<div id="NLpost" class="nl-post-wrapper" style="margin:0 auto;"><div id="NLHeader" class="post-card"><div id="Page-header" class="mainheader"><h1 class="t1">‘How China Sees Trump’s Trade War’</h1><div class="date">May 29, 2019</div><a href="https://www.linkedin.com/in/malcolmriddell/" target="_blank" class="date" style="color: inherit;border-bottom: 0px solid #008dc8;text-decoration: none;">by Malcolm Riddell</a></div><div class="table-block w-condition-invisible w-dyn-bind-empty w-richtext" data-ix="appear-on-load" style="opacity: 1; transition: opacity 1000ms ease 0s;"></div></div><div class="section_title w-condition-invisible"><strong>I. THE LAW AND THE PROTESTS</strong></div><div id="article1" class="post-card"><div class="t2-block">1 ‘How China Sees Trump’s Trade War’: Victor Shih</div><div class="table-block w-richtext" data-ix="appear-on-load" style="opacity: 1; transition: opacity 1000ms ease 0s;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><table class="nl_card" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><table class="multi-block" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="bg-holder" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;max-width: 100%;margin: 0 auto;padding: 0;"><img src="https://media.newyorker.com/photos/5ce574de0946388189e200be/master/w_649,c_limit/Chotiner-China-2.jpg" alt="CHINADebate" style="width: 100%;margin: 0 auto;"></td></tr></tbody></table><p class="caption" style="font-size: .8125em;line-height: 1.75em;margin: .625em 0;display: block;color: #848484;margin-top: .5em;margin-bottom: 1.2500em;font-family: 'Lato', sans-serif;">The New Yorker</p><p class="excerpt" style="font-size: 1.125em;line-height: 1.75em;margin: .625em 0;margin-bottom: 1.5em;font-style: italic;text-align: center;color: #c80000;padding: 10px 5%;font-family: 'Lato', sans-serif;">'Trump actually knows more about economics, how the market works, how the financial markets work, than Xi Jinping.'</p></td></tr><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="nl-post" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;padding: 0 2.5em;overflow: hidden;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>Victor Shih,</strong> a leading China expert and professor at the University of California, San Diego, was interviewed by <em>The New Yorker</em>’s Isaac Chotiner.</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>The aim</strong> – admirably accomplished – is to illuminate the Chinese perspective on the trade war.</li></ul><img style="margin-left: 50px;width: 40px;margin: 0 auto;" src="https://assets.website-files.com/5c864c33af62620dca1373ac/5d11a01b96e640e8538ce119_the%20new%20yorker%20logo.png" alt="CHINADebate"><strong>Read</strong> the full interview <a href="https://www.newyorker.com/news/q-and-a/a-political-economist-on-how-china-sees-trumps-trade-war" target="_blank" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;">here</a>.<h6 style="display: block;font-weight: 700;line-height: 1.9375em;margin: 1em 0;font-size: 1.0625em;font-style: italic;color: #0970b3;">‘What internal calculations are the Chinese leadership making around this tariff fight?’</h6><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Authoritarian regimes,</strong> because they’re not elected, can, in theory, impose a great deal of hardship on their population without suffering political repercussions.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘For Xi Jinping</strong> and the current leadership economic growth is an important objective for them for its own sake.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Xi has made</strong> a number of speeches where he has said that, interestingly, <a href="https://www.newyorker.com/magazine/2018/01/08/making-china-great-again" target="_blank" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;">making China great again</a> is an important objective, and continual growth, continual development, continual innovation, and technological breakthroughs are, according to him, important components of this great revival of China.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘So to the extent</strong> that an all-out trade war would jeopardize many of these objectives, it does behoove the Chinese leadership to think of ways of getting out of it.’</li></ul><h6 style="display: block;font-weight: 700;line-height: 1.9375em;margin: 1em 0;font-size: 1.0625em;font-style: italic;color: #0970b3;">‘When you say Xi has this idea about making China great again, is that driven by some long-term idea of China and its place in the world?’</h6><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘I think</strong> it’s similar to this Trumpian egoism. You really see some deep parallels between Trump and Xi Jinping.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Both leaders</strong> see themselves as uniquely capable of reviving greatness in their respective countries.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘For Trump</strong> it may be partly rhetoric and partly politics.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘For Xi Jinping,</strong> also partly politics—he needed to innovate a new ideology that was very different from his predecessors’ ideologies, so he picked national greatness.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘He could have picked</strong> a number of other ideological lines, but he picked this one.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘And I think for him, </strong>personally, it is an important objective.’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘And as a result,</strong> I don’t believe some of this rhetoric that you’re seeing out of China, saying that we’re prepared to suffer great economic hardship or to continue this economic fight with the U.S. is very credible.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Xi Jinping</strong> would like China to continue on this trajectory of economic growth.’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Of course,</strong> we can say that China can always just lends more money to build more infrastructure.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘But, for the past two years,</strong> many of Xi Jinping’s advisers, including Vice-Premier Liu He, have cautioned him against another massive stimulus program.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘He can always</strong> just ignore the advice of his advisers and launch another massive stimulus.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘But then China</strong> would have to deal with yet another substantially higher level of debt, as a share of G.D.P., in the near future.’</li></ul><img style="display: block;width: 120px;margin-left: auto;margin-right: auto;margin: 0 auto;" src="https://assets.website-files.com/5c864c33af62620dca1373ac/5d11a2bc5a662ab99d84d55a_making%20China%20great%20again.png" alt="CHINADebate"><h6 style="display: block;font-weight: 700;line-height: 1.9375em;margin: 1em 0;font-size: 1.0625em;font-style: italic;color: #0970b3;">‘Are you saying that, because Xi is wary of stimulus, that makes coming to some agreement on tariffs, extra important?’</h6><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘It’s more important</strong> than people credit.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘In the official media</strong> they’re beginning to try to portray this scenario where China is going to suffer economic hardship to fight this war with the U.S.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘I just don’t believe it.</strong> I think it’s propaganda.’</li></ul><h6 style="display: block;font-weight: 700;line-height: 1.9375em;margin: 1em 0;font-size: 1.0625em;font-style: italic;color: #0970b3;">‘If you’re running a very nationalist campaign, and then you cave to outsiders, you have to sell that to your people. What would that look like?’</h6><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘In democratic countries,</strong> we often talk about “audience costs,” which is, if you tell your public one thing and then you do another thing, your public is going to punish you for it.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘But leaders</strong> are not elected in China, so there’s a lot less popular-audience cost.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘And the regime prides</strong> itself on total control over the media and censors everything that it doesn’t like.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘So even if it,</strong> in reality, made important concessions to the U.S., it can simply hide that fact from the Chinese public.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Of course,</strong> the educated public will find out about it, but so what?’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘The vast majority</strong> of Chinese people will be almost completely ignorant of that fact, and that’s fine.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘So when the U.S.</strong> is negotiating with China it should not worry about things like that, because China prides itself on its total control over the media.’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Within the government,</strong> you can say there could be this ultranationalist contingent who may fault Xi Jinping for caving.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘I don’t buy that.’</strong></li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Xi Jinping</strong> has made it his mission to eradicate all his potential enemies from the Party, and I think he’s been quite successful with that.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘So, who’s going</strong> to challenge him?’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘And, on top of that,</strong> there are face-saving ways of doing almost anything—you can couch almost anything in a nationalist and victorious kind of language.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘I’ll give you one example.</strong> If U.S. wants to put in place a mechanism to monitor whether China is adhering to the agreement, of course, from China’s side they say, well, this is like imperialism.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘But, actually,</strong> these mechanisms are in place today.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘The I.M.F. conducts </strong>an annual review of China’s financial and economic well-being.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘The Chinese government</strong> opens its doors to I.M.F. inspectors.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Those inspectors,</strong> who, along with Chinese government officials, inspect various provinces, inspect banks in China, open their books and go through tons and tons of data on how the financial sector is performing.'</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘China does</strong> that willingly.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘So if something</strong> can be structured like what the I.M.F. is doing, China can’t really say that this is an infringement on its sovereignty, because it is happening already.’</li></ul><h6 style="display: block;font-weight: 700;line-height: 1.9375em;margin: 1em 0;font-size: 1.0625em;font-style: italic;color: #0970b3;">‘There have been rumblings that maybe there’s some degree of unhappiness with Xi.’</h6><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘I don’t believe</strong> that at all.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘He doesn’t have</strong> absolute, absolute power - but the threshold for some kind of intra-party uprising against him is very, very high.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘He would need</strong> to commit a catastrophic mistake that jeopardizes the continual rule of the Party for his potential enemies within the Party to rise up against him.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘And, certainly,</strong> making a few concessions to the U.S. does not come even close to that threshold.’</li></ul><h6 style="display: block;font-weight: 700;line-height: 1.9375em;margin: 1em 0;font-size: 1.0625em;font-style: italic;color: #0970b3;">‘What have you made of the way the Xi himself has tried to deal with Trump?’</h6><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘China suffers</strong> from a deficit of true expertise about the U.S.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘You can randomly</strong> pick a U.S. expert among the Chinese, and they will know a lot about what President Clinton did, what President Bush did, etc.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘But they have</strong> very little knowledge about interactions between Congress and the executive branch, and very, very little knowledge about interactions between businesses and the executive branch.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘So they looked</strong> at was the electoral map, and they said, “Well, look at these states that elected Trump. They’re all agricultural states. So we’re going to go after agriculture if things between the U.S. and China were to worsen.”</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘What they didn’t realize</strong> is that, actually, agricultural subsidies are the one subsidy that, across the aisle, members of Congress actually support.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘And so,</strong> after China punished the U.S. by not buying soybeans and corn, that was easily dealt with by additional agricultural subsidies.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘That was kind</strong> of a surprise to the Chinese side.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘They have</strong> a simplistic view of the U.S., but I think this trade war has educated China on many facets of the U.S. system.’</li></ul><h6 style="display: block;font-weight: 700;line-height: 1.9375em;margin: 1em 0;font-size: 1.0625em;font-style: italic;color: #0970b3;">‘Do you have some sense of what the Party makes of Trump personally?’</h6><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘On the one hand,</strong> they do see this very typical real-estate billionaire, of whom there are many, obviously, in China. The regime is filled with real-estate billionaires—selfish, egotistical, money-hungry.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘These are all patterns</strong> that are very familiar to the Chinese government.’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘But, on the other hand,</strong> they have been very surprised that doing things like granting Ivanka Trump’s brand copyrights in China, really playing up to Trump’s ego, have not been enough.’</p><img style="display: block;width: 120px;margin-left: 10px;margin: 0 auto;" src="https://img.thedailybeast.com/image/upload/c_crop,d_placeholder_euli9k,h_1687,w_3000,x_0,y_0/dpr_1.5/c_limit,w_908/fl_lossy,q_auto/v1548377949/190124-Demopoulos-Ivanka-China-tease_ddxlxx" align="right" alt="CHINADebate"><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘They were very surprised</strong> at how sincere the nationalist rhetoric, the anti-Chinese trade rhetoric, turned out to be.’</li></ul><h6 style="display: block;font-weight: 700;line-height: 1.9375em;margin: 1em 0;font-size: 1.0625em;font-style: italic;color: #0970b3;">‘Do we focus too much on the leader and not focus enough on Party dynamics?’</h6><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘One should not</strong> just focus on him. But, in terms of political dynamics, probably just him.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘The problem faced</strong> by Xi is the same one that is faced by Trump, which is that they’re not economic experts.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Trump can say,</strong> “I’ve been a business person.”</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘In a weird way,</strong> I’d argue that Trump actually knows more about economics, how the market works, how the financial markets work, than Xi Jinping.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Xi has lived his entire life</strong> under the care of the Chinese government and an entirely socialist internal economy.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘When you are an official</strong> in the Chinese government, your meals come from the government; salary and housing is allocated by the government.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘He really does not </strong>have a lot of intuition about how the market works.'</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘So, the small group</strong> of trusted advisers around him and their advice becomes important.’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘It’s right that people</strong> are focusing on Liu He, one of the technocrats that Xi Jinping trusts a great deal, because they go way back to high school.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘But for Liu He</strong>, there’s still a challenge. Even though he’s trusted, he’s listened to, if he makes a mistake, that trust also can go away. So Liu He is desperately trying not to make a mistake.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘It’s possible that,</strong> given all these other objectives of national greatness, and not having a financial crisis, Liu He may be a true moderating voice in trying to persuade Xi Jinping to make certain concessions.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘That’s the propaganda line</strong> that you see, but it’s possible that it’s true in reality.’</li></ul><h6 style="display: block;font-weight: 700;line-height: 1.9375em;margin: 1em 0;font-size: 1.0625em;font-style: italic;color: #0970b3;">‘Having put as many as a million Uighur Muslims in concentration camps, is the Xi regime different on human rights than previous regimes?’</h6><img style="display: block;width: 100%;margin-left: auto;margin-right: auto;padding-bottom: 20px;margin: 0 auto;" src="https://assets.website-files.com/5c864c33af62620dca1373ac/5d11a177d12a1e76e7ec8ffc_Uighur%20Muslims%20concentration%20camps.png" alt="CHINADebate"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Yeah, I think</strong> the concentration camps in Xinjiang really have inaugurated a new era for Chinese repression of its population.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘And, indeed,</strong> we have not seen such a large-scale mass internment since the Mao period, when Mao put millions of Chinese Communist Party members in labor camps and reëducation camps.’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘This is targeted</strong> toward a particular ethnic group.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘If you are a scholar</strong> of authoritarian politics, like myself, what’s really galling about what China did is that it was totally unnecessary to lock up all these people.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘I mean,</strong> it’s one thing if there is an active insurgency involving, you know, tens of thousands of people.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘In Xinjiang,</strong> there were no active insurgencies; there were isolated terrorist incidents. I don’t know why the leadership approved such an unnecessary step.’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘I think there</strong> is some kind of information asymmetry.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘You have these interest groups</strong> within the government—high terrorism officials, officials in Xinjiang—who gain enormously from these very extreme measures, because it costs billions and billions of dollars to build up these camps.'</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Somebody got these contracts.</strong> Somebody got rich by operating and building these camps.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Of course,</strong> the leadership has these tendencies to take very extreme measures.'</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;">‘<strong>But, in a way,</strong> they were also persuaded by interest groups to take these very extreme and unnecessary measures in reaction to what objectively we can say is a relatively modest problem.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Terrorism is a serious problem </strong>anywhere you go, but this was not on the verge of any kind of organized insurgency. Not anywhere close, as far as I can tell.’</li></ul></td></tr></tbody></table></p></div></div><div id="article2" class="post-card"><div class="t2-block">2. Nick Lardy on the trade war, fixing capital allocations, &amp; why China’s GDP numbers are right</div><div class="table-block w-richtext" data-ix="appear-on-load" style="opacity: 1; transition: opacity 1000ms ease 0s;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><table class="nl_card" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><table class="multi-block" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="bg-holder" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;max-width: 100%;margin: 0 auto;padding: 0;"><img src="https://assets.website-files.com/5c864c33af62620dca1373ac/5d11a317695b56026131e29e_Nicholas%20R.%20Lardy%20copy.jpg" alt="CHINADebate" style="width: 100%;margin: 0 auto;"></td></tr></tbody></table><p class="caption" style="font-size: .8125em;line-height: 1.75em;margin: .625em 0;display: block;color: #848484;margin-top: .5em;margin-bottom: 1.2500em;font-family: 'Lato', sans-serif;"></p><p class="excerpt" style="font-size: 1.125em;line-height: 1.75em;margin: .625em 0;margin-bottom: 1.5em;font-style: italic;text-align: center;color: #c80000;padding: 10px 5%;font-family: 'Lato', sans-serif;">'Washington policymakers have a somewhat older mindset. They still believe that China is highly dependent on exports. So, they think, "If we can slow China’s exports down, their economy is going to collapse." It won't.'</p></td></tr><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="nl-post" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;padding: 0 2.5em;overflow: hidden;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>Nick Lardy</strong> of the Peterson Institute for International Economics, in an interview at Australian’s Lowy Institute, gave his analysis of the trade war, fixing capital allocations, why China’s GDP numbers are right – and much more.</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>Listen</strong> to Nick’s full interview <a href="https://www.lowyinstitute.org/news-and-media/multimedia/audio/nicholas-lardy-state-strikes-back-end-economic-reform-china" target="_blank" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;">here</a>.</li></ul><table class="intable" style="border-collapse: separate;width: 100%;color: #001544;letter-spacing: 0px;border-spacing: 0;margin: 2.5em auto;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="intable-border" style="border-collapse: separate;width: 100%;color: #001544;letter-spacing: 0px;border-spacing: 0;border: 5px solid #f0f0f0;border-radius: 12px;background-color: #f4f4f4;padding: 1.5em;"><h5 style="display: block;font-weight: 700;line-height: 1.8em;margin: 1em 0;font-size: 1.3125em;margin-top: 1.5em;padding-bottom: .2em;border-bottom: 2px solid #c80000;">1. The Trade War</h5><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘China's dependence</strong> on the external sector has diminished substantially over the last decade.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘If you go back to the 2000s,</strong> up to around 2007/2008, their trade surplus, their current account surplus was growing at about 9% of GDP by 2007.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘For those of you</strong> who can remember back to the 80s when Japan at the peak had a current account surplus of something like 3 to 4% - at the time this was seemingly unfathomable, that a country could be running such big a current account surplus.'</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'But China's</strong> was almost three times bigger.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘So, this gave a big boost</strong> of economic growth because they were export a lot more than they were importing.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Since 2007</strong> that current account surplus is basically gone down to zero - it was 0.4% last year.’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘The first metric</strong> is that from 2007 when your surplus starts shrinking that means you're importing more than you're exporting. So your domestic demand is growing more slowly because a lot of your demand is being satisfied by imports compared to exports.’</p><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘The second metric</strong> is simply looking at exports to GDP. China's exports to GDP - I don't remember the exact numbers – has fallen to something in the 20%s.’</p><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘The third metric</strong> is that China share of global trade has come down.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘From 2001</strong> up until around 2015 or so, China’s share of global trade - in particular its share of global exports - expanded year after year after year.'</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘But in the last roughly three years</strong> their share of global exports has come down.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘So China is less</strong> trade-dependent than it used to be.’</li></ul></td></tr></tbody></table><table class="intable" style="border-collapse: separate;width: 100%;color: #001544;letter-spacing: 0px;border-spacing: 0;margin: 2.5em auto;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="intable-border" style="border-collapse: separate;width: 100%;color: #001544;letter-spacing: 0px;border-spacing: 0;border: 5px solid #f0f0f0;border-radius: 12px;background-color: #f4f4f4;padding: 1.5em;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘I don't think</strong> this third metric – that China is less trade-dependent than it used to be - is something that's been fully factored into the thinking of policymakers in Washington. To some extent they have a somewhat older mindset.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘They believe</strong> that China is highly dependent on exports.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘So, they think, "If we can slow</strong> their exports down, their economy is going to collapse."</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘The Chinese economy will slow down</strong> - there lots of different estimates out there.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘If Trump expands the tariffs</strong> to the products that have not been put on special tariffs and that stays at 25% for any significant amount of time that could slice a percentage point of China's economic growth.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘So instead</strong> of growing at 6 point something, China could be growing at 5 point something.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘The Chinese</strong> have some flexibility to further offset part of that by having more tax cuts of the type they introduced earlier this year - but I don't think they can fully offset it.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘But I don't think</strong> China is going to fall apart if they're going to get five point something instead of six point something.’</li></ul></td></tr></tbody></table><table class="intable" style="border-collapse: separate;width: 100%;color: #001544;letter-spacing: 0px;border-spacing: 0;margin: 2.5em auto;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="intable-border" style="border-collapse: separate;width: 100%;color: #001544;letter-spacing: 0px;border-spacing: 0;border: 5px solid #f0f0f0;border-radius: 12px;background-color: #f4f4f4;padding: 1.5em;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘If Trump puts the tariffs</strong> on the remaining three hundred and some billion, then that support for the tariffs in the United States is going to erode very, very rapidly.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘U.S. consumers</strong> have not paid much of a price for the tariffs that have been levied so far.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘That’s because</strong> the tariffs have gone overwhelmingly on intermediates goods that are used in the production process within the United States.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Those intermediates</strong> constitute only a part of the value of the final product – a lot but not all gets passed through.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘But the things</strong> that have been exempt from tariffs so far – like toys, footwear, apparel, and consumer electronics - none of those are intermediates.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Those are all consumer goods,</strong> and most of the 25% tariffs is going to get passed through to consumers.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘If the broader tariffs</strong> go through, U.S. consumers will soon be quite aware of the higher prices that they’re paying.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘If there's no trade agreement</strong> and if our deficit continues to expand as it has since the trade war, then the obvious question that will be raised: “What are we getting out of this trade dispute with China?”</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘I'm trying</strong> to make a comparison.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘China can withstand</strong> somewhat slower rate of growth.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘I don't think</strong> Trump can get reelected if these tariffs are on a very broad range of consumer goods, and he can't point to any gains.’</li></ul></td></tr></tbody></table><table class="intable" style="border-collapse: separate;width: 100%;color: #001544;letter-spacing: 0px;border-spacing: 0;margin: 2.5em auto;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="intable-border" style="border-collapse: separate;width: 100%;color: #001544;letter-spacing: 0px;border-spacing: 0;border: 5px solid #f0f0f0;border-radius: 12px;background-color: #f4f4f4;padding: 1.5em;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>Technology transfer.</strong> ‘I think the most overblown trade war issue is forced technology transfer.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘This has diminished dramatically</strong> over the last couple of decades.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘The reason is very simple:</strong> Initially if you were in a multi-national and wanted to invest in China, you had to do so in the form of a joint venture, and the technology that you brought to the table was part of your capital contribution.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Most companies</strong> have entered into these transactions voluntarily - they did not want to come to China and compete on the basis of Chinese technology - they thought their technology would give them an advantage in the market.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘But this also means</strong> the Chinese partner has access to the technology.’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Today about three-quarters </strong>of all direct investment going into China is in the form of wholly-owned foreign companies - there is no domestic partner, and there is no sharing of technology.