to sink one or two, which will totally change the game play.
• Two, the US dollar’s dominance in international trading. China should make the renminbi an international currency.
• Three, a great pool of talent. China should develop its own high-tech industries.
• Four, a vote-based system. China can target U.S. politicians’ voter bases by restricting the import of certain goods produced in some particular regions. There are three product lines in which China can have a good leverage: soil beans, cars, and airplanes.
• Five, creating an enemy to keep itself strong. Since the U.S. takes China as its enemy, China can just be an “enemy” that it cannot defeat. China should also make more and more friends so as to leave the U.S. with fewer and fewer allies.

Source: Kunlunce.com, December 24, 2018
http://www.kunlunce.com/gcjy/quanqiuzhanlue/2018-12-24/130131.html