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘But if you read the 301 report</strong> that came out from our Trade Representative’s Office last year, it is filled - page after page after page - with assertions of forced technology transfer.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘The US-China Business Council</strong> does an annual survey asking members: What are your greatest obstacles in doing business in China?’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Forced</strong> technology transfer is number seven.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Number one</strong> is regulatory problems, that is, arbitrary unforeseen changes in the regulatory environment that affect the industry.’</li></ul></td></tr></tbody></table><table class="intable" style="border-collapse: separate;width: 100%;color: #001544;letter-spacing: 0px;border-spacing: 0;margin: 2.5em auto;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="intable-border" style="border-collapse: separate;width: 100%;color: #001544;letter-spacing: 0px;border-spacing: 0;border: 5px solid #f0f0f0;border-radius: 12px;background-color: #f4f4f4;padding: 1.5em;"><h5 style="display: block;font-weight: 700;line-height: 1.8em;margin: 1em 0;font-size: 1.3125em;margin-top: 1.5em;padding-bottom: .2em;border-bottom: 2px solid #c80000;">2. Fixing the Capital Allocation Problem</h5><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Private companies</strong> were hit with a double whammy.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘They were already</strong> losing access to bank credit, and then the Chinese government decides that credit to GDP was too high.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘So they started cutting back,</strong> and the cutbacks came primarily in so-called shadow banking, which had become a major source of credit for private firms.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘This has led</strong> to much slower growth on the part of private firms.’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘The Central Bank regulators</strong> started taking steps to improve the allocation of credit to private firms at the beginning of 2018.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘The bank and insurance regulatory chairman</strong> gave some speeches and said banks should strive to make 30% of their loans to private companies.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘I'm a skeptic.</strong> I think this is basically window dressing and a waste of time.’</li></ul></td></tr></tbody></table><table class="intable" style="border-collapse: separate;width: 100%;color: #001544;letter-spacing: 0px;border-spacing: 0;margin: 2.5em auto;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="intable-border" style="border-collapse: separate;width: 100%;color: #001544;letter-spacing: 0px;border-spacing: 0;border: 5px solid #f0f0f0;border-radius: 12px;background-color: #f4f4f4;padding: 1.5em;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘That’s because</strong> as long as there is a practically implicit 100% guarantee on lending to state companies, then banks have no incentive to lend to private companies.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘On average private companies</strong> may be a lot more credit-worthy - and I think they are.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘But if the credit risk</strong> of lending a state company is zero because of the implied guarantee, banks will continue to lend overwhelmingly the state companies.’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘China’s got</strong> to get rid of that guarantee.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘They can start slowly.</strong> They can allow some state companies to go bankrupt and have banks absorb the loss out of their own profits and get reflected on their on their earnings.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘That would start</strong> to send a message that "Hey, we're not guaranteeing these loans anymore."</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Then banks</strong> would have to start doing a more serious allocation of credit worthiness.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Keep in mind 40%</strong> of all state companies lose money year after year after year, and none of them goes out of business. They just keep borrowing more money.’</li></ul></td></tr></tbody></table><table class="intable" style="border-collapse: separate;width: 100%;color: #001544;letter-spacing: 0px;border-spacing: 0;margin: 2.5em auto;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="intable-border" style="border-collapse: separate;width: 100%;color: #001544;letter-spacing: 0px;border-spacing: 0;border: 5px solid #f0f0f0;border-radius: 12px;background-color: #f4f4f4;padding: 1.5em;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘The number of state companies</strong> - even though their contribution to GDP is nowhere near what it once was - continues to go up.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘But with the restrictions</strong> on the flow of credit to private companies a lot of private companies have disappeared - they've either been taken over by state companies, or they've gone out of business.’</li></ul></td></tr></tbody></table><table class="intable" style="border-collapse: separate;width: 100%;color: #001544;letter-spacing: 0px;border-spacing: 0;margin: 2.5em auto;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="intable-border" style="border-collapse: separate;width: 100%;color: #001544;letter-spacing: 0px;border-spacing: 0;border: 5px solid #f0f0f0;border-radius: 12px;background-color: #f4f4f4;padding: 1.5em;"><h5 style="display: block;font-weight: 700;line-height: 1.8em;margin: 1em 0;font-size: 1.3125em;margin-top: 1.5em;padding-bottom: .2em;border-bottom: 2px solid #c80000;">3. Why China’s GDP Numbers are Accurate 📊</h5><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘China’s GDP numbers are generally accurate. </strong>But I wouldn't place a huge emphasis on whatever is to the right of the decimal place.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘That’s not to say</strong> the Chinese don't do some smoothing.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘The IMF </strong>has looked into this. When growth accelerates the official numbers may be understating growth; when it decelerates, it may be slightly overstating growth.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘But the IMF</strong> view is that over the over the long term the average of the official numbers over any multi-year period tends to be pretty close to the real performance.’</li></ul></td></tr></tbody></table><table class="intable" style="border-collapse: separate;width: 100%;color: #001544;letter-spacing: 0px;border-spacing: 0;margin: 2.5em auto;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="intable-border" style="border-collapse: separate;width: 100%;color: #001544;letter-spacing: 0px;border-spacing: 0;border: 5px solid #f0f0f0;border-radius: 12px;background-color: #f4f4f4;padding: 1.5em;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘When people</strong> are talking about a very, very sharp slowdown, the first thing I look at is what's happening to imports.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘If the economy</strong> is really decelerating rapidly, you should see a very substantial deceleration in imports.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘There a lot of factors</strong> that feed into the growth of imports, but the most important is growth of gross domestic income.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘The trade data</strong> in general have been proven to be quite reliable.'</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘I'll make one final point:</strong> on every metric that I've ever been able to find - whether its growth, return on sales, return on assets, credit worthiness, and so forth: private firms look better than state firms.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘So, if the state statistical authorities</strong> were cooking all the data, why have they done so in a way that makes state companies look so bad.'</li></ul></td></tr></tbody></table></td></tr></tbody></table></p></div></div><div id="article3" class="post-card"><div class="t2-block">3. ‘Death by China’ &amp; Peter Navarro</div><div class="table-block w-richtext" data-ix="appear-on-load" style="opacity: 1; transition: opacity 1000ms ease 0s;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><table class="nl_card" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><table class="multi-block" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="bg-holder" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;max-width: 100%;margin: 0 auto;padding: 0;"><img src="https://assets.website-files.com/5c864c33af62620dca1373ac/5d11a3525a662a4ac584d761_%27Death%20by%20China%27%20made%20by%20Peter%20Navarro.gif" alt="CHINADebate" style="width: 100%;margin: 0 auto;"></td></tr></tbody></table><p class="caption" style="font-size: .8125em;line-height: 1.75em;margin: .625em 0;display: block;color: #848484;margin-top: .5em;margin-bottom: 1.2500em;font-family: 'Lato', sans-serif;"></p><p class="excerpt" style="font-size: 1.125em;line-height: 1.75em;margin: .625em 0;margin-bottom: 1.5em;font-style: italic;text-align: center;color: #c80000;padding: 10px 5%;font-family: 'Lato', sans-serif;">'DEATH BY CHINA is right on. This important documentary depicts our problem with China with facts, figures and insight. I urge you to see it.’ Donald Trump.</p></td></tr><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="nl-post" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;padding: 0 2.5em;overflow: hidden;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>President Trump</strong> had China in his crosshairs long before he came into office.</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>But then</strong> he met Peter Navarro, author of the book and producer of the movie <em>Death by China</em>.</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>As one observer </strong>noted there was a ‘mind meld.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>Although others,</strong> notably USTR Lighthizer, get more press, Dr. Navarro seems to be behind the scenes, as he says, ‘Confirming President Trump’s excellent intuitions.’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>I have included</strong> a video of John Oliver on <em>Last Week Tonight</em> describing the Trumpian trade principals and Peter Navarro.</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>As laugh out loud</strong> funny as it is scary.</li></ul><hr style="border: 0;border-top: 3px solid #f5f5f5;height: 5px;margin: 10px auto;text-align: center;"><a href="https://www.newyorker.com/business/currency/trumps-muse-on-u-s-trade-with-china" target="_blank" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;"><img style="display: block;width: 100%;margin-bottom: 20px;margin: 0 auto;" src="https://assets.website-files.com/5c864c33af62620dca1373ac/5d11a4f25a662a29ae84d8ed_Trump%E2%80%99s%20Muse%20on%20US%20Trade%20with%20China%20Navarro.png" align="right" alt="CHINADebate"></a><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Trump’s views on trade are crude:</strong> there are winners (them) and losers (us), and there is one simple solution that will fix everything (threat of a trade war),’ writes <em>The New Yorker</em>’s Adam Davidson <a href="https://www.newyorker.com/business/currency/trumps-muse-on-u-s-trade-with-china" target="_blank" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;">‘Trump’s Muse on U.S. Trade with China’</a> in 2016.</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘How Trump came to these views</strong> is not totally clear, but his thinking, especially on trade and China, has certainly been influenced by Peter Navarro.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Peter Navarro</strong>, at the time of the article was ‘a professor of economics and public policy at the University of California, Irvine. Being the only economist—and one with a Harvard Ph.D. at that—on Donald Trump’s economic team, Navarro provides a patina of legitimacy.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Navarro’s views on trade and China</strong> are so radical, however, that, even with his assistance, I was unable to find another economist who fully agrees with them.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>After Mr. Trump’s election</strong> Navarro was appointed Director of Trade and Manufacturing Policy.</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>Also see.</strong></p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><a href="https://foreignpolicy.com/2017/03/13/peter-navarro-profile-national-trade-council-donald-trump-china-expert/" target="_blank" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;">‘Trump’s Top China Expert Isn’t a China Expert’</a> in <em>Foreign Policy</em></li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><a href="https://www.nationalreview.com/2017/04/peter-navarro-trump-china-adviser-bad-economics/" target="_blank" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;">‘Peter Navarro: Trump’s Nutty Economics Professor’</a> in the conservative <em>National Review</em></li></ul><br><a href="https://youtu.be/etkd57lPfPU" target="_blank" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;"><img style="display: block;width: 50%;margin-left: 20px;padding-top: 20px;margin: 0 auto;" src="https://i.ytimg.com/vi/etkd57lPfPU/maxresdefault.jpg" align="right" alt="CHINADebate"></a><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><a href="https://youtu.be/etkd57lPfPU" target="_blank" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;"><strong>Watch John Oliver on <em>Last Week Tonight</em></strong></a> - in 2018 he gave a very funny and very accurate (to my mind) account of the thought underlying the Trump administration’s trade and China policies.</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>Much of that account</strong> is about Peter Navarro (that starts around 13m 25s).</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘By most accounts</strong> the driving force [of China trade policy] is Peter Navarro, head of the Office of Trade and manufacturing policy,’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Navarro</strong> is the author of a series of get-rich investment books.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Like Trump</strong> he's obsessed with trade deficits in general and China in particular, saying trade with China is a zero-sum game, meaning one country can only win if the other country loses.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘And it is hard to overstate</strong> just how rare his views are among economists.’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘How on earth</strong> did Navarro get a job at the White House?’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Well, it is way dumber </strong>than you are thinking.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Apparently Jared Kushner</strong> was tasked with finding Trump experts on Chinese trade.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘So Jared went on Amazon,</strong> and he found some of Peter Navarro's books and he asked him to come to the White House.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘That's how Peter Navarro</strong> ended up in the White House</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Jared looked</strong> for experts on Amazon - that was his rigorous process.</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘The Navarro book</strong> that Jarrett found was called <a href="https://www.amazon.com/Death-China-Confronting-Dragon-paperback/dp/0134319036" target="_blank" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;"><em>Death by China</em></a><em>.’</em></p><a href="https://www.amazon.com/Death-China-Confronting-Dragon-paperback/dp/0134319036" target="_blank" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;"><img style="display: block;width: 25%;padding-top: 20px;margin-left: 20px;margin: 0 auto;" src="https://images-na.ssl-images-amazon.com/images/I/51gKpENc%2BmL._SX332_BO1,204,203,200_.jpg" alt="CHINADebate" align="right"></a><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘It paints</strong> the U.S.- Chinese trade relationship in apocalyptic terms.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Navarro</strong> actually turned the book into a movie that one critic called “the documentary equivalent of a raving street corner derelict.”</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><a href="https://www.youtube.com/watch?v=mMlmjXtnIXI&amp;t=117s" target="_blank" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;"><strong>Watch</strong></a> the movie ‘Death by China’ here. (At least, as a summary, watch the knife plunge at 1m 56s)</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong><em>Death by China</em>: the positive.</strong> ‘DEATH BY CHINA is right on. This important documentary depicts our problem with China with facts, figures and insight. I urge you to see it,’ says Donald Trump.</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘A really wonderful development</strong> is Dr. Navarro’s film, which is on YouTube online, is going to reach 1,000,000 viewers’ says China expert and fellow at the Hudson Institute, Michael Pillsbury. ‘The title is somewhat controversial it's called <em>Death by China'</em>.</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Its message,</strong> despite the hyperbole, certainly warrants examination and discussion,’ <a href="https://www.nytimes.com/2012/08/24/movies/death-by-china-documentary-directed-by-peter-navarro.html" target="_blank" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;">writes</a> the <em>New York Times</em>.</li></ul></td></tr></tbody></table></p></div></div></div>

<div id="NLpost" class="nl-post-wrapper" style="margin:0 auto;"><div id="NLHeader" class="post-card"><div id="Page-header" class="mainheader"><h1 class="t1">Why the West is getting Xi wrong</h1><div class="date">May 22, 2019</div><a href="https://www.linkedin.com/in/malcolmriddell/" target="_blank" class="date" style="color: inherit;border-bottom: 0px solid #008dc8;text-decoration: none;">by Malcolm Riddell</a></div><div class="table-block w-richtext" data-ix="appear-on-load" style="opacity: 1; transition: opacity 1000ms ease 0s;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><table class="nl_card" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="nl-post" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;padding: 0 2.5em;overflow: hidden;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;">Bill Overholt of the Harvard Kennedy School of Government is a contrarian on China – and, to the chagrin of many, he’s generally right.</p><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;">In 1993 Bill Overholt published <em>The Rise of China: How Economic Reform Is Creating a New Superpower</em>. Reviewers called the arguments 'nonsense' and 'too optimistic.' How did that work out for the reviewers?</p><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;">Now, almost three decades after <em>The Rise of China</em>, Bill believes that China's future has become 'much more uncertain.' And, he addresses his concerns in a new book, <em>China's Crisis of Success</em>.</p><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;">Bill outlines his points in a short essay, ‘How the West is Getting China Wrong.’</p><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;">Bill is one of the important interpreters of what’s happening in China and why. You’ll find more his insights in the last entry, including the key points from an interview I had with him.</p></td></tr></tbody></table></p></div></div><div class="section_title w-condition-invisible"><strong>I. THE LAW AND THE PROTESTS</strong></div><div id="article1" class="post-card"><div class="t2-block">1. How the West is getting China wrong</div><div class="table-block w-richtext" data-ix="appear-on-load" style="opacity: 1; transition: opacity 1000ms ease 0s;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><table class="nl_card" id="19may2201" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><table class="multi-block" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="bg-holder" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;max-width: 100%;margin: 0 auto;padding: 0;"><img src="https://media-cdn.list.ly/production/704032/3519615/3519615-bill-overholt_600px.jpeg?ver=2103844180" alt="CHINADebate" style="width: 100%;margin: 0 auto;"></td></tr></tbody></table><p class="caption" style="font-size: .8125em;line-height: 1.75em;margin: .625em 0;display: block;color: #848484;margin-top: .5em;margin-bottom: 1.2500em;font-family: 'Lato', sans-serif;">East Asia Forum</p><p class="excerpt" style="font-size: 1.125em;line-height: 1.75em;margin: .625em 0;margin-bottom: 1.5em;font-style: italic;text-align: center;color: #c80000;padding: 10px 5%;font-family: 'Lato', sans-serif;">‘The Western conclusion Xi is “president for life” and the most powerful Chinese leader since Mao is diametrically wrong.’</p></td></tr><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="nl-post" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;padding: 0 2.5em;overflow: hidden;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘The dominant narrative</strong> in the West reads that China has a stable administration run by a “president for life” who is the most powerful leader since Mao Zedong,’ writes Harvard’s Bill Overholt in <a href="https://www.eastasiaforum.org/2018/08/11/the-west-is-getting-china-wrong/" target="_blank" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;">‘The West is getting China Wrong.’</a></p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘China has escaped</strong> the pressures for political change that transformed earlier Asian miracle economies at similar levels of development.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘It has consolidated</strong> a particularly repressive market Leninism,which is destined to grow rapidly for the indefinite future.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘And its increasingly</strong> centralised economic control and ambitious industrial policies are so efficient that they constitute an unlimited threat to the West.’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘These arguments</strong> are wrong.’</p><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘China has not escaped</strong> the pressures of political complexity that forced political reform elsewhere.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Rather,</strong> those pressures are so powerful that the whole structure of Xi Jinping’s administration is a reaction to those pressures.’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Around 2005</strong> China’s leadership became fearful that the country was pulling apart. Economic reform lagged.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Powerful interest groups</strong> were taking control of policy.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Local governments </strong> were disobedient. ‘</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Ministries defied</strong> the premier.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Corrupt generals</strong> weakened the military.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Corruption</strong> was undermining Party legitimacy.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘These forces are powerful:</strong> China’s obstreperous provinces and interest groups are often larger than European countries.’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Apprehensive about emergent crises,</strong> China’s leaders designed a new economic plan based on market allocation of resources combined with a desperate centralisation of government.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘To facilitate decision making,</strong> the top leadership would have seven leaders rather than nine and would exclude “extreme” opinions(pseudo-Maoist Bo Xilai and reformist Li Yuanchao).’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Key policy areas</strong> would be controlled by small leading groups,including a new National Security Council,all chaired by a single leader.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Unlike his predecessor,</strong> the new leader would command the military immediately.’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘These decisions</strong> were made by workable consensus separate from the selection of Xi Jinping.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Contrary</strong> to the Washington meme,Xi is not a Putin.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Xi is a creature</strong> of the Party.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Putin’s party</strong> is a creature of Putin.’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Xi was allocated power</strong> along with a difficult reform assignment.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Market allocation of resources</strong> would damage the power and finances of every major power group:state enterprises,banks,the Party,the government,the military and local governments.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Xi’s instrument</strong> for dislodging reform opponents — the anti-corruption campaign — not only alienates the leaders of all those sectors but also leaves officials frightened to implement reforms.’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘So determined was the opposition,</strong> that supporters hoped — best case — that Xi would spend his first term consolidating power and his second implementing reforms.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Certainly Xi’s first term</strong> was spent consolidating his position.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Ferocious opposition</strong> (summarized by a leading executive as “you die or I die”) stimulated fears of personal retribution and reform reversal after Xi’s second term,hence the decision to allow Xi a third term if necessary.’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘The Western conclusion</strong> that this makes Xi “president for life” and the most powerful Chinese leader since Mao is diametrically wrong.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Xi does not have the power</strong> to unilaterally implement his agenda or to remain in power indefinitely.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘His repression of opponents</strong> does not prove his invincibility;it reflects his vulnerability.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘His many titles</strong> reflect insecurity.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Deng Xiaoping,</strong> confident of power,governed China as honorary chairman of the Bridge Players’ Society.’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Xi’s dilemma</strong> is reflected in his inability or unwillingness to make strategic decisions.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘He advocates rule of law</strong> but strengthens the Party commission that decides verdicts.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘He advocates marketization</strong> of state enterprises but strengthens Party committees’ control of business decisions in both state and private enterprises.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Faced with a choice</strong> between rapid reform with much slower growth,or rapid growth with much slower reform,he promises both rapid growth and rapid reform.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘This is more</strong> Theresa May than Mao Zedong.’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘China’s current leadership</strong> has acknowledged the new economic environment more explicitly and has planned more brilliantly than any predecessor,but politics is inhibiting economic reform.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Xi is trying to marry</strong> Jiang Jingguo’s economics to Park Chung-hee’s politics.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘But trying to subdue</strong> the political tide creates a cycle of destructive repression.’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Xi is </strong>vulnerable.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘He disappears</strong> from the media for days.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘An adulatory movie</strong> is suddenly curtailed.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Portraits</strong> are suddenly removed.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘His bodyguards</strong> are suddenly changed.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Lawyers and students</strong> are increasingly assertive.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘The annual Beidaihe</strong> leadership meeting is contentious.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘This is the opposite</strong> of an omnipotent president for life running an economy inexorably destined for rapid growth.’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘US policies</strong> based on that false premise lead Washington to declare defeat for its policy of engagement,declare China a fearsome national security enemy and launch desperate economic warfare against the presumed superior economic prospects of China’s politicized economy. <strong>Sad.’</strong></p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘The US policy</strong> of engagement has not failed.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘It has created</strong> the anticipated social and political pluralism.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘China can continue its cycle</strong> of self-destructive repression at the possible cost of interrupting its rise,it can democratize,or it can find a new way to channel the tide of pluralism.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Critics of the engagement policy</strong> understand neither the time required for change in China’s vast society nor the reality beneath Xi’s adulatory headlines.’</li></ul></td></tr></tbody></table></p></div></div><div id="article2" class="post-card"><div class="t2-block">2. Now China's Got Its Own Anti-U.S. Trade War Song</div><div class="table-block w-richtext" data-ix="appear-on-load" style="opacity: 1; transition: opacity 1000ms ease 0s;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><table class="nl_card" id="19may2202" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><table class="multi-block" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="embed-responsive embed-responsive-16by9" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;position: relative;display: block;height: 100%;padding: 0;overflow: hidden;"><iframe class="embed-responsive-item" src="https://www.youtube.com/embed/cM0fK1SB7z4"></iframe></td></tr></tbody></table><p class="caption" style="font-size: .8125em;line-height: 1.75em;margin: .625em 0;display: block;color: #848484;margin-top: .5em;margin-bottom: 1.2500em;font-family: 'Lato', sans-serif;">Bloomberg</p><p class="excerpt" style="font-size: 1.125em;line-height: 1.75em;margin: .625em 0;margin-bottom: 1.5em;font-style: italic;text-align: center;color: #c80000;padding: 10px 5%;font-family: 'Lato', sans-serif;">“Trade war! Trade War! Not afraid of the outrageous challenge!</p></td></tr><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="nl-post" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;padding: 0 2.5em;overflow: hidden;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong><a href="https://youtu.be/cM0fK1SB7z4" target="_blank" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;">Listen to 'Trade War'</a></strong> and watch Chinese social media support on this video from South China Morning Post. </p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>Me</strong>, I would have set the lyrics to 'The Yellow River Concerto.'</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Perhaps nothing captures</strong> the growing anti-U.S. sentiment in China better than a song about the trade war that is going viral in Beijing: “If the perpetrator wants to fight, we will beat him out of his wits,” says Bloomberg in <a href="https://www.bloomberg.com/news/articles/2019-05-20/trade-war-fight-song-shows-growing-anti-u-s-sentiment-in-china" target="_blank" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;">‘Now China's Got Its Own Anti-U.S. Trade War Song.’</a>‘</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘It begins</strong> with a male chorus singing“Trade war!Trade War!Not afraid of the outrageous challenge!Not afraid of the outrageous challenge!A trade war is happening over the Pacific Ocean!”</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘The song,</strong> simply called “Trade War,” is set to the tune of an anti-Japanese song from the 1960s film “Tunnel War” -- in which a Chinese town defends itself from invasion.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>“I chose ‘Tunnel War’ </strong>because that is reminiscent of the similar situation that China is facing today,” says the song’s producer and lyricist Zhao Liangtian,a retired official. “Since the trade war broke out,I felt the urge to do something.”</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘This privately-produced song </strong>has more than 100,000 views on WeChat and is just one of many signs of brewing anti-American sentiment on Chinese social media as trade talks falter.’</p></td></tr></tbody></table></p></div></div><div id="article3" class="post-card"><div class="t2-block">3. ‘Trade tensions will persist until global financial imbalances are addressed’</div><div class="table-block w-richtext" data-ix="appear-on-load" style="opacity: 1; transition: opacity 1000ms ease 0s;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><table class="nl_card" id="19may2203" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><table class="multi-block" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="bg-holder" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;max-width: 100%;margin: 0 auto;padding: 0;"><img src="https://i2.wp.com/www.eastasiaforum.org/wp-content/uploads/2019/05/2017-08-14T200331Z_1899603127_RC1F8982E730_RTRMADP_3_USA-TRUMP-TRADE-SIGNING.jpg?fit=3500%2C2333&amp;ssl=1" alt="CHINADebate" style="width: 100%;margin: 0 auto;"></td></tr></tbody></table><p class="caption" style="font-size: .8125em;line-height: 1.75em;margin: .625em 0;display: block;color: #848484;margin-top: .5em;margin-bottom: 1.2500em;font-family: 'Lato', sans-serif;">East Asia Forum</p><p class="excerpt" style="font-size: 1.125em;line-height: 1.75em;margin: .625em 0;margin-bottom: 1.5em;font-style: italic;text-align: center;color: #c80000;padding: 10px 5%;font-family: 'Lato', sans-serif;">‘Foreign leaders may bend to Trump’s will. The laws of economics do not.’</p></td></tr><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="nl-post" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;padding: 0 2.5em;overflow: hidden;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘US presidents</strong> seem to have ‘selective vision’ when it comes to international economic relations,’ writes <em>Adam Triggs of Australian National University,and the Brookings Institution in </em><a href="https://www.eastasiaforum.org/2019/05/17/trade-tensions-will-persist-until-global-financial-imbalances-are-addressed/" target="_blank" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;">‘Trade tensions will persist until global financial imbalances are addressed.’</a></p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘They watch in horror</strong> as money flows out of their economy to purchase goods and services abroad.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘But they seem blind</strong> to the avalanche of money coming into their economy to bankroll their mortgages,finance their investment and pay for their tax cuts.’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘This flow of finance</strong> into the US economy is why it <a href="https://www.eastasiaforum.org/2019/05/17/trade-tensions-will-persist-until-global-financial-imbalances-are-addressed/" target="_blank" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;">runs a trade deficit.</a></p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘A country that invests</strong> more than it is saves,like the United States,imports capital from other countries to finance that investment.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘This inflow of capital</strong> appreciates the US dollar,reducing exports and increasing imports,resulting in a trade deficit.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘There is nothing wrong</strong> with this arrangement and there is no economic case for changing it.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘But a different conclusion</strong> emerges when a trade deficit is being created or worsened by financial distortions,especially when the ensuing trade deficit is inflaming political tensions that are being used to justify trade protectionism and dangerous attacks on the world trading system by a global superpower.’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘The IMF’s most recent </strong><a href="https://www.imf.org/en/Publications/ESR/Issues/2018/07/19/2018-external-sector-report" target="_blank" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;">External Assessment Report</a>found that 40 to 50 per cent of the global current account balances were deemed excessive,meaning they could not be explained by countries’ fundamentals and desirable policies.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Olivier Blanchard and Gian Maria Milesi-Ferretti </strong><a href="https://www.imf.org/external/pubs/ft/sdn/2011/sdn1103.pdf" target="_blank" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;">have shown</a>how these distortions result in excessive savings in surplus countries and insufficient savings in deficit economies that distort global financial flows and thus trade flows.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘The biggest distortion</strong> is US fiscal policy and its large unfunded tax cuts and spending promises.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘<a href="https://www.brookings.edu/research/the-economic-and-political-case-for-coordinating-fiscal-stimulus/" target="_blank" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;">My recent modelling</a></strong> at the Brookings Institution shows that for every 1 per cent increase in the US fiscal deficit,the US trade deficit worsens by .6 per cent.’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘The consequences</strong> of Trump’s tax cuts are available for all to see in December’s US trade figures.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Despite all his talk of tariffs and deal-making,</strong> the US trade deficit <a href="https://www.bea.gov/data/intl-trade-investment/international-trade-goods-and-services" target="_blank" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;">worsened</a>by 12 per cent since his tax measures came into effect.’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘There is no automatic economic case</strong> for reducing the US trade deficit.</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘But there is an economic case </strong> for addressing the distortions that fuel financial imbalances and political tensions.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Unless these imbalances are addressed,</strong> the US trade deficit will continue to be excessive.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘And unless 40 years</strong> of US political precedent suddenly changes,these deficits will continue to be a source of political concerns,however misguided those concerns may be.’</li></ul></td></tr></tbody></table></p></div></div><div class="section_title w-condition-invisible"><strong>II. POTENTIAL BACKLASH FROM THE U.S.<br></strong></div><div id="article4" class="post-card"><div class="t2-block">4. ‘Five Big Myths of China's Belt and Road Initiative.’</div><div class="table-block w-richtext" data-ix="appear-on-load" style="opacity: 1; transition: opacity 1000ms ease 0s;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><table class="nl_card" id="19may2204" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><table class="multi-block" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="bg-holder" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;max-width: 100%;margin: 0 auto;padding: 0;"><img src="https://assets.bwbx.io/images/users/iqjWHBFdfxIU/iN2Yx9Ab5CAg/v5/-1x-1.jpg" alt="CHINADebate" style="width: 100%;margin: 0 auto;"></td></tr></tbody></table><p class="caption" style="font-size: .8125em;line-height: 1.75em;margin: .625em 0;display: block;color: #848484;margin-top: .5em;margin-bottom: 1.2500em;font-family: 'Lato', sans-serif;">Bloomberg</p><p class="excerpt" style="font-size: 1.125em;line-height: 1.75em;margin: .625em 0;margin-bottom: 1.5em;font-style: italic;text-align: center;color: #c80000;padding: 10px 5%;font-family: 'Lato', sans-serif;"></p></td></tr><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="nl-post" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;padding: 0 2.5em;overflow: hidden;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘In the West</strong> the Belt and Road initiative gets a terrible press,’ says Andy Brown the editorial director of the Bloomberg: New Economy in the video <a href="https://www.bloomberg.com/news/videos/2019-05-17/five-big-myths-of-china-s-belt-and-road-initiative-video" target="_blank" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;">‘Five Big Myths of China's Belt and Road Initiative.’</a></p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Is that</strong> criticism fair?’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Let's look</strong> at the five big myths of the Belt and Road.’</li></ul><hr style="border: 0;border-top: 3px solid #f5f5f5;height: 5px;margin: 10px auto;text-align: center;"><h2><strong>‘MYTH #1: It's a debt trap.’ </strong></h2><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘This is</strong>pretty unfair.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘The idea here</strong> is that China plies poor countries with unsupportable debt.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘And when</strong> they can't repay the loans, it then grabs physical infrastructure.’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Actually</strong> there's only been one clear-cut example of this - in Sri Lanka.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘There the Chinese</strong> helped to build a port.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘The project turned</strong> into a commercial flop.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘And then the Sri Lankan government</strong> was obliged to hand over the port to a Chinese state company.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘But that</strong> was an exception not the rule.’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Having said that</strong> China doesn't seem to have much regard for risk.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘It scatters its loans</strong> around to countries that are already heavily indebted like Pakistan Mongolia and Djibouti.’</li></ul><hr style="border: 0;border-top: 3px solid #f5f5f5;height: 5px;margin: 10px auto;text-align: center;"><h2><strong>‘MYTH #2: The Belt and Road is China’s Marshall Plan'</strong></h2><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Actually </strong>this gets everything backwards.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘The enduring legacy</strong> of the Marshall Plan was that it inculcated free market ideas in Europe and habits of cooperation among former enemies that underpinned democracy.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘To the extent</strong> that Belt and Road is about China's attempts to spread its own values including state capitalism and authoritarian governance it is the exact opposite of the Marshall Plan.’</li></ul><h2><strong>'MYTH #3:Belt and Road is China's grand strategy' </strong></h2><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘As a matter of fact</strong> Belt and Road is a sprawling project.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘It's haphazard</strong>; it’s chaotic.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘It's all about multiple actors</strong> jumping aboard a state-funded investment free-for-all.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘They have</strong> multiple different agendas,some of them conflicting.’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Certainly</strong> it has a geopolitical aim to draw China's neighbors more closely into its own economic orbit.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘But this</strong> doesn't add up to a grand strategy.’</li></ul><hr style="border: 0;border-top: 3px solid #f5f5f5;height: 5px;margin: 10px auto;text-align: center;"><h2><strong>'MYTH #4: China has unlimited amounts of money to pour into Belt and Road' </strong></h2><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Not true.’</strong></p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Over time</strong> it's quite likely that lending will exceed a trillion dollars.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘But this</strong> won't come anywhere near the eight trillion dollars that some people report.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘What is the case</strong> is that Chinese spending is likely to be far less than the trillions of dollars that the United States squandered on fruitless wars in Asia and the Middle East over the past several decades.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘That's why the US can</strong> snipe at Belt and Road but it doesn't have the financial resources to match.’</li></ul><hr style="border: 0;border-top: 3px solid #f5f5f5;height: 5px;margin: 10px auto;text-align: center;"><h2><strong>‘MYTH #5:It's all about yuan internationalization.’ </strong></h2><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘The idea here</strong> is that China is going to use Belt and Road to spread use of its own currency and challenge the mighty dollar.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Well the dollar</strong> is safe.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘It turns out</strong> that a majority of Belt and Road contracts are signed in dollars not yuan.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘And actually</strong> China's access to dollars is dwindling because its current account surpluses are narrowing.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘So it's going</strong> to have less and less money to invest in Belt and Road projects in the future.’</li></ul></td></tr></tbody></table></p></div></div><div id="article5" class="post-card"><div class="t2-block">5. Trump's 2019 Protection Could Push China Back to Smoot-Hawley Tariff Levels</div><div class="table-block w-richtext" data-ix="appear-on-load" style="opacity: 1; transition: opacity 1000ms ease 0s;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><table class="nl_card" id="19may2205" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><table class="multi-block" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="bg-holder" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;max-width: 100%;margin: 0 auto;padding: 0;"><img src="https://assets.website-files.com/5c864c33af62620dca1373ac/5d119f0989e27169e4070e07_Trump%27s%202019%20Protection%20Could%20Push%20China%20PIIE.png" alt="CHINADebate" style="width: 100%;margin: 0 auto;"></td></tr></tbody></table><p class="caption" style="font-size: .8125em;line-height: 1.75em;margin: .625em 0;display: block;color: #848484;margin-top: .5em;margin-bottom: 1.2500em;font-family: 'Lato', sans-serif;">PIIE</p><p class="excerpt" style="font-size: 1.125em;line-height: 1.75em;margin: .625em 0;margin-bottom: 1.5em;font-style: italic;text-align: center;color: #c80000;padding: 10px 5%;font-family: 'Lato', sans-serif;">‘If Trump follows through with his threat to impose a 25 percent tariff on most of the rest of US imports from China,the average US tariff toward China would increase to 27.8 percent.’</p></td></tr><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="nl-post" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;padding: 0 2.5em;overflow: hidden;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘The Trump administration</strong> has begun the <a href="https://ustr.gov/sites/default/files/enforcement/301Investigations/May_2019_Proposed_Modification.pdf" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;">process </a>expected to lead to a 25 percent tariff on most of the US imports from China so far untouched by his trade war,’ write Chad P. Bown and Eva(Yiwen) Zhang of the Peterson Institute for International Economics in <a href="https://piie.com/blogs/trade-investment-policy-watch/trumps-2019-protection-could-push-china-back-smoot-hawley-tariff" target="_blank" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;">‘Trump's 2019 Protection Could Push China Back to Smoot-Hawley Tariff Levels.’</a></p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Should President Trump</strong> follow through with these additional tariff threats, taxes would go up on a vast array of imported consumer products—like clothing, shoes, toys, and electronics—previously spared by his actions.'</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Taken together,</strong> such steps would also raise US tariffs on China to levels similar to those resulting from the infamous <a href="https://piie.com/commentary/op-eds/does-trump-want-trade-war" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;">Smoot-Hawley Tariff Act of 1930 </a>enacted on the eve of the Great Depression'.</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Before Trump’s 2018 actions,</strong> US tariffs on imports from China averaged 3.1 percent.’</p><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘In 2018, Trump</strong> imposed three major sets of tariffs on China alone.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘The first announcement</strong> of tariffs on imports of $50 billion included 25 percent tariffs, first on $34 billion (imposed July 6) and later on $16 billion of imports (imposed August 23).’ </li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Then,</strong> on September 24 he imposed 10 percent tariffs on a separate set of imports of approximately $200 billion. When Trump was done applying his 2018 tariffs—on $250 billion of imports from China, as well as imports of steel, aluminum, solar panels, and washing machines from all countries—average US tariffs toward China had increased to 12.4 percent.’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘On May 10, 2019,</strong> Trump increased his tariffs on that $200 billion of imports from 10 percent to 25 percent.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>Once those tariffs</strong> are fully in effect, the United States will apply an average tariff toward China of 18.3 percent.’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Finally,</strong> if Trump follows through with his threat to impose a 25 percent tariff on most of the rest of US imports from China, the average US tariff toward China would increase to 27.8 percent.’</p><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>Read</strong> the entire analysis <a href="https://piie.com/blogs/trade-investment-policy-watch/trumps-2019-protection-could-push-china-back-smoot-hawley-tariff" target="_blank" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;">here</a>.</p></td></tr></tbody></table></p></div></div><div class="section_title w-condition-invisible"><strong>III. CONGRESS &amp; THE PRESIDENT REACT<br></strong></div><div id="article6" class="post-card"><div class="t2-block">6. More from Bill Overholt</div><div class="table-block w-richtext" data-ix="appear-on-load" style="opacity: 1; transition: opacity 1000ms ease 0s;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><table class="nl_card" id="19may2206" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><table class="multi-block" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="bg-holder" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;max-width: 100%;margin: 0 auto;padding: 0;"><img src="https://assets.website-files.com/5a3e922cf6b9a40001bc2d70/5cf17e3fd039c808a089d66b_William%20H%20Overholt%2BBook%20cover.png" alt="CHINADebate" style="width: 100%;margin: 0 auto;"></td></tr></tbody></table><p class="caption" style="font-size: .8125em;line-height: 1.75em;margin: .625em 0;display: block;color: #848484;margin-top: .5em;margin-bottom: 1.2500em;font-family: 'Lato', sans-serif;">CHINADebate</p><p class="excerpt" style="font-size: 1.125em;line-height: 1.75em;margin: .625em 0;margin-bottom: 1.5em;font-style: italic;text-align: center;color: #c80000;padding: 10px 5%;font-family: 'Lato', sans-serif;"></p></td></tr><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="nl-post" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;padding: 0 2.5em;overflow: hidden;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><a href="https://youtu.be/1UsZBwSAZbQ" target="_blank" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;">Here is Bill’s video presentation</a> on <em>China’s Crisis of Success</em> at the Center for Strategic and International Studies.</p><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>Bill Overholt</strong> is a Senior Fellow at Harvard’s Asia Center and CEO of AsiaStrat.</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>His career</strong> includes 16 years doing policy research at think tanks, nine years at Harvard University, and 21 years running investment bank research teams. </li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>And, he is the author</strong> of eight books, including his most recent - the terrific, <a href="https://www.amazon.com/Chinas-Crisis-Success-William-Overholt/dp/1108431992/ref=tmm_pap_swatch_0?_encoding=UTF8&amp;qid=&amp;sr=" target="_blank" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;"><em>China's Crisis of Success</em></a><em>.</em></li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>Here are five insights</strong> from &nbsp;<em>China’s Crisis for Success</em> from my interview with Bill.</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><a href="https://app.robly.com/archive?id=418dbf1b93c0637b797412dc42843baf&amp;v=true" target="_blank" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;">You can read the full interview here.</a></li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>Five Insights </strong></p><ol style="font-size: 1em;line-height: 1.875em;margin: .625em 0;margin-left: -1.1em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong> Fear and simplicity. </strong>A 'sense of terrible crisis was a prerequisite for an Asian economic take off,' Bill says. </li></ol><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>Fear. </strong>Following the events that befell Asian countries - such as, the Korean War and the Chinese civil war - each nation faced the real possibility that it might not recover. This made leaders more willing to take great risks and their peoples more willing to accept them.</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>Simplicity.</strong> 'These countries' economies, when they're getting started, are basically agriculture, infrastructure, and some very primitive manufacturing.' This makes the plan simple: ‘stimulate growth, build infrastructure, and open and marketize the economy.'</li></ul><ol start="2" style="font-size: 1em;line-height: 1.875em;margin: .625em 0;margin-left: -1.1em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong> Simplicity to complexity - and new crisis.</strong> With success comes more complex economies, politics, and societies. 'And, then you gradually get to a point of complexity, where there is an economic and political crisis of some kind.' Time for a transformation.</li></ol><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>China's leaders</strong> realized this and reached consensus about the need for reform during Hu Jintao's 'lost decade,' 2002 to 2012.</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>The guide for reform: </strong><em>China 2030</em>, jointly prepared by the World Bank and China and adopted by the Third Plenum in 2013.</li></ul><ol start="3" style="font-size: 1em;line-height: 1.875em;margin: .625em 0;margin-left: -1.1em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong> Slower reform, bigger debt.</strong> The decision for leadership: quick reform and lower GDP, or slow reform, maintaining higher GDP but accumulating debt in support of inefficient industries.</li></ol><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>China chose</strong> slower reform, higher GDP, and increasing debt.</li></ul><ol start="4" style="font-size: 1em;line-height: 1.875em;margin: .625em 0;margin-left: -1.1em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong> China's leadership</strong><em> wanted</em> Xi to centralize power. We often hear criticism that Xi Jinping is power hungry. But, in fact, Xi's centralizing of power was part of the consensus leadership plan, what they saw as the only way to push reforms through. </li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong> But, 'Xi Jinping may</strong> have gone well beyond what the consensus originally intended, and the politicization of the reform may not be exactly what some of the designers of the reform intended.' </li></ol><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>Read Bill’s full interview</strong> with explanations of each insight <a href="https://app.robly.com/archive?id=418dbf1b93c0637b797412dc42843baf&amp;v=true" target="_blank" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;">here</a>.</p></td></tr></tbody></table></p></div></div></div>

<div id="NLpost" class="nl-post-wrapper" style="margin:0 auto;"><div id="NLHeader" class="post-card"><div id="Page-header" class="mainheader"><h1 class="t1">Trade talks breakdown: How the U.S. misunderstands Chinese negotiating style</h1><div class="date">May 18, 2019</div><a href="https://www.linkedin.com/in/malcolmriddell/" target="_blank" class="date" style="color: inherit;border-bottom: 0px solid #008dc8;text-decoration: none;">by Malcolm Riddell</a></div><div class="table-block w-condition-invisible w-dyn-bind-empty w-richtext" data-ix="appear-on-load" style="opacity: 1; transition: opacity 1000ms ease 0s;"></div></div><div class="section_title w-condition-invisible"><strong>I. THE LAW AND THE PROTESTS</strong></div><div id="article1" class="post-card"><div class="t2-block">1. Tracing Trump's Aggressive Tariff Strategy Back to the 1980s</div><div class="table-block w-richtext" data-ix="appear-on-load" style="opacity: 1; transition: opacity 1000ms ease 0s;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><table class="nl_card" id="19may1801" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><table class="multi-block" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="embed-responsive embed-responsive-16by9" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;position: relative;display: block;height: 100%;padding: 0;overflow: hidden;"><iframe class="embed-responsive-item" src="https://www.youtube.com/embed/4_xQ5JisFuo"></iframe></td></tr></tbody></table><p class="caption" style="font-size: .8125em;line-height: 1.75em;margin: .625em 0;display: block;color: #848484;margin-top: .5em;margin-bottom: 1.2500em;font-family: 'Lato', sans-serif;">PBS</p><p class="excerpt" style="font-size: 1.125em;line-height: 1.75em;margin: .625em 0;margin-bottom: 1.5em;font-style: italic;text-align: center;color: #c80000;padding: 10px 5%;font-family: 'Lato', sans-serif;">Trump Forged His Ideas on Trade in the 1980s—and Never Deviated. The president has been consistent on trade for decades, unlike on other issues, dating to the rise of Japan as a global economic power.</p></td></tr><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="nl-post" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;padding: 0 2.5em;overflow: hidden;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>I have to admit</strong> I bristled every time President Trump claimed that China is paying the tariffs on Chinese exports – just misleading his base again, I thought. Then, a couple of days ago, I read <a href="https://www.axios.com/donald-trump-us-china-trade-war-tariffs-deal-e154abe0-a00e-4c2f-8caa-1e9a6f370238.html" target="_blank" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;">reporting by Jonathan Swan</a> in Axios:</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;">‘<strong>I've asked </strong>several current and former administration officials whether Trump actually believes that China pays the tariffs — rather than the reality that U.S. importers and consumers do.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘The consensus is "yes":</strong> That's what he actually believes.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘And as one former aide</strong> said: There’s little point trying to persuade Trump otherwise, because his belief in tariffs is "like theology."</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>Could it be</strong> that Mr. Trump also really believes that trade wars are easy to win and that the U.S. is in a great position in the U.S. China trade war, and that tariffs are his theology?</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>The answers</strong> appear to be yes.</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>Here’s some </strong>of what I learned.</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Three decades</strong> before President Trump’s trade agenda jolted the world, he laid out his vision in full-page newspaper advertisements foreshadowing what was to come,’ writes Jacob M. Schlesinger of <em>The New York Times</em> in <a href="https://www.wsj.com/articles/trump-forged-his-ideas-on-trade-in-the-1980sand-never-deviated-1542304508" target="_blank" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;">‘Trump Forged His Ideas on Trade in the 1980s—and Never Deviated.’</a></p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>“Japan and other nations</strong> have been taking advantage of the United States” for years, wrote the New York real-estate developer, in the typewritten letter addressed “To The American People,” his signature affixed to the bottom.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>“ ‘Tax’ these wealthy nations, not America.</strong> End our huge deficits, reduce our taxes…” the September 1987 ads demanded.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>“Let’s not let</strong> our great country be laughed at anymore.”</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong> ‘Asked in a recent</strong> Wall Street Journal interview about the origin of his views on trade, Mr. Trump said, “I just hate to see our country taken advantage of. I would see cars, you know, pour in from Japan by the millions.”</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘In the interview</strong>, Mr. Trump called Japan “interchangeable with China, interchangeable with other countries. But it’s all the same thing.”</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Shortly after</strong> the 1987 publication of Mr. Trump’s book, “The Art of the Deal,” he applied his world view in speeches and television interviews to a raging trade debate as Japan flooded the U.S. with inexpensive, high-quality autos and electronics.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘He continued</strong> gaining attention, and the book became a best seller.’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'He followed his newspaper ads</strong>—they ran in the New York Times, Washington Post and Boston Globe—and a brief flirtation with the 1988 presidential campaign with appearances on talk shows, telling hosts such as Larry King and Oprah Winfrey:’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>“I do get tired</strong> of seeing the country ripped off.” He told Diane Sawyer in 1989 he would impose a 15% to 20% tariff on Japanese imports, adding: “I’m not afraid of a trade war.”</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘He complained specifically</strong> about the persistent trade deficit with Japan costing the U.S. money, as well as Japanese “import quotas and tariffs to protect their own interest,” as he put it in his 1990 book “Trump: Surviving at the Top.”</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>PBS Frontline’s</strong><a href="https://www.youtube.com/watch?v=n7st2oG5AwU" target="_blank" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;">‘Tracing Trump's Aggressive Tariff Strategy Back to the 1980s’</a> includes clips of Mr. Trump during the Japan years. Mr. Trump from the clips:</p><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>On Larry King:</strong> “The fact is that you don't have free trade”</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>“We think</strong> of it as free trade, but we don't have free trade.”</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>“And I think a lot of people</strong> are tired of watching other countries ripping off the United States.”</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>“This is</strong> a great country.”</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>On Oprah:</strong> “They laugh at us because of our own stupidity”</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>“We let Japan</strong> come in and dump everything right into our marketsand everything it's not free trade.”</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>“If you ever go to Japan</strong> right now and try to sell something forget about it out but just forget about it it's almost impossible.”</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>Back to the NYT article: </strong>‘Mr. Trump made trade a signature issue during a brief run for the 2000 Reform Party presidential nomination.'</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>“If President Trump</strong> does the negotiating…watch our trade deficit dwindle,” he wrote in a 1999 Wall Street Journal op-ed headlined <a href="https://www.wsj.com/articles/SB938645589464803190?mod=article_inline" target="_blank" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;">“America Needs a President Like Me.”</a></li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'In 2012, ‘Mr. Trump</strong> also turned serious about exploring a presidential run.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Considering a 2012 GOP bid</strong>, Mr. Trump met for two hours in August 2010 with Steve Bannon, co-founder of the Breitbart News website that shared Mr. Trump’s views on trade and immigration.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Mr. Bannon</strong> was struck by the developer’s familiarity and focus on trade.’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>Again in the PBS Frontline’s</strong><a href="https://www.youtube.com/watch?v=n7st2oG5AwU" target="_blank" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;">‘Tracing Trump's Aggressive Tariff Strategy Back to the 1980s’</a> an interview clip with Steve Bannon about his 2012 meeting with Mr. Trump, in which he said:</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>“The first time</strong> I ever met Trump I was set to be unimpressed. I was actually very impressed.”</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>“Now he didn't know</strong> a lot of details, he knew almost no policy.”</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>“But what I found</strong> most extraordinary was when we got to the section on China, which I kind of threw out, out of a two-hour meeting almost 30 minutes or more was all about China.”</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>“We’ve got a remember</strong> a lot of this he was just reciting everything you'd heard from Lou Dobbs.”</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>“He's been a guy</strong> that's watched Lou Dobbs for 30 or 40 years and the only thing he had formed as a worldview was China.”</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>About Mr. Trump’s</strong> winning 2016 message, Mr. Bannon says:</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>“He talked</strong> in this kind of vernacular that kind of hit people in the gut.”</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>“Particularly</strong> he talked about trade and jobs - job shipping overseas was his message to these people on trade: China's to blame.”</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>“The messages are very simple:</strong> the elite shipped the jobs overseas, and I'm going to bring them back.”</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>Watch Frontline’s</strong> excellent report <a href="https://youtu.be/4_xQ5JisFuo" target="_blank" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;">‘Trump’s Trade War,’ a 55m full video </a>with great interviews and commentary.</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘The inside story</strong> of President Trump’s gamble to confront China over trade.’</li></ul></td></tr></tbody></table></p></div></div><div id="article2" class="post-card"><div class="t2-block">2. Tom Friedman explains why he agrees with Trump's China aims but not his means</div><div class="table-block w-richtext" data-ix="appear-on-load" style="opacity: 1; transition: opacity 1000ms ease 0s;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><table class="nl_card" id="19may1802" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><table class="multi-block" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="embed-responsive embed-responsive-16by9" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;position: relative;display: block;height: 100%;padding: 0;overflow: hidden;"><iframe class="embed-responsive-item" src="https://www.youtube.com/embed/nVBqSOPWIUw"></iframe></td></tr></tbody></table><p class="caption" style="font-size: .8125em;line-height: 1.75em;margin: .625em 0;display: block;color: #848484;margin-top: .5em;margin-bottom: 1.2500em;font-family: 'Lato', sans-serif;">CNBC</p><p class="excerpt" style="font-size: 1.125em;line-height: 1.75em;margin: .625em 0;margin-bottom: 1.5em;font-style: italic;text-align: center;color: #c80000;padding: 10px 5%;font-family: 'Lato', sans-serif;">‘I'm absolutely certain Trump is the American president that China deserves right now.’</p></td></tr><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="nl-post" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;padding: 0 2.5em;overflow: hidden;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘We can disagree</strong> whether Donald Trump is the American president that America deserves right now,’ <a href="https://youtu.be/nVBqSOPWIUw" target="_blank" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;">says NYT’s Thomas Friedman</a> in a CNBC video interview.</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘But I'm absolutely certain</strong> he's the American president that China deserves right now.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘China needed someone</strong> who was going to actually take on the trade relationship between the two countries because that relationship was misaligned.’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong> ‘For many years</strong> we bought their toys and solar panels t-shirts and tennis shoes.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘They bought</strong> our soybeans and Boeings.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Occasionally</strong> it got out of whack.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Then we would come</strong> to them, and they would buy more Boeings and soybeans.’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong> ‘Two fundamental things</strong> have happened that has changed this equation.’</p><ol style="font-size: 1em;line-height: 1.875em;margin: .625em 0;margin-left: -1.1em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong> ‘They are now</strong> competing head-to-head with our most cutting-edge companies.’</li></ol><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>“China 2025”</strong> is not about soybeans – it's about artificial intelligence, new materials, aerospace supercomputing.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘So they're now competing </strong>head-to-head with our cutting-edge companies.’</li></ul><ol start="2" style="font-size: 1em;line-height: 1.875em;margin: .625em 0;margin-left: -1.1em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong> ‘These technologies</strong> are all dual-use: things that will turn on your toaster will also you know turn on your missile. This is why we had to take this on.’</li></ol><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘If China is going to compete</strong> with us the way they did before – okay, cheating on some of these things.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘But, now</strong> it's about AI and supercomputers.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘They can protect all their companies,</strong> grow them to a giant size inside China, and then unleash them on the world - that becomes a strategic challenge to us as number one.’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong> ‘So while I agree</strong> with the President's aims, I don't agree with his means.’</p><ol style="font-size: 1em;line-height: 1.875em;margin: .625em 0;margin-left: -1.1em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘I would have</strong> made signing the Trans Pacific Partnership a top priority – TPP represented 40% of global GDP’ - whether or not it could be passed by Congress.</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong> ‘I would have</strong> gotten the Europeans completely on my side – not wasting my ammunition on aluminum and steel tariffs with them.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong> ‘Then I would have</strong> called Xi Jinping the president China and said, “You send your three top negotiators to Hainan Island, and I'm going to send my three. We're going to do all this in secret - nothing on Twitter, nothing in public, not going to try to embarrass you.”</li></ol></td></tr></tbody></table></p></div></div><div id="article3" class="post-card"><div class="t2-block">3. Trade talks breakdown: How the U.S. misunderstands Chinese negotiating style</div><div class="table-block w-richtext" data-ix="appear-on-load" style="opacity: 1; transition: opacity 1000ms ease 0s;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><table class="nl_card" id="19may1803" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><table class="multi-block" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="bg-holder" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;max-width: 100%;margin: 0 auto;padding: 0;"><img src="https://webapi.project-syndicate.org/library/41d4dc269e27892dd3cdef9cbcc998cf.2-1-super.1.jpg" alt="CHINADebate" style="width: 100%;margin: 0 auto;"></td></tr></tbody></table><p class="caption" style="font-size: .8125em;line-height: 1.75em;margin: .625em 0;display: block;color: #848484;margin-top: .5em;margin-bottom: 1.2500em;font-family: 'Lato', sans-serif;">Project Syndicate</p><p class="excerpt" style="font-size: 1.125em;line-height: 1.75em;margin: .625em 0;margin-bottom: 1.5em;font-style: italic;text-align: center;color: #c80000;padding: 10px 5%;font-family: 'Lato', sans-serif;">‘Although it is hard to pinpoint the exact cause of the breakdown in talks, I suspect a clash of negotiating norms and styles may have played a role.’</p></td></tr><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="nl-post" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;padding: 0 2.5em;overflow: hidden;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;">‘<strong>Although it is hard to pinpoint</strong> the exact cause of the breakdown in talks, I suspect a clash of negotiating norms and styles may have played a role, in addition to differences on substance,’ writes <strong>Shang-Jin Wei</strong>, former Chief Economist of the Asian Development Bank, now Professor of Finance and Economics at Columbia University, in <a href="https://www.project-syndicate.org/commentary/us-china-trade-talks-breakdown-by-shang-jin-wei-2019-05" target="_blank" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;">‘Why the US and China See Negotiations Differently.’</a></p><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong> ‘Consider the example</strong> of a three-day negotiation between the US and Chinese teams that will cover nine topics.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Let us say</strong> that the two sides have reached an agreement on the first six topics after two days of talks.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘On the final day, </strong>they reach an impasse on the last three points, and the Chinese side declares – suddenly, from the US team’s viewpoint – that they have to alter the agreement on the first six topics.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘At this point,</strong> the American team may very well feel that the Chinese side is untrustworthy or insincere, and the whole negotiation may break down as a result.’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong> ‘Most American negotiators</strong> adopt a checklist approach: if they wish to cover nine topics, they would like to reach agreement on each one in turn.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘The Chinese, by contrast</strong>, are accustomed to taking a more holistic approach, and follow a norm of “nothing is agreed until everything is agreed.”</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong> ‘In the above example,</strong> when the Chinese side agreed to positions on the first six topics, they had certain expectations about how the last three points would look at the end of the negotiations.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘When the discussion</strong> about these three topics turned out to be quite different from what they had expected, they asked to revisit the first six, because the various tradeoffs among the nine topics had changed.’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘If the above impasse</strong> had occurred between two opposing Chinese negotiating teams, neither side would have found it strange had the other asked to revisit the first six topics.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Each would have expected</strong> the “agreement” on these six points to be only temporary, and subject to revision based on the outcome of the discussions about the last three topics.’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong> ‘Both the checklist approach</strong> and the norm of nothing-is-agreed-until-everything-is-agreed are perfectly valid.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘But a clash of expectations</strong> can result if the two sides are not aware of these different styles.’</li></ul></td></tr></tbody></table></p></div></div><div class="section_title w-condition-invisible"><strong>II. POTENTIAL BACKLASH FROM THE U.S.<br></strong></div><div id="article4" class="post-card"><div class="t2-block">4. Trade War Won’t Dent China’s GDP</div><div class="table-block w-richtext" data-ix="appear-on-load" style="opacity: 1; transition: opacity 1000ms ease 0s;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><table class="nl_card" id="19may1804" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><table class="multi-block" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="bg-holder" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;max-width: 100%;margin: 0 auto;padding: 0;"><img src="https://assets.bwbx.io/images/users/iqjWHBFdfxIU/i206YyewR2Pk/v1/1000x-1.jpg" alt="CHINADebate" style="width: 100%;margin: 0 auto;"></td></tr></tbody></table><p class="caption" style="font-size: .8125em;line-height: 1.75em;margin: .625em 0;display: block;color: #848484;margin-top: .5em;margin-bottom: 1.2500em;font-family: 'Lato', sans-serif;">Bloomberg</p><p class="excerpt" style="font-size: 1.125em;line-height: 1.75em;margin: .625em 0;margin-bottom: 1.5em;font-style: italic;text-align: center;color: #c80000;padding: 10px 5%;font-family: 'Lato', sans-serif;">‘As long as China has debt capacity, and the government is willing to use it, China can achieve any GDP growth target it wants.’</p></td></tr><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="nl-post" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;padding: 0 2.5em;overflow: hidden;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Chinese GDP</strong> will be unaffected by a trade war with the U.S., no matter how severe,’ <a href="https://www.bloomberg.com/opinion/articles/2018-08-19/trade-war-with-u-s-won-t-dent-china-s-gdp" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;">writes Michael Pettis,</a> professor at the Guanghua School of Management at Peking University.</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Because the government</strong> will do whatever it takes to meet its growth targets.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘That doesn’t mean</strong> higher tariffs won’t damage the Chinese economy.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘The pain</strong> will instead show up instead mainly in the form of a more rapid rise in debt.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘The harsher</strong> the war’s impact, in other words, the more debt China will need to achieve its growth target.’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘In China,</strong> the government sets the GDP growth rate early in the year at a level thought adequate to accommodate its social and political objectives, among which is to keep unemployment low.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘The political nature</strong> of the target modifies the standard economic constraints.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Local governments </strong>are encouraged to generate whatever additional economic activity is required.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>In this way,</strong> ‘along with the economic activity of the private and real-estate sectors, the target is reached (within a few tenths of a percentage point).’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong> ‘Two factors</strong> unique to China are critical for this system to work.’</p><ol style="font-size: 1em;line-height: 1.875em;margin: .625em 0;margin-left: -1.1em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong> ‘Until</strong> now local governmentshaven’t been subject to hard budget constraints.’</li></ol><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'They can engage </strong>in near-unlimited amounts of non-productive economic activity unconstrained by worries about remaining solvent.’</li></ul><ol start="2" style="font-size: 1em;line-height: 1.875em;margin: .625em 0;margin-left: -1.1em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong> 'Second </strong>and necessary for the first, local governments control most credit creation within the banking system.’</li></ol><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Because such loans</strong> are directly or indirectly guaranteed, banks don’t have to write down loans when the projects they fund cannot service the debt.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘This allows</strong> the banks to extend as much new credit as local governments need to meet their targets.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘If, as is widely acknowledged</strong> even by the government, the amount of debt written down in every period is less than the amount of non-economic loans extended during that period, recorded GDP growth will rise, regardless of whether the underlying economy can or can’t generate enough activity on its own.’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘As long as China has debt capacity</strong>, and the government is willing to use it, China can achieve any GDP growth target it wants.’</p><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Thus, while GDP numbers</strong> may tell us something about the government’s social and political priorities, they’re a poor measure of the underlying performance of the economy.’</p><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘They tell us</strong> even less about the impact of trade war on the Chinese economy.’</p></td></tr></tbody></table></p></div></div><div id="article5" class="post-card"><div class="t2-block">5. Comments on the U.S.-China trade war from PIIE president Adam Posen</div><div class="table-block w-richtext" data-ix="appear-on-load" style="opacity: 1; transition: opacity 1000ms ease 0s;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><table class="nl_card" id="19may1805" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><table class="multi-block" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="embed-responsive embed-responsive-16by9" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;position: relative;display: block;height: 100%;padding: 0;overflow: hidden;"><iframe class="embed-responsive-item" src="https://www.youtube.com/embed/fK9RqIDMbo4"></iframe></td></tr></tbody></table><p class="caption" style="font-size: .8125em;line-height: 1.75em;margin: .625em 0;display: block;color: #848484;margin-top: .5em;margin-bottom: 1.2500em;font-family: 'Lato', sans-serif;">PIIE</p><p class="excerpt" style="font-size: 1.125em;line-height: 1.75em;margin: .625em 0;margin-bottom: 1.5em;font-style: italic;text-align: center;color: #c80000;padding: 10px 5%;font-family: 'Lato', sans-serif;">‘My second point is that U.S. tariffs are “Stupid.”</p></td></tr><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="nl-post" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;padding: 0 2.5em;overflow: hidden;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘The first point</strong> I would make to China is you should not be surprised that President Trump put on these tariffs,’ <a href="https://youtu.be/fK9RqIDMbo4" target="_blank" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;">says Adam Posen</a>, president of the Peterson Institute for International Economics in an address to a joint PIIE and China Finance 40 conference.</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘We at the Peterson Institute</strong> have been warning for quite some time that the President genuinely believes in tariffs, genuinely believes that China is a national security threat to the US, and therefore the combination was likely to result in some aggressive moves by the US government.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘This is not solely a matter of Trump however</strong> – the shift in opinion among business elites in the US and among defense elites in the US in terms of being suspicious of China and worrying about China's economic power had already begun late in the Obama administration.’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘My second point</strong> is that U.S. tariffs are - as my colleague Yang Ding here would say - “Stupid.”</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘They are mostly destructive to the U.S.</strong> and - depending on the specific good or service – because they are a tax on the ultimate consumer.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘The tariffs</strong> are not paid for by China.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘The revenues attracted</strong> by the U.S. government, as president Trump claims, are small potatoes and not useful compared to the economic losses caused.’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong> ‘The damage</strong> to the US economy and to the Chinese economy from the tariffs is amplified in a world of global supply chains.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘That’s because </strong>of the complexity and the interactions and efficiency of these supply chains.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Tariffs at intermediate stages</strong> of production cost more and are more disruptive.’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘But the biggest losses</strong> to both the Chinese and the US economies come through the investment channel not through the tariffs directly.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘We have created </strong>a new regime of ongoing uncertainty in which there will be diminished investment overall and in which there will be more inefficient investment.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘This is partly clouded</strong> in the aggregate data because there are redundant inefficient investments being made.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘There are investments</strong> being made to back up or diversify supply chains.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘There are investments</strong> being made to ensure market access.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘These may on balance,</strong> given the politics, be the rational thing to do but in economic terms these are redundant investments or distortionary investments at best.’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘In my view</strong> this U.S.-China economic conflict is part of the corrosion of globalization.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘It's not that there is an all-out attack</strong> on globalization specifically or that there's some unified direction of history: globalization is up or down.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘But it is that the quality of globalization,</strong> how evenly it is applied across the world, how consistent it is, is eroding.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘There are holes</strong> in the network even as at some places it expands or contracts.’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>Adam Posen</strong> goes on to make seven recommendations about how China should manage the U.S. in the trade war.</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>Watch</strong> his full analysis <a href="https://youtu.be/fK9RqIDMbo4" target="_blank" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;">here</a>.</li></ul></td></tr></tbody></table></p></div></div><div class="section_title w-condition-invisible"><strong>III. CONGRESS &amp; THE PRESIDENT REACT<br></strong></div><div id="article6" class="post-card"><div class="t2-block">6. China’s response: a stable or a weakened Yuan?</div><div class="table-block w-richtext" data-ix="appear-on-load" style="opacity: 1; transition: opacity 1000ms ease 0s;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><table class="nl_card" id="19may1806" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><table class="multi-block" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="bg-holder" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;max-width: 100%;margin: 0 auto;padding: 0;"><img src="https://cfrd8-files.cfr.org/sites/default/files/styles/large_l/public/image/2019/05/Tracking%20the%20yuan%20%285.13%29_1.png" alt="CHINADebate" style="width: 100%;margin: 0 auto;"></td></tr></tbody></table><p class="caption" style="font-size: .8125em;line-height: 1.75em;margin: .625em 0;display: block;color: #848484;margin-top: .5em;margin-bottom: 1.2500em;font-family: 'Lato', sans-serif;">cfr</p><p class="excerpt" style="font-size: 1.125em;line-height: 1.75em;margin: .625em 0;margin-bottom: 1.5em;font-style: italic;text-align: center;color: #c80000;padding: 10px 5%;font-family: 'Lato', sans-serif;">‘My best guess is that China limits any near-term Yuan move as it tries to see if there is still time (and will) to cut a deal that avoids further escalation.’</p></td></tr><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="nl-post" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;padding: 0 2.5em;overflow: hidden;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘If Trump</strong> goes ahead with all the threatened tariffs, it raises a basic question:</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Will China continue </strong>to want to keep its currency stable, or would it want to try to offset the (substantial) trade impact of “full” U.S. tariffs with a weaker yuan?’ asks the Council on Foreign Relations’ Brad Setser in <a href="https://www.cfr.org/blog/what-difference-week-or-weekend-makes" target="_blank" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;">‘What a Difference a Week (or a Weekend) Makes.’</a></li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘There are</strong> two different interpretations of what China can and should do in response to the increase in U.S. tariffs.’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'One view,</strong> more or less, is that China has no need to upset the apple cart.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘The yuan’s recent stability</strong> hasn’t required heavy intervention (at least so long as the financial account remains controlled) or forced China to raise interest rates, and’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘China has shown</strong> that it can stabilize its domestic economy by relaxing lending curbs and a more expansionary fiscal policy.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Letting the yuan</strong> move too quickly could upset the restoration of domestic confidence in China’s economic management, and, well, force China to dip into its reserves to keep any move limited.’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘I suspect that China</strong> has more than enough firepower to maintain the yuan in its current band if it wants to even with U.S. tariff escalation.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘The tariffs</strong>—plus the Iranian and Venezuelan oil sanctions—might be enough to push China’s current account into an external deficit (China is the world’s largest oil importer, so the price of oil matters for the overall balance as much as U.S. tariffs).’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘But if China signaled</strong> that the yuan would remain stable, portfolio inflows would likely continue—and a modest deficit need not put any real strain on China’s reserves (especially if Xi insists on a bit more discipline in Belt and Road lending to avoid new debt traps).’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘The other view</strong> is that China has shown that it is firmly in control of its exchange rate and balance of payments, and thus it is in a position to let its currency weaken without putting its own financial stability at risk.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Controlled depreciations are hard</strong>—the market (even a controlled market like the market for the yuan) obviously has an incentive to front run any predictable move (as China learned in 15 and 16).’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘But I suspect China</strong> could pull that off —it would just need to signal at some point that once the yuan had reset down, China would resist further depreciation. The goal, in effect, would be to reset the yuan’s trading range around a new post U.S. tariff band, not to move directly to a true free float.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘That would let Chinese firms </strong>(who have already started to complain) cut their dollar prices (offsetting some of the impact of the tariff) without reducing their yuan revenues, and help China make up for lost exports to the United States with additional exports to the rest of the world.’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Basically,</strong> it is China’s choice - it won't be forced into an option it doesn't like.’</p><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘But it is a choice</strong> that obviously matters enormously for the entire world.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Other Asian economies, </strong>setting Japan aside, would likely let their currencies depreciate along with the yuan to avoid losing out to China in global markets.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Other manufacturing</strong> exporting and oil importing emerging economies (like Turkey) might face a bit of unwelcome pressure on their currencies as well.’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Not all currencies</strong> though would depreciate along side the yuan.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘And a weaker yuan</strong> against the euro and the yen would hurt European and Japanese exports (China exports a lot of capital goods these days, it isn't just a producer of consumer goods).’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘A weaker yuan,</strong> in effect, redistributes some of China's trade pain globally, and thus poses a challenge to those parts of the world that have relied on exports rather than domestic demand to power their own economies.’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘My best guess</strong> is that China limits any near-term move as it tries to see if there is still time (and will) to cut a deal that avoids further escalation.’</p><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>Lots more</strong><strong>excellent analysis.</strong> Read all of Brad Setser’s <a href="https://www.cfr.org/blog/what-difference-week-or-weekend-makes" target="_blank" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;">‘What a Difference a Week (or a Weekend) Makes.’</a></p></td></tr></tbody></table></p></div></div></div>

<div id="NLpost" class="nl-post-wrapper" style="margin:0 auto;"><div id="NLHeader" class="post-card"><div id="Page-header" class="mainheader"><h1 class="t1">Sharpening the US-China trade debate</h1><div class="date">May 15, 2019</div><a href="https://www.linkedin.com/in/malcolmriddell/" target="_blank" class="date" style="color: inherit;border-bottom: 0px solid #008dc8;text-decoration: none;">by Malcolm Riddell</a></div><div class="table-block w-condition-invisible w-dyn-bind-empty w-richtext" data-ix="appear-on-load" style="opacity: 1; transition: opacity 1000ms ease 0s;"></div></div><div class="section_title w-condition-invisible"><strong>I. THE LAW AND THE PROTESTS</strong></div><div id="article1" class="post-card"><div class="t2-block">1. It's Trump vs. Xi in the China trade war — and it's personal</div><div class="table-block w-richtext" data-ix="appear-on-load" style="opacity: 1; transition: opacity 1000ms ease 0s;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><table class="nl_card" id="19may1501" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><table class="multi-block" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="bg-holder" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;max-width: 100%;margin: 0 auto;padding: 0;"><img src="https://cdn.cnn.com/cnnnext/dam/assets/190510145730-02-china-trade-file-exlarge-169.jpg" alt="CHINADebate" style="width: 100%;margin: 0 auto;"></td></tr></tbody></table><p class="caption" style="font-size: .8125em;line-height: 1.75em;margin: .625em 0;display: block;color: #848484;margin-top: .5em;margin-bottom: 1.2500em;font-family: 'Lato', sans-serif;"></p><p class="excerpt" style="font-size: 1.125em;line-height: 1.75em;margin: .625em 0;margin-bottom: 1.5em;font-style: italic;text-align: center;color: #c80000;padding: 10px 5%;font-family: 'Lato', sans-serif;"></p></td></tr><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="nl-post" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;padding: 0 2.5em;overflow: hidden;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong> ‘Neither </strong>Donald Trump nor Xi Jinping can afford to blink,’ <a href="https://edition.cnn.com/2019/05/14/politics/donald-trump-xi-jinping-china-trade-war/index.html" target="_blank" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;">writes</a> CNN’s Stephen Collinson.</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong> ‘The showdown </strong>is now no longer just a confrontation between China and the US.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘It's become a test of wills</strong> between two of the world's most powerful men, each of whom has political interests that are more likely to deepen the conflict than to quickly ease it.’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong> ‘The confrontation </strong>has already revealed a truth that reflects an important geopolitical evolution: <strong>Beijing is not afraid of the United States.</strong>’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Trump spent the weekend</strong> warning China on Twitter that it would be "hurt very badly" if it didn't do a deal.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘By Monday morning,</strong> he had his answer when Beijing announced plans to raise tariffs on $60 billion in US goods.’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>"China feels</strong> it does not have to give in," said Max Baucus, a former US. Ambassador to China.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>"Add to that</strong>, saving face is a big deal in China.”</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>“President Xi Jinping</strong> does not want to appear to have backed down.”</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>“I don't think</strong> Americans understand that.”</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>So, ‘the Chinese leader</strong> is no keener to climb down than Trump.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Xi sees US demands</strong> as an infringement on Chinese sovereignty.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘And has an incentive</strong> to keep globalization intact since China has profited handsomely from the status quo.’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>Also ‘Xi</strong> is not immune to political pressures.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Although</strong> he is the most dominant Chinese leader in decades, he cannot completely ignore complicated internal Communist Party dynamics.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Chinese leaders</strong> are always wary of any changes to social conditions - that could be brought on by a slowing economy - that could cause public resentment and translate into political activity.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘China is also sensitive</strong> to its own experience under colonialism and proud of its rise as a key regional power and global player.’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong> ‘So there is no circumstance</strong> under which Xi could allow himself to be seen as bowing to bullying from any Western leader, let alone an American president as combative as Trump.’</p></td></tr></tbody></table></p></div></div><div id="article2" class="post-card"><div class="t2-block">2. 'Reaching an agreement can only be done at the top.’</div><div class="table-block w-richtext" data-ix="appear-on-load" style="opacity: 1; transition: opacity 1000ms ease 0s;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><table class="nl_card" id="19may1502" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><table class="multi-block" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="bg-holder" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;max-width: 100%;margin: 0 auto;padding: 0;"><img src="https://csis-prod.s3.amazonaws.com/s3fs-public/styles/csis_banner/public/publication/190513_U.S._China.jpg?itok=4XZkSz8a" alt="CHINADebate" style="width: 100%;margin: 0 auto;"></td></tr></tbody></table><p class="caption" style="font-size: .8125em;line-height: 1.75em;margin: .625em 0;display: block;color: #848484;margin-top: .5em;margin-bottom: 1.2500em;font-family: 'Lato', sans-serif;"></p><p class="excerpt" style="font-size: 1.125em;line-height: 1.75em;margin: .625em 0;margin-bottom: 1.5em;font-style: italic;text-align: center;color: #c80000;padding: 10px 5%;font-family: 'Lato', sans-serif;"></p></td></tr><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="nl-post" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;padding: 0 2.5em;overflow: hidden;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Once again</strong> it is impossible not to write about China,’ <a href="https://www.csis.org/analysis/china-again-and-again-and-again-0" target="_blank" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;">says</a> Bill Reinsch of Center for ‘Strategic &amp; International Studies and top trade expert.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘The events</strong> of the past week and a half, where we managed to go from an agreement that was nearly finished to one that had fallen apart to one that was still hanging in there by its fingertips roiled the markets, distressed retailers and manufacturers, and left all of us confused.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Looking at the way</strong> it played out, I draw several conclusions.’ </li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘First, it is apparent</strong> that we were not as close to a finished agreement as the president was tweeting.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘It seems</strong> that while the so-called structural items were not entirely resolved, neither was the package of Chinese purchases fully nailed down nor the agreement on what would happen to the existing tariffs.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘This</strong> was not news to close observers.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘The U.S. Trade Representative (USTR)</strong> had been telling people for some time not to assume an agreement was imminent, but the president kept tweeting away anyway.’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Second,</strong> for once the president's cranky tweet was not entirely gratuitous.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘The Chinese</strong> clearly signaled their intent to pull back from commitments we thought were settled.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘There has been</strong> a good bit of speculation about why they did that, but the opacity of the Chinese system makes it very difficult to say with certainty what happened.’ </li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Third,</strong> one clear consequence is that the two presidents have effectively declared themselves the chief negotiators.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Trump</strong> has been overruling his various representatives for some time, and it looks like Xi Jinping did the same to Liu He.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘The result</strong> is that both negotiators know they do not have full authority, and anything they agree to risks being countermanded.’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Fourth,</strong> that means reaching an agreement can only be done at the top.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘If you're going</strong> to act as the negotiator, then eventually you actually have to negotiate.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘This is also</strong> one of those cases where each president thinks he can get the better of the other.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Xi probably thinks,</strong> correctly, that he will know the details better than Trump and can outwit him.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Trump thinks,</strong> less correctly, that he is a better negotiator and can intimidate Xi.</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Not a recipe</strong> for a successful outcome, but the two presidents have, by their own actions, made a meeting inevitable.’</li></ul></td></tr></tbody></table></p></div></div><div id="article3" class="post-card"><div class="t2-block">3. Sharpening the US-China trade debate</div><div class="table-block w-richtext" data-ix="appear-on-load" style="opacity: 1; transition: opacity 1000ms ease 0s;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><table class="nl_card" id="19may1503" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><table class="multi-block" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="bg-holder" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;max-width: 100%;margin: 0 auto;padding: 0;"><img src="https://www.aei.org/wp-content/uploads/2019/05/RTX6V6CJ-e1557759022290.jpg" alt="CHINADebate" style="width: 100%;margin: 0 auto;"></td></tr></tbody></table><p class="caption" style="font-size: .8125em;line-height: 1.75em;margin: .625em 0;display: block;color: #848484;margin-top: .5em;margin-bottom: 1.2500em;font-family: 'Lato', sans-serif;"></p><p class="excerpt" style="font-size: 1.125em;line-height: 1.75em;margin: .625em 0;margin-bottom: 1.5em;font-style: italic;text-align: center;color: #c80000;padding: 10px 5%;font-family: 'Lato', sans-serif;"></p></td></tr><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="nl-post" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;padding: 0 2.5em;overflow: hidden;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘China trade</strong> is being argued in strings of tweets and 7-minute (if you’re lucky) TV segments,’ says AEI’s Derek Scissors in <a href="http://www.aei.org/publication/sharpening-the-us-china-trade-debate/" target="_blank" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;">‘Sharpening the US-China trade debate.’</a></p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘As a result,</strong> no one gets it quite right, present company included.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Here are corrections</strong> of four important missteps in the debate.’</li></ul><table class="intable" style="border-collapse: separate;width: 100%;color: #001544;letter-spacing: 0px;border-spacing: 0;margin: 2.5em auto;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="intable-border" style="border-collapse: separate;width: 100%;color: #001544;letter-spacing: 0px;border-spacing: 0;border: 5px solid #f0f0f0;border-radius: 12px;background-color: #f4f4f4;padding: 1.5em;"><h5 style="display: block;font-weight: 700;line-height: 1.8em;margin: 1em 0;font-size: 1.3125em;margin-top: 1.5em;padding-bottom: .2em;border-bottom: 2px solid #c80000;">‘1) President Trump being partly wrong: Every dollar of the trade deficit we run with China is a loss for the US.’</h5><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘The President</strong> shouldn’t use the full trade deficit as representing losses, as the US doesn’t just hand China cash.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘The store analogy</strong> is common: when buying something you want at a store, you don’t just lose the money spent.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘You also don’t go</strong> to stores looking to only buy the same amount the store buys from you — for the equivalent of balanced trade.’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘While President Trump</strong> is wrong about imports we buy, he’s right about exports we don’t sell.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Beijing’s protection</strong> of state-owned enterprises from competition depresses sales of American goods and services.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>Temporarily higher purchases</strong> of farm and energy products would be lucrative but, when they end, would leave the market just as restricted as before.’</li></ul></td></tr></tbody></table><table class="intable" style="border-collapse: separate;width: 100%;color: #001544;letter-spacing: 0px;border-spacing: 0;margin: 2.5em auto;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="intable-border" style="border-collapse: separate;width: 100%;color: #001544;letter-spacing: 0px;border-spacing: 0;border: 5px solid #f0f0f0;border-radius: 12px;background-color: #f4f4f4;padding: 1.5em;"><h5 style="display: block;font-weight: 700;line-height: 1.8em;margin: 1em 0;font-size: 1.3125em;margin-top: 1.5em;padding-bottom: .2em;border-bottom: 2px solid #c80000;">‘2) His critics being uselessly right: We oppose China’s unfair trade practices. But tariffs are not the right approach.</h5><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Most times</strong> that’s the end of a quote — there’s no alternative.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Across-the-board tariffs</strong> constitute collective punishment, not just punishment of those receiving stolen intellectual property or heavy subsidies.’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘There are indeed better choices,</strong> and not suggesting any raises questions about the aims of those rejecting tariffs.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘An incomplete alternative</strong> is to insist we cooperate with allies when confronting China. How?’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘If our cooperation</strong> with our allies is just more talk, it’s worse than useless.’ </li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Large SOEs</strong> are the inevitable beneficiaries of illicit IP transfer, the biggest recipient of subsidies, and the key instruments for the Party’s control of the economy.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘They are</strong> the proper targets.’</li></ul></td></tr></tbody></table><table class="intable" style="border-collapse: separate;width: 100%;color: #001544;letter-spacing: 0px;border-spacing: 0;margin: 2.5em auto;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="intable-border" style="border-collapse: separate;width: 100%;color: #001544;letter-spacing: 0px;border-spacing: 0;border: 5px solid #f0f0f0;border-radius: 12px;background-color: #f4f4f4;padding: 1.5em;"><h5 style="display: block;font-weight: 700;line-height: 1.8em;margin: 1em 0;font-size: 1.3125em;margin-top: 1.5em;padding-bottom: .2em;border-bottom: 2px solid #c80000;">‘3) President Trump, seeming to veer off his original goal: “These [tariffs] are partially responsible for our great economic results.”</h5><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘The President</strong> has touted the fiscal benefits of tariffs, with tens of billions of dollars taken in.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘One problem</strong> is we still run a large budget deficit.’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘More subtle</strong> is that higher tariffs make Chinese goods costlier, leading to lower imports.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘His recent tweets</strong> strangely make this sound like a bad thing, because tariff revenue would be lower.’ </li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘In fact,</strong> revenue raised by tariffs is a trivial issue both for the budget and the Sino-American relationship.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Those attacking</strong> the President on this score are also misguided.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘The money</strong> involved and who formally pays it doesn’t matter; what matters is if imports from China fall.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Falling imports</strong> will hurt the PRC; the effect on us depends on how they are replaced.’</li></ul></td></tr></tbody></table><table class="intable" style="border-collapse: separate;width: 100%;color: #001544;letter-spacing: 0px;border-spacing: 0;margin: 2.5em auto;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="intable-border" style="border-collapse: separate;width: 100%;color: #001544;letter-spacing: 0px;border-spacing: 0;border: 5px solid #f0f0f0;border-radius: 12px;background-color: #f4f4f4;padding: 1.5em;"><h5 style="display: block;font-weight: 700;line-height: 1.8em;margin: 1em 0;font-size: 1.3125em;margin-top: 1.5em;padding-bottom: .2em;border-bottom: 2px solid #c80000;">‘4) His critics talking their own book, not the country’s: Higher tariffs blast American consumers and could tip us into recession.’</h5><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘The US faces </strong>consumer inflation bordering on too low.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘That doesn’t make</strong> higher prices from tariffs a positive but it neutralizes them as a macroeconomic threat.’ </li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘If the US places</strong> 25 percent tariffs on all Chinese imports and no substitution for those goods and services occurs, the additional cost would be $145 billion.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘That’s a bit over</strong> one percent of 2018 consumer spending.’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘The cost will certainly</strong> not that be that high, because substitution will occur.’</p><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;">‘And the cost will fall over time as more producers enter to replace Chinese.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘The big numbers</strong> in tariff losses come from the stock market, which is supposed to match risk and return but which some investors treat as deserving government protection.’ </li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Wall Street whining aside,</strong> farmers and others are indeed harmed by the trade conflict. The justification?’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘The dictatorship</strong> running the world’s 2nd largest economy wants permanent unbalanced market access and to take the innovations of others at will.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘The costs</strong> of trying to change this can be exaggerated but there are no magic tariffs, magic coalitions, or magic negotiations.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘It’s not going</strong> to change without pain.’</li></ul></td></tr></tbody></table></td></tr></tbody></table></p></div></div><div class="section_title w-condition-invisible"><strong>II. POTENTIAL BACKLASH FROM THE U.S.<br></strong></div><div id="article4" class="post-card"><div class="t2-block">4. FACE OFF: Brookings vs. American Enterprise Institute</div><div class="table-block w-richtext" data-ix="appear-on-load" style="opacity: 1; transition: opacity 1000ms ease 0s;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><table class="nl_card" id="19may1504" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><table class="multi-block" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="embed-responsive embed-responsive-16by9" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;position: relative;display: block;height: 100%;padding: 0;overflow: hidden;"><iframe class="embed-responsive-item" src="https://www.youtube.com/embed/uEg-s-FN8VA"></iframe></td></tr></tbody></table><p class="caption" style="font-size: .8125em;line-height: 1.75em;margin: .625em 0;display: block;color: #848484;margin-top: .5em;margin-bottom: 1.2500em;font-family: 'Lato', sans-serif;"></p><p class="excerpt" style="font-size: 1.125em;line-height: 1.75em;margin: .625em 0;margin-bottom: 1.5em;font-style: italic;text-align: center;color: #c80000;padding: 10px 5%;font-family: 'Lato', sans-serif;"></p></td></tr><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="nl-post" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;padding: 0 2.5em;overflow: hidden;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>The PBS Newshour</strong> brought together two top experts with two opposing views of the U.S.-China trade war.</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><a href="https://www.youtube.com/watch?v=uEg-s-FN8VA" target="_blank" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;">Watch the match up here</a> (11m 42s video, debate starting at minute 4).</li></ul><hr style="border: 0;border-top: 3px solid #f5f5f5;height: 5px;margin: 10px auto;text-align: center;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>NICK SCHIFRIN</strong>: ‘This afternoon President Trump tweeted and called today's discussions candid and constructive and said the conversations will continue.’</p><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘To talk this through,</strong> we get two differing views.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Ryan Hass</strong> was the director for China on the National Security Council staff during the Obama administration. He is now a Brookings Institution fellow, and’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Derek Scissors</strong> who has written extensively about China's economy and is a resident scholar at the American Enterprise Institute.’</li></ul><br><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;">❓<strong>NICK SCHIFRIN : </strong><em>‘Many assumed last week that there would be a deal between the two sides. Was this a breakdown we saw today?’</em></p><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;">⚡<strong>RYAN HASS:</strong> ‘Well, it appears to have been a breakdown from expectations.'</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘A week ago,</strong> it looked promising that there would be a deal.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘And then</strong>, over the weekend, President Trump and members of his team indicated that the Chinese had backed away from commitments that they thought they had already received from them.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘And, as a consequence,</strong> we now have another step on the escalatory ladder of tariffs with China.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘So, my concern</strong> is that we have taken another step down a dark tunnel with no end in sight.’</li></ul><br><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;">❓<strong>NICK SCHIFRIN : </strong><em> ‘Derek Scissors, is this a step down a dark tunnel with no end in sight?’</em></p><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;">⚡<strong>DEREK SCISSORS:</strong> ‘If you wanted the deal that was on the table, it is.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘I was not at all convinced</strong> the deal on the table was going to work.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘In particular,</strong> I thought China's incentives to keep its promises on intellectual property were unlikely -- were low.'</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘And then the Chinese</strong> backed that up by saying, we don't want to make the legal changes that even might lead us to keeping our word on intellectual property.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘So it's certainly</strong> a step away from the deal.'</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘I don't think</strong> that's necessarily a step down a dark tunnel.’</li></ul><br><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;">❓<strong>NICK SCHIFRIN : </strong><em> ‘Meaning you don't think it's necessarily a bad thing to step away from that deal?’</em></p><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;">⚡<strong>DEREK SCISSORS:</strong> ‘That's right.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘It's going to be very difficult</strong> to get China to change its policies on intellectual property, as well as others, such as subsidies to state-owned enterprises.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘It shouldn't</strong> be an easy deal.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘It certainly</strong> shouldn't be a deal that the president makes in a phone call with Xi Jinping.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘As some have implied,</strong> we're going to have difficulties in the negotiation.'</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘This is all part</strong> of the -- what the process should look like.’</li></ul><br><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;">❓<strong>NICK SCHIFRIN : </strong><em> ‘So, Ryan Hass, intellectual property, as Derek Scissors just mentioned, subsidies for state-owned enterprises, forced technology transfer, these are the things the U.S. is trying to get China to change. Can tariffs achieve that?’</em></p><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;">⚡<strong>RYAN HASS:</strong> ‘Well, thus far, I think that we have overestimated our ability to muscle the Chinese into accepting our will, and underestimated China's ability to punch us in places that hurt.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘And, as a result,</strong> American people are feeling the pain.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘So if the question is,</strong> are we going to get absolute surrender from the Chinese, <strong>I'm very pessimistic</strong> that that's the case. ‘</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘If we can make progress</strong> where progress is possible, I think we should do so.’</li></ul><br><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;">❓<strong>NICK SCHIFRIN : </strong><em> ‘Derek Scissors, is that enough progress, as Ryan Hass put it, rather than get the Chinese to surrender?’</em></p><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;">⚡<strong>DEREK SCISSORS:</strong> ‘Well, first of all, I disagree with both premises in Ryan's point.'</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘When he says</strong> the American people are feeling the pain, farmers are feeling the pain.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Aggregate U.S. economic growth</strong> is strong.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Consumer prices</strong> are low.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘I don't see much pain</strong> caused by China tariffs.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘They may be caused</strong> by bad fiscal policy, but not by our China policy.’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘And then the second part,</strong> of course, it's a false dichotomy to say the idea is, we have to accept the Chinese offer or they have to surrender.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘As I said,</strong> this is going to be a long, difficult process.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘We're not going</strong> to get everything we want.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘But the turn</strong> - to make a deal just so that you can remove uncertainty for the stock market or the like would be a mistake that would hurt the U.S. for years to come.’</li></ul><br><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;">❓<strong>NICK SCHIFRIN : </strong><em> ‘Ryan Hass, short-term pain OK for long-term gain? What do you think?’</em></p><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;">⚡<strong>RYAN HASS:</strong> ‘Well, if there is long-term gain that accompanies the short-term pain, then sure.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘But right now,</strong> all we're seeing is the pain, without any accompanying gain.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘I think the American people</strong> were supportive of President Trump shaking things up and trying a new approach to China. I think that there was merit to it.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘But they wanted</strong> to achieve a purpose, not attack China on principle.'</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘And, right now</strong>, we are in this exculpatory spiral, where neither side appears willing to take a step back from the brink.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘I don't think</strong> that's a good place for the United States to be.’</li></ul><br><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;">❓<strong>NICK SCHIFRIN : </strong><em> ‘Derek Scissors, let me ask about leverage right now. Who has more leverage, the United States or China? And do both leaders believe right now that they can actually push the other around?’</em></p><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;">⚡<strong>DEREK SCISSORS: ‘</strong>I hope not, because that's -- that's -- pushing the other around, as Ryan just mentioned, for no goal is not a good strategy to get what you want.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘I do think</strong> the U.S. has more leverage. The president is right about that.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘But the leverage</strong> has to be applied over an extended period of time.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;">If the president becomes impatient, as it seems he was late last year and early this year, then we can't use that leverage.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘The U.S. leverage advantage </strong>is a long-term leverage advantage.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;">It's not about signing on tariffs and then saying a week later, are you ready to make a deal?’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘We're going</strong> to have to have some pain to get China to change its policies.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘If we're not willing to put up</strong> with that pain, then we should just abandon this process and sign a short-term deal that does very little.’</li></ul><br><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;">❓<strong>NICK SCHIFRIN : </strong><em> ‘Ryan?’</em></p><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;">⚡<strong>RYAN HASS</strong>:’ I think Derek makes a great point.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘In trade negotiations,</strong> the patient party has an advantage. The disciplined party has an advantage.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘And right now,</strong> the Chinese are trying to stake out that territory.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘The Chinese</strong> have a view that they have leverage, because the closer that we get to our 2020 presidential election, the more desirous President Trump will be of a deal.’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘The United States</strong> believes that it has leverage, because our economy is strong and China, we believe - the Trump administration believes that China's economy is brittle and that President Xi needs a deal.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘And so we find</strong> ourselves stuck in this dilemma where both sides think they have leverage over the other, and neither appears willing to make the compromises necessary to reach a deal.’</li></ul><br><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;">❓<strong>NICK SCHIFRIN : </strong><em>&nbsp;‘Derek Scissors, should the U.S. be making compromises right now?’</em></p><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;">⚡<strong>DEREK SCISSORS:</strong> ‘No, it should not.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Again, if you start</strong> with the premise that we have serious problems in our relationship with China, you don't try to get to a quick outcome.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘You have to deal</strong> with uncertainty and risk and stock market losses and all the things that come in with long negotiations.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘We should not be</strong> in a hurry to make a deal.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Now, Ryan may be right</strong> that the president sees the need to make a deal before the 2020 election.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘I hope that's not true.</strong> I hope he continues to receive support, as he has, from both parties, because both parties have realized we need a change in the China relationship, and it's not going to be easy.’</li></ul><br><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;">❓<strong>NICK SCHIFRIN : </strong><em> ‘Ryan Hass, you mentioned whether -- the perspective from the Chinese that the U.S. actually has less leverage. There's a notion of the Chinese officials I talk to who say, basically, you guys can't take the heat. You guys can't take the political heat -- or the president can't take the political heat and actually make sacrifices. Is that right?’</em></p><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;">⚡<strong>RYAN HASS:</strong> ‘Well, Nick, I think you're right.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘I think there's a baked-in assumption</strong> that the Chinese have that the American political system is ill-equipped for pain tolerance.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘And the Chinese</strong> see that as their advantage.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘They see their system,</strong> their top-down Leninist system, where they have a leader that doesn't face reelection, a leader that does have control over his media and can tamp down discontent or protest, and a leader that can allocate resources where they're needed, with control of fiscal monetary levers, as distinct advantages that they have on a systemic level relative to the United States.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘I agree with Derek.</strong> I would like for us to prove them wrong, as an American.'</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘But</strong> we will see.’</li></ul><br><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;">❓<strong>NICK SCHIFRIN : </strong><em> ‘Derek Scissors, last word to you. Do you have faith that the administration is going to pursue this path in the correct way, in your opinion?’</em></p><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;">⚡<strong>DEREK SCISSORS:</strong> ‘No, I'm afraid not.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘I think the president's constant comments</strong> about his friendship with Xi Jinping make it difficult to have faith.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘I think he deserves great credit</strong> for identifying this problem and being more aggressive than President Obama and President Bush.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘We</strong> need that.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘But I think the president</strong> is still looking for maybe a personal connection to Xi to seal a deal that will benefit the United States for a year or two, but not solve the problems we have with China.’</li></ul></td></tr></tbody></table></p></div></div><div id="article5" class="post-card"><div class="t2-block">5. Trade war: Is the U.S. panicking due to China’s big hedge?</div><div class="table-block w-richtext" data-ix="appear-on-load" style="opacity: 1; transition: opacity 1000ms ease 0s;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><table class="nl_card" id="19may1505" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><table class="multi-block" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="bg-holder" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;max-width: 100%;margin: 0 auto;padding: 0;"><img src="https://thumbor.forbes.com/thumbor/960x0/https%3A%2F%2Fblogs-images.forbes.com%2Faliciagarciaherrero%2Ffiles%2F2019%2F05%2FChina-1200x800.jpg" alt="CHINADebate" style="width: 100%;margin: 0 auto;"></td></tr></tbody></table><p class="caption" style="font-size: .8125em;line-height: 1.75em;margin: .625em 0;display: block;color: #848484;margin-top: .5em;margin-bottom: 1.2500em;font-family: 'Lato', sans-serif;"></p><p class="excerpt" style="font-size: 1.125em;line-height: 1.75em;margin: .625em 0;margin-bottom: 1.5em;font-style: italic;text-align: center;color: #c80000;padding: 10px 5%;font-family: 'Lato', sans-serif;"></p></td></tr><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="nl-post" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;padding: 0 2.5em;overflow: hidden;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>Alicia García-Herrero</strong> of the Bruegel think tank in Brussels gets the U.S. wrong in <a href="http://bruegel.org/2019/05/trade-war-is-the-u-s-panicking-due-to-chinas-big-hedge/" target="_blank" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;">‘Trade war: Is the U.S. panicking due to China’s big hedge?’</a></p><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>But she one big thing right:</strong> China has slow walked many U.S. demands and at the same time has been preparing to weather a long trade war.</p><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘To the question</strong> of why the U.S. suddenly raised the stakes again at this point in time, my take is that the U.S. is in desperate need for a comprehensive victory, which it is not even close to obtaining.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘China is ready to make concessions,</strong> but not to the extent of transforming its state-led economic model into a market-based economy.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Trump’s abrupt change</strong> of direction in his negotiation strategy reveals despair more than strength.’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>China</strong> has clearly learned its way, painfully but surely, out of its current impasse with the U.S.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘From a tit-for-tat approach</strong> to negotiation and hedging, China is more in control of the situation now than before.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘In fact,</strong> China has been negotiating with the U.S. since November, aware that the U.S. also needs a deal for its consumers and investors and only a comprehensive deal revamping China’s economic model will be acceptable.’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Along with the negotiation,</strong> China has also worked harder to hedge its economy against the negative effects.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘More specifically,</strong> China has not - as Trump’s negotiators have demanded - drafted a detailed foreign investment law, handed in a complete list of subsidies to SOEs, or applied a workable measure of “competitive neutrality” to Chinese corporates.'</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>Instead, ‘</strong>China’s policymakers have focused on stimulating the economy with considerable effect.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘And,</strong> with a longer-term perspective in mind, Beijing has been making efforts to extend friendly ties with as many countries as possible.’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>How effective</strong> China’s measures will be remains to be seen.</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>But from Alicia’s analysis</strong> China seems to have always considered seriously the prospect of an all-out trade.</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>And,</strong> has gotten ready as best it can.</li></ul></td></tr></tbody></table></p></div></div><div class="section_title w-condition-invisible"><strong>III. CONGRESS &amp; THE PRESIDENT REACT<br></strong></div><div id="article6" class="post-card"><div class="t2-block">6. ‘The Chinese don't get this concept “earn” their way out of punitive tariffs’: Michael Pillsbury</div><div class="table-block w-richtext" data-ix="appear-on-load" style="opacity: 1; transition: opacity 1000ms ease 0s;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><table class="nl_card" id="19may1506" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><table class="multi-block" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="embed-responsive embed-responsive-16by9" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;position: relative;display: block;height: 100%;padding: 0;overflow: hidden;"><iframe class="embed-responsive-item" src="//video.foxnews.com/v/video-embed.html?video_id=6035535232001&amp;loc=hudson.org&amp;ref=https%3A%2F%2Fwww.hudson.org%2Fresearch%2F15019-president-trump-raises-tariffs-on-chinese-goods-as-latest-round-of-trade-talks-ends-without-a-deal&amp;_xcf=" width="100%" height="auto" marginwidth="0" marginheight="0" frameborder="0" scrolling="no" autoplay="false" autostart="false"></iframe></td></tr></tbody></table><p class="caption" style="font-size: .8125em;line-height: 1.75em;margin: .625em 0;display: block;color: #848484;margin-top: .5em;margin-bottom: 1.2500em;font-family: 'Lato', sans-serif;"></p><p class="excerpt" style="font-size: 1.125em;line-height: 1.75em;margin: .625em 0;margin-bottom: 1.5em;font-style: italic;text-align: center;color: #c80000;padding: 10px 5%;font-family: 'Lato', sans-serif;"></p></td></tr><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="nl-post" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;padding: 0 2.5em;overflow: hidden;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>China hawk with the President’s ear,</strong> Michael Pillsbury of the Hudson Institute.</p><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>Paul Gigot</strong>, WSJ editorial page editor and Pulitzer Prize winner – and very knowledgeable about China, interviews him.</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;">Watch their video '<a href="https://video.foxnews.com/v/6035535232001/#sp=show-clips" target="_blank" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;">President Trump raises tariffs on Chinese goods as latest round of trade talks ends without a deal</a>' (6m 25s).</li></ul><hr style="border: 0;border-top: 3px solid #f5f5f5;height: 5px;margin: 10px auto;text-align: center;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;">❓<strong>GIGOT:</strong><em> ‘Is Liu He losing the argument back in Beijing?’</em></p><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;">⚡<strong>PILLSBURY:</strong> Well, we all noticed when we read the tea leaves that his main title of being a “special envoy of President Xi” was removed. So it's not that he's lost total confidence.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>But I suspect</strong> the hardliners in China didn't like the 150-page agreement once they got to look at it.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘The hardliners</strong> may have said, “No we’ve got to back out of some of these things.”</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘That causes Liu He</strong> to lose face, but he still seems to be in there fighting.'</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘You know</strong> he's an economic reformer, so he's caught in the middle.’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;">🔸<strong>GIGOT:</strong> ‘Well you know my sources tell me that in fact that 150-page document included very prescriptive language of the sort that said the State Council, which sets policy, will do the following on X date.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘And that Liu He,</strong> when he went back, said, “Wait a minute. I can't be that prescriptive, that would be too much to give to an American president.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>President Xi</strong> would look like he's losing face. So let's make it more general.”</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘And the US side</strong> said you can't make it general; we’ve got to have you make specific commitments.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘So what do</strong> the hardliners want? No deal.’ </li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;">⚡<strong>PILLSBURY</strong>: ‘Well Liu He used a phrase in Mandarin in a briefing to the Chinese press: ”balance of dignity.”</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘In other words</strong> if the Americans are going to intrude and draft State Council directives for us and inspect things and punish us if we don't go straight, we would like we want the same privileges in Washington D.C. ‘</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;">🔸<strong>GIGOT:</strong> ‘What can the U.S. do in negotiations if it wants these prescriptive concessions? Xi has to get something.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘My suggestion</strong> would be lift the tariffs that the president imposed. If they violate the agreement you can always go back and re-impose them.’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;">⚡<strong>PILLSBURY:</strong> ‘That's pretty much what I say in my Wall Street Journal op-ed piece.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘The Chinese</strong> need to “earn” their way out of these tariffs with good conduct.'</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘These are not</strong> long- term punitive tariffs.’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘The Chinese</strong> don't seem to get this concept “earn” their way out of punitive tariffs.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘I've tried to put</strong> it in Mandarin to them.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘They still say no</strong>, this is humiliation; we will lose face you know; we can't do this.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘But I think</strong> over a month or so ahead they're going to probably change their minds.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Otherwise</strong> they get everything up to 25% tariffs all their exports to our country.’</li></ul></td></tr></tbody></table></p></div></div></div>

<div id="NLpost" class="nl-post-wrapper" style="margin:0 auto;"><div id="NLHeader" class="post-card"><div id="Page-header" class="mainheader"><h1 class="t1">'Trump was right to call China's bluff in the trade talks'</h1><div class="date">May 10, 2019</div><a href="https://www.linkedin.com/in/malcolmriddell/" target="_blank" class="date" style="color: inherit;border-bottom: 0px solid #008dc8;text-decoration: none;">by Malcolm Riddell</a></div><div class="table-block w-condition-invisible w-dyn-bind-empty w-richtext" data-ix="appear-on-load" style="opacity: 1; transition: opacity 1000ms ease 0s;"></div></div><div class="section_title w-condition-invisible"><strong>I. THE LAW AND THE PROTESTS</strong></div><div id="article1" class="post-card"><div class="t2-block">1. As China Trade Talks Stall, Xi Faces a Dilemma: Fold? Or Double Down?</div><div class="table-block w-richtext" data-ix="appear-on-load" style="opacity: 1; transition: opacity 1000ms ease 0s;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><table class="nl_card" id="19may1001" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><table class="multi-block" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="bg-holder" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;max-width: 100%;margin: 0 auto;padding: 0;"><img src="https://static01.nyt.com/images/2019/05/10/world/10china-xi1/merlin_154172142_13fb508d-0c57-4be9-97ad-ab0f85454043-articleLarge.jpg?quality=75&amp;auto=webp&amp;disable=upscale" alt="CHINADebate" style="width: 100%;margin: 0 auto;"></td></tr></tbody></table><p class="caption" style="font-size: .8125em;line-height: 1.75em;margin: .625em 0;display: block;color: #848484;margin-top: .5em;margin-bottom: 1.2500em;font-family: 'Lato', sans-serif;">New York Times</p><p class="excerpt" style="font-size: 1.125em;line-height: 1.75em;margin: .625em 0;margin-bottom: 1.5em;font-style: italic;text-align: center;color: #c80000;padding: 10px 5%;font-family: 'Lato', sans-serif;">'Mr. Xi now faces questions at home over whether he miscalculated Mr. Trump’s resolve.'</p></td></tr><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="nl-post" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;padding: 0 2.5em;overflow: hidden;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>When Mr. Trump leapt onto Twitter to complain</strong>, it was a public rebuke that put Mr. Xi in a tight spot,' write NYT's Chris Buckley and Steven Lee Myers in <a href="https://www.nytimes.com/2019/05/09/world/asia/xi-jinping-donald-trump.html" target="_blank" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;">'As China Trade Talks Stall, Xi Faces a Dilemma: Fold? Or Double Down?'</a></p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'The blaring nature of the Trump administration’s</strong> broadsides has sharpened the dilemma that Mr. Xi faces in the negotiations.'</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>"To have Trump doing it so</strong> publicly is obviously very, very difficult for Xi Jinping,” said Susan L. Shirk, a professor at the University of California, San Diego, who worked as a deputy assistant secretary of state responsible for China under President Bill Clinton.'</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>"It makes</strong> it much more difficult for him to make the compromises needed."</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'Mr. Xi is China’s most powerful leader in decades</strong>, and he guards his image as a visionary statesman guiding his country to greatness.'</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'But</strong> China’s relationship with the United States is its most important, and if ties between the countries are mismanaged, that could damage China’s economy and tarnish Mr. Xi’s authority.'</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'Mr. Xi now faces questions</strong> at home over whether he miscalculated Mr. Trump’s resolve.'</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'Domestic rumblings could grow</strong> if the United States forces Mr. Xi to make concessions or if the talks break down.'</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'Some Chinese academics</strong> and business executives have already argued privately and online that Mr. Xi misjudged how far he could push Mr. Trump and promote China as a potential rival to the United States’ dominance.'</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'China had been willing to protect</strong> intellectual property and open its markets to American business, but the Trump administration wanted the agreement to specify that some of those changes be made in Chinese law. '</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'For China</strong>, any legislative change or policy reversal could be a very public — and potentially humbling — reminder that it gave ground under pressure.'</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'That would bring back painful memories</strong> of the days of national humiliation in our history,” said Wang Yong, the director of the Center for International Political Economy at Peking University.'</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'China</strong> has made too many concessions.'</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'The Trump officials said</strong> that China had retreated from draft agreements calling on its legislature to change laws that have threatened or constricted American trade and business.'</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'Two Chinese scholars in Beijing said</strong> they were told by well-placed officials that the changes in commitments appeared after Mr. Xi reviewed the draft deal.'</li></ul></td></tr></tbody></table></p></div></div><div id="article2" class="post-card"><div class="t2-block">2. 'Trump was right to call China's bluff in the trade talks': Bill Bishop</div><div class="table-block w-richtext" data-ix="appear-on-load" style="opacity: 1; transition: opacity 1000ms ease 0s;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><table class="nl_card" id="19may1002" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><table class="multi-block" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="embed-responsive embed-responsive-16by9" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;position: relative;display: block;height: 100%;padding: 0;overflow: hidden;"><iframe class="embed-responsive-item" src="https://www.youtube.com/embed/FoAwALq1oYo"></iframe></td></tr></tbody></table><p class="caption" style="font-size: .8125em;line-height: 1.75em;margin: .625em 0;display: block;color: #848484;margin-top: .5em;margin-bottom: 1.2500em;font-family: 'Lato', sans-serif;"></p><p class="excerpt" style="font-size: 1.125em;line-height: 1.75em;margin: .625em 0;margin-bottom: 1.5em;font-style: italic;text-align: center;color: #c80000;padding: 10px 5%;font-family: 'Lato', sans-serif;">'President Trump was right to call China's bluff.'</p></td></tr><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="nl-post" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;padding: 0 2.5em;overflow: hidden;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'Both sides have gotten increasingly confident</strong> with their economic positions,' says Bill Bishop, publisher of the <a href="https://sinocism.com/" target="_blank" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;">Sinocism</a> newsletter and author of <a href="https://www.axios.com/tag/china/" target="_blank" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;">Axios China</a> in a <a href="https://youtu.be/FoAwALq1oYo" target="_blank" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;">CNBC video interview.</a></p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'For the Chinese,</strong> the recent Belt and Road Forum, which they view as a great success, made them overconfident.'</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'This</strong>, as well as other factors, gave them sense that they could push back on the US.'</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'Frankly</strong> I think President Trump was right to call their bluff.'</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'This kind of last minute blow up</strong> is not unique to this particular trade negotiation.'</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'It’s basically</strong> a Chinese negotiating 101.'</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'It's actually</strong> the whole chapter in their playbook about how to reopen things right before you think you're done.'</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'Ambassador Lighthizer</strong> has frankly been preparing for this for his career'.</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'He's the absolute best person</strong> the US could have to be negotiating with the Chinese.'</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'He's focused on</strong> getting the best deal possible but nobody expects the Chinese to give up their state driven economic model anytime soon.'</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'If they change some of these fundamental practices</strong>, it basically becomes an existential threat to the control of the Communist Party.'</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'Ultimately</strong> nothing will be allowed to to fundamentally threaten the Communist Party.'</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'The contradiction</strong> though is they need to make some reforms and some changes the economy to continue to deliver the goods and continue economic growth.'</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'So the Chinese side</strong> is trying to figure out how to thread the needle where they can maintain what they believe they need for party control, while at the same time really ramping up their economic development and moving up to what they call higher level economic development.'</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'So the best-case deal is</strong> one that maybe change things on the margins and adds some ability to penalize the Chinese when things got a little bit too egregious.'</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'But the Chinese are</strong> trying to push back on even those enforcement mechanisms.'</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'They are trying to make the deal </strong>as ambiguous as possible which is frankly what they always do.'</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'So</strong> that's all we'll ever really get in the end.'</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'It's worked for</strong> the Chinese for decades: muddle through and don’t not collapse.'</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>BTW</strong> if are not a subscriber to Bill Bishop's <a href="https://sinocism.com/" target="_blank" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;">Sinocism</a> newsletter, you should be.</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><a href="https://sinocism.com/" target="_blank" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;">'Sinocism</a> is the presidential daily brief for China hands,' says <a href="https://www.newyorker.com/contributors/evan-osnos" target="_blank" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;">Evan Osnos</a>, New Yorker correspondent and National Book Award winner for <em>Age of Ambition: Chasing Fortune, Truth, and Faith in the New China</em> (also well worth reading).</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;">I agree.</li></ul></td></tr></tbody></table></p></div></div><div id="article3" class="post-card"><div class="t2-block">3. The US-China trade war is poised to enter the next phase</div><div class="table-block w-richtext" data-ix="appear-on-load" style="opacity: 1; transition: opacity 1000ms ease 0s;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><table class="nl_card" id="19may1003" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><table class="multi-block" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="bg-holder" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;max-width: 100%;margin: 0 auto;padding: 0;"><img src="https://fm.cnbc.com/applications/cnbc.com/resources/img/editorial/2019/05/10/105905396-15574673516ED3-SSA-051019-SteveOkun.1910x1000.jpg" alt="CHINADebate" style="width: 100%;margin: 0 auto;"></td></tr></tbody></table><p class="caption" style="font-size: .8125em;line-height: 1.75em;margin: .625em 0;display: block;color: #848484;margin-top: .5em;margin-bottom: 1.2500em;font-family: 'Lato', sans-serif;"></p><p class="excerpt" style="font-size: 1.125em;line-height: 1.75em;margin: .625em 0;margin-bottom: 1.5em;font-style: italic;text-align: center;color: #c80000;padding: 10px 5%;font-family: 'Lato', sans-serif;">New U.S. tariffs on Chinese goods effectively only kick in in around three weeks - not today.</p></td></tr><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="nl-post" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;padding: 0 2.5em;overflow: hidden;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'The trade war is poised</strong> to enter the next phase' says Steve Okun of McLarty Associates in a <a href="https://www.cnbc.com/video/2019/05/10/the-us-china-trade-war-is-poised-to-enter-the-next-phase-analyst.html" target="_blank" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;">CNBC video interview.</a></p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'But</strong> we're not there yet because USTR took a very interesting approach in applying these tariffs.'</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'The tariffs</strong> go into effect in midnight.'</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'But</strong> they only go into effect when goods exit China, not when goods enter the U.S.'</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'Most goods from China</strong> come to the U.S. by sea.'</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'So anything</strong> on the ocean now - that hasn't entered the U.S. yet - is not subject to these new tariffs.'</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'It's only those</strong> that leave effective midnight today.'</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'So realistically</strong>, there's about three weeks give or take before these new tariffs hit.'</li></ul></td></tr></tbody></table></p></div></div><div class="section_title w-condition-invisible"><strong>II. POTENTIAL BACKLASH FROM THE U.S.<br></strong></div><div id="article4" class="post-card"><div class="t2-block">4. Tariffs on China are no substitute for a trade deal</div><div class="table-block w-richtext" data-ix="appear-on-load" style="opacity: 1; transition: opacity 1000ms ease 0s;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><table class="nl_card" id="19may1004" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><table class="multi-block" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="bg-holder" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;max-width: 100%;margin: 0 auto;padding: 0;"><twitter-widget class="twitter-tweet twitter-tweet-rendered" id="twitter-widget-0" style="position: static;visibility: visible;display: block;transform: rotate(0deg);max-width: 708px;width: 500px;min-width: 220px;margin-top: 10px;margin-bottom: 10px;margin: 0 auto;" data-tweet-id="1101620175638614016"></twitter-widget><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script></td></tr></tbody></table><p class="caption" style="font-size: .8125em;line-height: 1.75em;margin: .625em 0;display: block;color: #848484;margin-top: .5em;margin-bottom: 1.2500em;font-family: 'Lato', sans-serif;"></p><p class="excerpt" style="font-size: 1.125em;line-height: 1.75em;margin: .625em 0;margin-bottom: 1.5em;font-style: italic;text-align: center;color: #c80000;padding: 10px 5%;font-family: 'Lato', sans-serif;">'The full cost of tariffs is being passed on to American consumers.'</p></td></tr><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="nl-post" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;padding: 0 2.5em;overflow: hidden;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'President Trump said</strong> this week that “tariffs are an excellent alternative to a trade deal,” implying that escalating tariffs would be as good for the U.S. economy as a deal,' says <a href="https://www.brookings.edu/experts/david-dollar/" target="_blank" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;">David Dollar</a> of Brookings in a special edition of his podcast <a href="https://www.brookings.edu/podcast-episode/tariffs-on-china-are-no-substitute-for-a-trade-deal/" target="_blank" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;">'Dollar &amp; Sense.'</a></p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'Hopefully</strong> this is just a negotiating ploy, because it certainly is not true.'</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'Tariffs</strong> are paid by the American firms that import from China, not by the Chinese exporters.'</li></ul><table class="multi-block" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="podcast" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><iframe style="border: none" src="//html5-player.libsyn.com/embed/episode/id/9731321/height/90/theme/custom/thumbnail/yes/direction/backward/render-playlist/no/custom-color/87A93A/" height="90" width="100%"></iframe></td></tr></tbody></table><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'In theory</strong>, there are cases where the exporter – China in this case – responds by lowering prices, which would be a gain for Americans.'</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'Recent studies</strong> find that this is NOT happening in this case – Chinese export prices have not gone down.'</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'And the full cost</strong> of tariffs is being passed on to American consumers.'</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'Keep in mind</strong> that this is the objective of protection: to raise prices of goods so that producing in America becomes more profitable.'</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'A good recent study</strong> of the 25 percent tariff on washing machine shows how this works.'</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'The full cost of the tariffs was</strong> passed on to households who had to pay more for washing machines.'</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'This made</strong> U.S. producers more profitable and they added 1,800 jobs.'</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'However</strong>, the extra cost to consumers was 1.5 billion dollars – I’ll do the math for you, that’s more than 800,000 dollars per job. You may be surprised at the price tag, but economists are not.'</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'A study by Gary Hufbauer</strong> at the Peterson Institute looked at 26 previous cases of import tariffs and found that on average it costs 500,000 dollars per year to protect one job through protection.'</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'To come back</strong> to washing machine case:'</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'The extra $1.5 billion paid</strong> by consumers means that they cannot buy other things.'</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'They go to fewer restaurant meals</strong>, buy fewer automobiles, maybe cut back on healthcare – and so what happens is jobs are lost in other sectors of the economy.'</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'Careful research generally establishes</strong> that the jobs lost are many times greater than the jobs that are gained in protected sectors.'</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'What all is this means</strong> is that the import tariffs are bad for the U.S. economy.'</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'The key question</strong> then is whether the tariffs are a means to a good trade deal with China. If there is no deal, and the tariffs stay in place, that is definitely a loss for Americans.'</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'The loss was modest</strong> when we taxed some of our imports from China at 10 percent.'</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'If we move to taxing</strong> all our imports from China at 25 percent then the losses will be much larger.'</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'We are going to be</strong> living with a lot of uncertainty concerning U.S.-China trade for the foreseeable future.'</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'The negotiations</strong> are going on – they are still going on.'</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'It seems unlikely</strong> that there would be a sudden agreement as each side has dug in their heels, but it’s always possible there will be a sudden agreement.'</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'But probably</strong>, we’re going to be living with the tariffs that are in place for a while.'</li></ul></td></tr></tbody></table></p></div></div><div id="article5" class="post-card"><div class="t2-block">5. China can earn its way out of Trump’s tariffs</div><div class="table-block w-richtext" data-ix="appear-on-load" style="opacity: 1; transition: opacity 1000ms ease 0s;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><table class="nl_card" id="19may1005" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><table class="multi-block" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="embed-responsive embed-responsive-16by9" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;position: relative;display: block;height: 100%;padding: 0;overflow: hidden;"><iframe class="embed-responsive-item" src="https://www.youtube.com/embed/4TjH-KMa9LI"></iframe></td></tr></tbody></table><p class="caption" style="font-size: .8125em;line-height: 1.75em;margin: .625em 0;display: block;color: #848484;margin-top: .5em;margin-bottom: 1.2500em;font-family: 'Lato', sans-serif;">Fox Business</p><p class="excerpt" style="font-size: 1.125em;line-height: 1.75em;margin: .625em 0;margin-bottom: 1.5em;font-style: italic;text-align: center;color: #c80000;padding: 10px 5%;font-family: 'Lato', sans-serif;">'Tariffs give the opportunity to China to “earn” their way out of the tariffs by complying with commitments they've made.’</p></td></tr><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="nl-post" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;padding: 0 2.5em;overflow: hidden;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>China hawk</strong> with the president's ear, Michael Pillsbury explains how President Trump is using tariffs in this <a href="https://youtu.be/4TjH-KMa9LI" target="_blank" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;">Fox Business video interview.</a></p><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘The president is reacting to two different things.’</strong></p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;">‘<strong>'One is the reneging</strong> - he used the word in his tweet – the renegotiating by China.'</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;">‘<strong>'There's a second part</strong> - there's a fear that China is going to cheat on the trade agreement - that they have no real incentives not to cheat, to go straight.’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;">‘<strong>So tariffs give the opportunity to China</strong> to “earn” their way out of the tariffs by complying with commitments they've made.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;">‘<strong>This is an unusual</strong> new idea President Trump is using.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;">‘<strong>It's not the old kind of tariffs</strong> that Alexander Hamilton proposed to protect the American industry - it's not a tariff that's designed to protect steel or aluminum.'</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;">‘<strong>This is a way</strong> to get China's attention.’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;">‘<strong>On the Chinese side it's possible</strong> that the hawks didn't really understand the degree of concessions that had been made.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;">‘<strong>And so they got</strong> a hold of the whole 150 pages instead of a summary.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;">‘<strong>And they began</strong> to realize that these are serious concessions President Trump has got out of China.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;">‘<strong>So</strong> maybe they got a chance to take them back recently.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;">‘<strong>Now they've seen</strong> that the punishment President Trump is giving them means don't do this again’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;">'<strong>If</strong> you make a concession, stick by it.'</li></ul></td></tr></tbody></table></p></div></div><div class="section_title w-condition-invisible"><strong>III. CONGRESS &amp; THE PRESIDENT REACT<br></strong></div><div id="article6" class="post-card"><div class="t2-block">6. Xi Jinping Wanted Global Dominance. He Overshot</div><div class="table-block w-richtext" data-ix="appear-on-load" style="opacity: 1; transition: opacity 1000ms ease 0s;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><table class="nl_card" id="19may1006" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><table class="multi-block" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="bg-holder" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;max-width: 100%;margin: 0 auto;padding: 0;"><img src="https://static01.nyt.com/images/2019/05/09/opinion/09lian/8bfb9b09b8f74f119fa6cc7277c96ff1-superJumbo.jpg?quality=90&amp;auto=webp" alt="CHINADebate" style="width: 100%;margin: 0 auto;"></td></tr></tbody></table><p class="caption" style="font-size: .8125em;line-height: 1.75em;margin: .625em 0;display: block;color: #848484;margin-top: .5em;margin-bottom: 1.2500em;font-family: 'Lato', sans-serif;">New York Times</p><p class="excerpt" style="font-size: 1.125em;line-height: 1.75em;margin: .625em 0;margin-bottom: 1.5em;font-style: italic;text-align: center;color: #c80000;padding: 10px 5%;font-family: 'Lato', sans-serif;">China wasn’t ready for the trade war with the United States.</p></td></tr><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="nl-post" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;padding: 0 2.5em;overflow: hidden;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'The endgame in the trade war</strong> between China and the United States seems near. President Trump, betting with real currency — American strength — apparently has the upper hand, and the concessions President Xi Jinping is likely to make won’t be mere tokens,' writes Yi-Zheng Lian in a NYT op-ed <a href="https://www.nytimes.com/2019/05/07/opinion/xi-trump-trade-war-china-leadership.html?searchResultPosition=1" target="_blank" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;">'Xi Jinping Wanted Global Dominance. He Overshot.'</a></p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'When — if? — an agreement</strong> is finally announced, Mr. Trump will surely fire off bragging tweets, partly to shore up his credentials for a second term, amid personal and policy troubles.'</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'For Mr. Xi</strong>, almost any deal could mean a very serious loss of face.'</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'The trade war is</strong> the first real occasion to assess Mr. Xi’s leadership capabilities.'</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'And his performance</strong> might not look so good, even if one discounts the setbacks related to the trade war.'</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'First and foremost</strong>, Mr. Xi has utterly failed to manage the United States–Chinese relationship.'</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'In contrast</strong>, every Chinese leader since the founding of the communist state in 1949 had recognized the paramount importance of those ties, worked hard to improve them — and reaped huge benefits.'</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'Mr. Xi assumed power</strong> when China was still riding high on its so-called economic miracle (and the United States remained mired in the aftereffects of the 2008-9 recession).'</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'Since</strong> then, Mr. Xi has been aggressively hard-line.'</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'These hard-line efforts</strong> have set off alarms among some Americans.'</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'In 2017 and 2018,</strong> two groups of blue-ribbon scholars and ex-officials from previous United States administrations advocated a fundamental change in America’s view of China.'</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'Their members were</strong> moderates and mostly well-disposed toward China.'</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'Yet</strong> some of their recommendations dovetailed with the views of the Trump administration hawks who consider China to be America’s number-one enemy and security threat.'</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'Mr. Xi, apparently oblivious</strong> to this sea change, was caught unprepared when Mr. Trump hit China with a tariff war.'</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'Why is all of this happening</strong> under Mr. Xi? History suggests an answer.'</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'In the late 1950s</strong>, Mao began to challenge the Soviet Union’s leadership of the international communist movement, then a potent force that hoped to overturn the United States-led world order.'</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'Mao was also seeking global dominance</strong>, in line with the traditional concept that the emperor of the Middle Kingdom was the rightful ruler of “tian xia” (天下), everything under the heavens.'</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'But Mao overreached</strong>; China wasn’t strong enough for that then.'</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'The Soviet Union’s decision</strong> to scrap aid programs to China and pull out its scientific and technological advisers there dealt a severe blow to China’s underperforming socialist economy.'</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'Like Mao with the Soviets</strong>, Mr. Xi may have challenged the global leadership of the United States too hard and too soon.'</li></ul></td></tr></tbody></table></p></div></div><div id="article7" class="post-card"><div class="t2-block">7. Trade War Results in Substantial Losses for U.S.</div><div class="table-block w-richtext" data-ix="appear-on-load" style="opacity: 1; transition: opacity 1000ms ease 0s;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="bg-holder" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;max-width: 100%;margin: 0 auto;padding: 0;"><img src="http://wws.princeton.edu/sites/default/files/styles/detail-page/public/news/images/shutterstock_1038413953-resizw.jpg?itok=uR5lIgMR" alt="CHINADebate" style="width: 100%;margin: 0 auto;"></td></tr><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="nl-post" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;padding: 0 2.5em;overflow: hidden;"><p class="caption" style="font-size: .8125em;line-height: 1.75em;margin: .625em 0;display: block;color: #848484;margin-top: .5em;margin-bottom: 1.2500em;font-family: 'Lato', sans-serif;"></p><p class="excerpt" style="font-size: 1.125em;line-height: 1.75em;margin: .625em 0;margin-bottom: 1.5em;font-style: italic;text-align: center;color: #c80000;padding: 10px 5%;font-family: 'Lato', sans-serif;">'Almost all of the tariff costs so far have been shouldered by U.S. consumers and importers.'</p><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>“The Trump tariffs</strong> were almost completely passed through into domestic prices up to now, meaning that almost all of the costs so far have been shouldered by U.S. consumers and importers,” said Stephen Redding of Princeton University’s Woodrow Wilson School of Public and International Affairs.</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'U.S. producers</strong> had to respond to reduced import competition by raising their prices or no longer offering certain imported goods.'</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>Redding's conclusion comes</strong> from the recent paper, <a href="http://www.princeton.edu/~reddings/papers/CEPR-DP13564.pdf" target="_blank" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;">'The Impact of the 2018 Trade War on U.S. Prices and Welfare,'</a> he co-authored with Mary Amiti from the Federal Reserve Bank of New York and David Weinstein at Columbia University.</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>Another paper</strong>, <a href="http://www.econ.ucla.edu/pfajgelbaum/RTP.pdf" target="_blank" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;">'The Return to Protectionism,'</a> by Pinelopi Goldberg, the World Bank’s chief economist, Pablo Fajgelbaum of UCLA, Patrick Kennedy of the University of California, Berkeley, and Amit Khandelwal of Columbia Business School, agreed that consumers and businesses absorbed the cost of the tariffs - not China and other impacted countries.</p><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'After more than a half-century of leading efforts</strong> to lower international trade barriers, in 2018 the United States enacted several waves of tariff increases on specific products, sectors, and countries.'</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'Import tariffs</strong> increased from 2.6% to 17% on 12,007 products covering $303 billion (12.6%) of 2017 annual U.S. imports.'</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'These measures</strong> represent the most comprehensive protectionist trade policies implemented by the U.S. since the 1930 Smoot-Hawley Act and the 1971 “Nixon shock".'</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'Overall</strong>, when tariff revenue is factored in, we find that the trade war lowered aggregate U.S. welfare in the short-run by $7.8 billion, or 0.04% of GDP.'</li></ul></td></tr><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="pdf-container" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;max-width: 100%;padding: 0 2%;background-color: #ccc;"><iframe src="https://docs.google.com/viewer?url=http://www.princeton.edu/~reddings/papers/CEPR-DP13564.pdf&amp;embedded=true" style="width:100%; height:500px;border:none;"></iframe></td></tr></p></div></div><div id="article8" class="post-card"><div class="t2-block">8. Trump Could Raise Tariffs on China. Here’s How China Could Respond.</div><div class="table-block w-richtext" data-ix="appear-on-load" style="opacity: 1; transition: opacity 1000ms ease 0s;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><table class="nl_card" id="19may1008" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><table class="multi-block" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="bg-holder" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;max-width: 100%;margin: 0 auto;padding: 0;"><img src="https://static01.nyt.com/images/2019/05/10/world/10chinaoptions/merlin_154546482_28dd7c52-98e4-47cc-9a38-445424b6d343-jumbo.jpg?quality=90&amp;auto=webp" alt="CHINADebate" style="width: 100%;margin: 0 auto;"></td></tr></tbody></table><p class="caption" style="font-size: .8125em;line-height: 1.75em;margin: .625em 0;display: block;color: #848484;margin-top: .5em;margin-bottom: 1.2500em;font-family: 'Lato', sans-serif;">New York Times</p><p class="excerpt" style="font-size: 1.125em;line-height: 1.75em;margin: .625em 0;margin-bottom: 1.5em;font-style: italic;text-align: center;color: #c80000;padding: 10px 5%;font-family: 'Lato', sans-serif;">Beijing could match what the United States does, and its options include upping the ante in untraditional ways. But most of its choices come with drawbacks.</p></td></tr><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="nl-post" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;padding: 0 2.5em;overflow: hidden;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>Meeting tariffs with tariffs.</strong> 'China’s obvious choice would be higher, and possibly wider, tariffs,' says NYT's Keith Bradsher in <a href="https://www.nytimes.com/2019/05/09/business/trump-china-tariffs.html" target="_blank" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;">'Trump Could Raise Tariffs on China. Here’s How China Could Respond.'<br></a></p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'China could</strong> also revive import barriers specifically aimed at some of the states that supported Mr. Trump in the 2016 election.'</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'For China</strong>, the problem with retaliatory tariffs is that they might not be enough to persuade Washington to relent.'</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'China could broaden its tariffs</strong> to cover the one-third of its imports from the United States that it has not yet penalized.'</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'These are mainly</strong> semiconductors and Boeing aircraft.'</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'But</strong> Chinese companies need the semiconductors, and there are few rival producers elsewhere for some of them.'</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'They would simply</strong> have to pay the tariffs and become less competitive.'</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>Weaponizing shoppers.</strong> 'Another option is for the Chinese government to encourage the country’s consumers to boycott American products, or to allow such boycotts to be organized at a grass-roots level.'</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'China has used this weapon</strong> during foreign policy disputes with South Korea and Japan over the past decade.'</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'But once unleashed</strong>, Chinese nationalism could be hard to contain.'</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'If a boycott led to</strong> anti-American protests in the streets, Beijing’s ability to reach deals with the United States would be constrained.'</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>China’s other options.</strong> 'If China really wants to fight back hard, it has other options. But all of them have big potential drawbacks.'</p><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'It could delay</strong> imports from the United States through elaborate customs inspections and quarantines.'</p><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'If China wanted to</strong> get Mr. Trump’s attention in a big way, it could outright hinder the global supply chain.'</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'China makes a huge amount of</strong> the parts and components that American companies need to produce their finished products.'</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'Many American companies</strong> have asked trade officials for exemptions from the Trump administration’s tariffs on Chinese goods, contending that they are heavily dependent on these products.'</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'So</strong> that would disrupt corporate supply chains.'</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'But it could also</strong> permanently damage China’s reputation as a reliable supplier for practically every large company in the West.'</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'Foreign companies</strong> are already re-evaluating their dependence on China as a manufacturing hub.'</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'Finally</strong>, China could let the value of its currency, the renminbi, slide sharply against the dollar.'</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'That would make China’s exports</strong> less expensive and more competitive in foreign markets, and could partly offset the cost of higher tariffs.'</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'But</strong> letting the renminbi drop could pose the greatest risks of all.'</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'It would make</strong> oil and other imports more expensive in China, fanning Chinese inflation at a time when prices are already starting to rise.'</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'And</strong> if a falling currency prompts Chinese companies and families to evade limits on moving their money overseas, a flood of outbound money could destabilize China’s financial system.'</li></ul></td></tr></tbody></table></p></div></div><div class="section_title w-condition-invisible"><strong>IV. EXTRADITION LAW:PRO &amp; CON<br></strong></div><div id="article9" class="post-card"><div class="t2-block">9. A year of trade losses in the U.S.-China tariff war.....—AEI</div><div class="table-block w-richtext" data-ix="appear-on-load" style="opacity: 1; transition: opacity 1000ms ease 0s;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><table class="nl_card" id="19may1009" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><table class="multi-block" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="bg-holder" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;max-width: 100%;margin: 0 auto;padding: 0;"><img src="http://www.aei.org/wp-content/uploads/2019/05/PC1.png" alt="CHINADebate" style="width: 100%;margin: 0 auto;"></td></tr></tbody></table><p class="caption" style="font-size: .8125em;line-height: 1.75em;margin: .625em 0;display: block;color: #848484;margin-top: .5em;margin-bottom: 1.2500em;font-family: 'Lato', sans-serif;"></p><p class="excerpt" style="font-size: 1.125em;line-height: 1.75em;margin: .625em 0;margin-bottom: 1.5em;font-style: italic;text-align: center;color: #c80000;padding: 10px 5%;font-family: 'Lato', sans-serif;">'The cumulative loss of direct trade between the U.S. and China now totals $27.1 billion.'</p></td></tr><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="nl-post" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;padding: 0 2.5em;overflow: hidden;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'The year over year growth rate</strong> for both U.S. imports from China and Chinese imports from the United States are deeply in negative territory,' says Mark Perry of AEI in <a href="http://www.aei.org/publication/a-year-of-trade-losses-in-u-s-china-tariff-war/" target="_blank" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;">'A year of trade losses in the U.S.-China tariff war…..'</a></p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'In the absence of the tariff war</strong> that distorts the economic signal provided by this data, would be consistent with what we’ve previously observed during periods where recessionary conditions prevailed in both nations’ economies.'</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>Bottom Line</strong>: 'All together, the cumulative loss of direct trade between the U.S. and China now totals $27.1 billion.'</p></td></tr></tbody></table></p></div></div></div>

<div id="NLpost" class="nl-post-wrapper" style="margin:0 auto;"><div id="NLHeader" class="post-card"><div id="Page-header" class="mainheader"><h1 class="t1">Will Trump's ‘Crazy Uncle’ strategy work this time?</h1><div class="date">May 8, 2019</div><a href="https://www.linkedin.com/in/malcolmriddell/" target="_blank" class="date" style="color: inherit;border-bottom: 0px solid #008dc8;text-decoration: none;">by Malcolm Riddell</a></div><div class="table-block w-condition-invisible w-dyn-bind-empty w-richtext" data-ix="appear-on-load" style="opacity: 1; transition: opacity 1000ms ease 0s;"></div></div><div class="section_title w-condition-invisible"><strong>I. THE LAW AND THE PROTESTS</strong></div><div id="article1" class="post-card"><div class="t2-block">1. 'Expect the president to move forward with tariffs this Friday.": Meredith Sumpter, Eurasia Group</div><div class="table-block w-richtext" data-ix="appear-on-load" style="opacity: 1; transition: opacity 1000ms ease 0s;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><table class="nl_card" id="19may0801" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><table class="multi-block" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="embed-responsive embed-responsive-16by9" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;position: relative;display: block;height: 100%;padding: 0;overflow: hidden;"><iframe class="embed-responsive-item" src="https://www.youtube.com/embed/Un7cQExk49Q"></iframe></td></tr></tbody></table><p class="caption" style="font-size: .8125em;line-height: 1.75em;margin: .625em 0;display: block;color: #848484;margin-top: .5em;margin-bottom: 1.2500em;font-family: 'Lato', sans-serif;"></p><p class="excerpt" style="font-size: 1.125em;line-height: 1.75em;margin: .625em 0;margin-bottom: 1.5em;font-style: italic;text-align: center;color: #c80000;padding: 10px 5%;font-family: 'Lato', sans-serif;"><em>‘We should anticipate that the president will move forward with tariffs this Friday.'</em></p></td></tr><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="nl-post" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;padding: 0 2.5em;overflow: hidden;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘We should anticipate</strong> that the president will move forward with tariffs this Friday,' <a href="https://youtu.be/Un7cQExk49Q" target="_blank" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;">predicts Meredith Sumpter</a> of the Eurasia Group in a Bloomberg video interview.</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘He's given the Chinese</strong> a very small window to come to the table with what Beijing would consider to be large concessions.'</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Also, we're in the middle</strong> of some very politically sensitive days for the Chinese.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘The “May 4th Movement”</strong> just passed and the June 4th anniversary of Tiananmen is coming up.'</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘So Xi Jinping</strong> cannot be seen to capitulate to U.S. demands during this sensitive time.’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘We've got</strong> two strong personalities.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘President Trump</strong> on one side, Xi Jinping on the other.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Both men</strong> are fairly confident that they will win out in the end.’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Both sides believe</strong> that they have time on their side.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Both sides believe</strong> that their respective economies can withstand additional pressure.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘The U.S. is coming off</strong> very strong Q1 growth.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘China for its part</strong> has seen some success with its stimulus measures from earlier this year.’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘What it comes down to</strong> is market pressure on one or the other economies.'</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘That’s going</strong> to force the hand.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘What we see happening now</strong> is a likely continued extension of trade negotiations - a delay of any deal perhaps even into 2020 depending upon how this latest bout works out.’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘What we're also seeing here</strong> is the underlying negotiations have been much more contentious than we had anticipated.'</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘You really have to look</strong> at what was negotiated - Liu He had a 150 page document with seven chapters written in English.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Some of the negotiators</strong> have described that language is fairly broad brushstrokes.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘So this is a perfect opportunity</strong> for Beijing to go back, take a look at that language, translate into Chinese, and then come to Washington and say, “You know we need to clarify what we meant in certain chapters or with certain key provisions.”</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘This is really</strong> Chinese diplomacy.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘You think</strong> you're getting somewhere with the Chinese.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘And at the very last minute</strong> they'll come back and say, “Actually what we had agreed to, we need to take another look at that”’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘That's essentially</strong> where we are now.'</li></ul></td></tr></tbody></table></p></div></div><div id="article2" class="post-card"><div class="t2-block">2. Will Trump's ‘Crazy Uncle’ strategy work this time?</div><div class="table-block w-richtext" data-ix="appear-on-load" style="opacity: 1; transition: opacity 1000ms ease 0s;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><table class="nl_card" id="19may0802" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><table class="multi-block" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="embed-responsive embed-responsive-16by9" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;position: relative;display: block;height: 100%;padding: 0;overflow: hidden;"><iframe class="embed-responsive-item" src="https://www.youtube.com/embed/ZPDlhRZVk6M"></iframe></td></tr></tbody></table><p class="caption" style="font-size: .8125em;line-height: 1.75em;margin: .625em 0;display: block;color: #848484;margin-top: .5em;margin-bottom: 1.2500em;font-family: 'Lato', sans-serif;"><strong>Scott Kennedy,</strong> Bloomberg &nbsp;<a href="https://www.youtube.com/watch?v=ZPDlhRZVk6M" target="_blank" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;">4m video interview</a></p><p class="excerpt" style="font-size: 1.125em;line-height: 1.75em;margin: .625em 0;margin-bottom: 1.5em;font-style: italic;text-align: center;color: #c80000;padding: 10px 5%;font-family: 'Lato', sans-serif;"><em>‘Trump has tried to scare the bejeezus out the Chinese with his “Crazy Uncle” strategy.</em><br><em>'The president has his own analysis of what the problems are and is willing to do just about anything to hurt China if if that will help bring a deal.'</em></p></td></tr><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="nl-post" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;padding: 0 2.5em;overflow: hidden;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘The president's</strong> tweets and the announcement of potential tariffs have brought us to a genuinely dramatic turning point in the trade negotiations,' says Scott Kennedy of the Center for Strategic and International Studies in his essay <a href="https://www.csis.org/analysis/challenges-crazy-uncle-strategy" target="_blank" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;">'The Challenges of the "Crazy Uncle" Strategy.'</a></p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘And the president's threats</strong> are believable because he has already acted on them before, pushing aside entreaties from Wall Street, allies, and close friends.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Trump abandoned</strong> the Trans-Pacific Partnership, chastised the World Trade Organization, and engaged in a series of bilateral talks, while also slapping trading partners with tariffs and threatening still more penalties.’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘To their credit,</strong> the administration has created tremendous leverage against China.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'The president</strong> has marshalled hyperbolic "facts" concerning the trade balance to portray the United States as a long-suffering victim and the amount of collected tariffs to show that the trade war is benefitting Americans.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Although objectively inaccurate,</strong> his apparently sincere declarations signal the fervency of his beliefs and his willingness to bear tremendous economic costs in the short-run that conventional politicians wouldn't consider, all in order to force a stubborn China to modify its economic policies and system.’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>The “Crazy Uncle” Strategy.</strong> 'But the president's "Crazy Uncle" strategy may be wearing thin, not only through fatigue but also as listeners become accustomed to his outbursts and have difficulty differentiating between momentary complaints and genuine threats.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Ever more tempestuous language</strong> is needed to generate the desired anxiety and subsequent concessions, and at some point, targets either don't get the message or decide to break this anxiety-compliance spiral by not giving in.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘This strategy</strong> vis-a-vis China may be nearing the end of its shelf-life.’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>Also ‘President Trump's "Crazy Uncle" strategy</strong> reinforces the impression in Beijing that deals with the United States are temporary and that sooner or later Washington will up the ante and demand still more, while offering no more than momentary calm in return.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘This does not bode well</strong> for efforts to reach any sort of enduring equilibrium in the U.S.-China relationship, whether one based on cooperation and harmony or even one rooted in greater competition and rivalry.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Such stability</strong> would require an approach that strengthens Washington's credibility at home and abroad.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Bilateral brinksmanship,</strong> whether conveyed by Twitter or other means, cannot serve that function.’</li></ul></td></tr></tbody></table></p></div></div><div id="article3" class="post-card"><div class="t2-block">3. New tariffs could cost China 1% GDP: Tao Wang, UBS</div><div class="table-block w-richtext" data-ix="appear-on-load" style="opacity: 1; transition: opacity 1000ms ease 0s;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><table class="nl_card" id="19may0803" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><table class="multi-block" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="embed-responsive embed-responsive-16by9" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;position: relative;display: block;height: 100%;padding: 0;overflow: hidden;"><iframe class="embed-responsive-item" src="https://www.youtube.com/embed/KYHkTwwRh_Y"></iframe></td></tr></tbody></table><p class="caption" style="font-size: .8125em;line-height: 1.75em;margin: .625em 0;display: block;color: #848484;margin-top: .5em;margin-bottom: 1.2500em;font-family: 'Lato', sans-serif;"></p><p class="excerpt" style="font-size: 1.125em;line-height: 1.75em;margin: .625em 0;margin-bottom: 1.5em;font-style: italic;text-align: center;color: #c80000;padding: 10px 5%;font-family: 'Lato', sans-serif;"></p></td></tr><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="nl-post" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;padding: 0 2.5em;overflow: hidden;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘If the tariffs</strong> on the 200 billion go from 10% to 25%, it's going to have another .3 or .34% points of negative impact on China's GDP,' says Wang Tao, a leading and highly respected China economist and Head of China Economic Research at UBS in a <a href="https://youtu.be/KYHkTwwRh_Y" target="_blank" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;">Bloomberg video interview.</a></p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Still with a little bit</strong> more easing I think China can still keep growth above 6% this year.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘But</strong> if a 25% tariff is imposed on everything, then the additional impact could be more than one percentage point.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'The Chinese government</strong> would then have to step up the stimulus - and even in that case growth may fall below 6%.'</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘If Xi does have to stimulate</strong> the economy, ‘the usual levers can still be used, infrastructure spending and so on.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘But this time</strong> we have already seen China focus more on tax cuts for corporates and also more support for the private sector.'</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘And</strong> pushing through domestic structural reforms – such as SOE reforms and introducing more private sector participation - has had a lot of support.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘So even if tariffs</strong> push growth below 6%, I think those kinds of reforms will boost domestic confidence.'</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘To me</strong> that's more important for the sustainable growth in China than resolving the trade war.’</li></ul></td></tr></tbody></table></p></div></div><div class="section_title w-condition-invisible"><strong>II. POTENTIAL BACKLASH FROM THE U.S.<br></strong></div><div id="article4" class="post-card"><div class="t2-block">4. 'Why Trump Is Raising Tariffs on China' - by Trump advisor Michael Pillsbury</div><div class="table-block w-richtext" data-ix="appear-on-load" style="opacity: 1; transition: opacity 1000ms ease 0s;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><table class="nl_card" id="19may0804" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><table class="multi-block" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="bg-holder" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;max-width: 100%;margin: 0 auto;padding: 0;"><img src="https://media-cdn.list.ly/production/714920/3486812/3486812-why-trump-is-raising-tariffs-on-china-by-trump-advisor-michael-pillsbury_600px.jpeg?ver=6781958426" alt="CHINADebate" style="width: 100%;margin: 0 auto;"></td></tr></tbody></table><p class="caption" style="font-size: .8125em;line-height: 1.75em;margin: .625em 0;display: block;color: #848484;margin-top: .5em;margin-bottom: 1.2500em;font-family: 'Lato', sans-serif;"></p><p class="excerpt" style="font-size: 1.125em;line-height: 1.75em;margin: .625em 0;margin-bottom: 1.5em;font-style: italic;text-align: center;color: #c80000;padding: 10px 5%;font-family: 'Lato', sans-serif;">'China has been busy in these final three weeks trying to weaken the deal.' <br>'That’s Beijing’s modus operandi: String the West along, then renegotiate and take back earlier concessions from the gullible “barbarians.” </p></td></tr><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="nl-post" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;padding: 0 2.5em;overflow: hidden;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>Michael Pillsbury</strong> is director of Chinese strategy at the Hudson Institute and author of <em>The Hundred Year Marathon: China’s Secret Strategy to Replace America As the Global Superpower</em> – a must-read to understand the China hawk view of U.S.-China relations.</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>He is also</strong> an advisor to President Trump.</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>So, Mr. Pillsbury</strong> may have had a role in Mr. Trump’s recent threat to raise tariffs.</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>At the very least</strong>, we can assume that Mr. Trump has been briefed on Mr. Pillsbury's take.</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>His take</strong> is definitely essential to interpret what influences President Trump's views China and the trade deal.</li></ul><hr style="border: 0;border-top: 3px solid #f5f5f5;height: 5px;margin: 10px auto;text-align: center;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘President Trump’s Sunday tweet,</strong> in which he said he’d raise tariffs from 10% to 25% on $200 billion of Chinese exports at the end of this week shocked China’s leaders,' writes Michael Pillsbury in <a href="https://www.wsj.com/articles/why-trump-is-raising-tariffs-on-china-11557181162" target="_blank" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;">'Why Trump Is Raising Tariffs on China.'</a></p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'They underestimated</strong> the strength of American hawks’ influence.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Just as Americans</strong> once underestimated the influence of Chinese hawks.’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘But the president’s tough line now</strong>—heading into the final stretch of negotiations—will reduce friction later.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘China is less likely to cheat</strong> on any future agreement if it needs to comply to earn a reduction of these tariffs.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘China will cheat</strong> if the U.S. has no tariffs to enforce it.’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘As trade watchers</strong> around the world armchair-quarterback this week’s negotiations, it’s useful to assess the likelihood of success in each key area of the deal to determine whether it has indeed fallen apart.’</p><hr style="border: 0;border-top: 3px solid #f5f5f5;height: 5px;margin: 10px auto;text-align: center;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;">⚡<strong>‘First,</strong> cyber intrusions into U.S. business networks have helped Chinese companies gain advantages in key high-tech areas, including artificial intelligence, electrical vehicles, jet engines and nuclear reactors.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘America can’t maintain</strong> its technological supremacy if this continues'.</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'But China is loath</strong> to give up the hacking and espionage that help its entrepreneurs pillage America’s intellectual property and technological crown jewels.’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘My forecast</strong> is no deal in this area.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘For Beijing,</strong> crime pays too well.’</li></ul><hr style="border: 0;border-top: 3px solid #f5f5f5;height: 5px;margin: 10px auto;text-align: center;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;">⚡<strong>‘Second,</strong> it’s difficult to monitor and restrict China’s efforts to force the transfer of American technology in exchange for access to Chinese markets unless tariffs remain to aid enforcement.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘It’s almost</strong> as difficult to police China’s intellectual-property theft effectively.'</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'Besides,</strong> the hawks in Beijing will likely work overtime to scuttle this part of the deal.’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'Agreement can be found</strong> here only if the U.S. takes a leap of faith that China will do what it has never done before—fulfill its commitment to a trade deal.’</p><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘China has a long history</strong> of quickly breaking promises to the West.'</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘From refusing to abide</strong> by the rules of the World Trade Organization after it joined in 2001 to abandoning President Xi Jinping’s promise to President Obama not to militarize the South China Sea, Beijing’s record makes strong enforcement mechanisms a necessary precondition to any U.S. agreement to a deal.’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘But seen through the lens</strong> of Chinese history, strong monitoring and enforcement look like humiliation at the hands of the West.’</p><hr style="border: 0;border-top: 3px solid #f5f5f5;height: 5px;margin: 10px auto;text-align: center;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;">⚡<strong>‘Third,</strong> China’s state-owned enterprises represent a critical cog in its mercantilist machinery.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘SOEs roam the globe</strong> with massive subsidies, running circles around private-sector corporations.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘There is no reason</strong> a Chinese corporation should be the largest producer of railroad cars in the world other than subsidies and stolen technology.’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘But any agreement</strong> that commits China to reining in its SOEs is a nonstarter in Beijing.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘The SOEs</strong> are too powerful politically and too important economically.’</li></ul><hr style="border: 0;border-top: 3px solid #f5f5f5;height: 5px;margin: 10px auto;text-align: center;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;">⚡<strong>‘Fourth,</strong> Beijing’s currency manipulation has harmed the trade balance.'</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>Treasury Secretary</strong> Steven Mnuchin is dovish on this issue—he hasn’t branded China a currency manipulator, as Mr. Trump promised to do during the 2016 campaign—so the U.S. may not press Beijing too hard.’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘A deal is possible here,</strong> although it’s likely not in the U.S. long-term interest because it wouldn’t be enforceable.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Even so,</strong> Sen. Bernie Sanders is hitting the president on the broken campaign promise.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Mr. Trump</strong> may pay a political price for inaction.’</li></ul><hr style="border: 0;border-top: 3px solid #f5f5f5;height: 5px;margin: 10px auto;text-align: center;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Given these challenges,</strong> it’s hardly surprising that the long-negotiated deal appears to be falling apart.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘China has been busy</strong> in these final three weeks trying to weaken the deal.'</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'That’s Beijing’s modus operandi:</strong> String the West along, then renegotiate and take back earlier concessions from the gullible “barbarians.”</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘China has a clear strategic choice':</strong></p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'establish</strong> a real accord that will lead to better growth for both nations,'</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'or continue</strong> its predatory mercantilist reliance on national champions, beginning the descent into a cold war that portends security concerns and slower growth rates for all.’ </li></ul></td></tr></tbody></table></p></div></div><div id="article5" class="post-card"><div class="t2-block">5. Trump's Tariff Threat on Rest of Chinese Goods Would Hit Final Consumer Product</div><div class="table-block w-richtext" data-ix="appear-on-load" style="opacity: 1; transition: opacity 1000ms ease 0s;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><table class="nl_card" id="19may0805" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><table class="multi-block" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="bg-holder" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;max-width: 100%;margin: 0 auto;padding: 0;"><img src="https://assets.website-files.com/5c864c33af62620dca1373ac/5d119c7489e271ac3a0706a3_Trump%27s%20Tariff%20Threat%20on%20Rest%20of%20Chinese%20Goods%20Would%20Hit%20Final%20Consumer%20Products.png" alt="CHINADebate" style="width: 100%;margin: 0 auto;"></td></tr></tbody></table><p class="caption" style="font-size: .8125em;line-height: 1.75em;margin: .625em 0;display: block;color: #848484;margin-top: .5em;margin-bottom: 1.2500em;font-family: 'Lato', sans-serif;">PIIE</p><p class="excerpt" style="font-size: 1.125em;line-height: 1.75em;margin: .625em 0;margin-bottom: 1.5em;font-style: italic;text-align: center;color: #c80000;padding: 10px 5%;font-family: 'Lato', sans-serif;"></p></td></tr><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="nl-post" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;padding: 0 2.5em;overflow: hidden;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'In a sudden reversal</strong> during the US-China trade negotiations, President Trump tweeted that the United States will increase the 10 percent tariff on $200 billion of imports from China to 25 percent on May 10, 2019,'<a href="https://piie.com/research/piie-charts/trumps-tariff-threat-rest-chinese-goods-would-hit-final-consumer-products" target="_blank" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;"> write Chad P. Bown Eva (Yiwen) Zhang </a>of the Peterson Institute for International Economics.</p><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'He also indicated</strong> he would "shortly" impose 25 percent tariffs on the rest of US imports from China not yet targeted with his Section 301 tariffs, which he states are "325 Billions Dollars" and would mostly hit final consumer products, such as toys, footwear, clothing, and electronics.'</p></td></tr></tbody></table></p></div></div></div>

<div id="NLpost" class="nl-post-wrapper" style="margin:0 auto;"><div id="NLHeader" class="post-card"><div id="Page-header" class="mainheader"><h1 class="t1">China Never Stopped Managing its Trade</h1><div class="date">May 4, 2019</div><a href="https://www.linkedin.com/in/malcolmriddell/" target="_blank" class="date" style="color: inherit;border-bottom: 0px solid #008dc8;text-decoration: none;">by Malcolm Riddell</a></div><div class="table-block w-condition-invisible w-dyn-bind-empty w-richtext" data-ix="appear-on-load" style="opacity: 1; transition: opacity 1000ms ease 0s;"></div></div><div class="section_title w-condition-invisible"><strong>I. THE LAW AND THE PROTESTS</strong></div><div id="article1" class="post-card"><div class="t2-block">1. China Never Stopped Managing its Trade</div><div class="table-block w-richtext" data-ix="appear-on-load" style="opacity: 1; transition: opacity 1000ms ease 0s;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><table class="nl_card" id="19may0401" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><table class="multi-block" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="bg-holder" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;max-width: 100%;margin: 0 auto;padding: 0;"><img src="https://media-cdn.list.ly/production/712059/3478569/3478569-china-never-stopped-managing-its-trade_600px.jpeg?ver=8718296269" alt="CHINADebate" style="width: 100%;margin: 0 auto;"></td></tr></tbody></table><p class="caption" style="font-size: .8125em;line-height: 1.75em;margin: .625em 0;display: block;color: #848484;margin-top: .5em;margin-bottom: 1.2500em;font-family: 'Lato', sans-serif;"></p><p class="excerpt" style="font-size: 1.125em;line-height: 1.75em;margin: .625em 0;margin-bottom: 1.5em;font-style: italic;text-align: center;color: #c80000;padding: 10px 5%;font-family: 'Lato', sans-serif;">So long as the bulk of China's imports from the United States (and many others) are bought by state firms, China has the ability to manage its trade.</p></td></tr><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="nl-post" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;padding: 0 2.5em;overflow: hidden;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘One standard criticism</strong>&nbsp;of Trump’s emphasis on bilateral trade—and reducing the bilateral trade deficit—is that it’s leading China back toward a world of managed trade,' writes&nbsp;<strong>Brad Setser of the Council on Foreign Relations</strong>&nbsp;in&nbsp;<a href="https://www.cfr.org/blog/china-never-stopped-managing-its-trade" target="_blank" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;">'China Never Stopped Managing its Trade.'</a></p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘The argument</strong>, though, misses one critical point: China never stopped managing a large part of its trade.’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Forget</strong>&nbsp;the formal structure of “trade”—tariffs, quotas and the like.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘They don’t matter</strong>&nbsp;much when the bulk of China’s imports are carried out by state owned companies, or by private companies that can only import with a license from China’s state.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘When the state controls</strong>&nbsp;the firms that are doing the importing, a few phone calls can have a big impact.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘That’s why China</strong>&nbsp;can shut down trade in canola with Canada without formally introducing any tariffs.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘That’s why China</strong>&nbsp;can scale back its purchases of Australian coal without filing a “dumping” or “national security” tariffs case.’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘The reality</strong>&nbsp;is that China’s state influence over a wide range of large purchases, including large orders for a range of imports, never really went away, even after China joined the WTO.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘In sector after sector</strong>—particularly on the capital goods side—the ultimate buyer is the Chinese state.’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'This is all part</strong>&nbsp;of what makes China a tough nut for imports to crack.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'China isn’t willing</strong>&nbsp;to give up the state’s control over the commanding heights of the economy in a trade negotiation.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'So if China</strong>&nbsp;doesn’t want to import something, it has a lot of levers it can use to limit import demand—even if there aren’t the kind of formal controls or taxes at the border that are traditionally part of a trade negotiation.’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘The best critique of Trump’s deal</strong>—setting aside the argument that Australia and others have made that the United States is in effect selling out its allies to get a bigger share of a limited import pie —isn’t that it returns China to a world of managed trade, where the state will have to reinsert itself in the economy.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Rather it is the criticism</strong>&nbsp;made by Kevin Book (and Derek Scissors)' [quoted in NYT&nbsp;<a href="https://www.nytimes.com/2019/04/01/us/politics/us-china-trade-trump.html" target="_blank" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;">‘China Purchases Could Undercut Trump’s Larger Trade Goal'</a>]: “If it can be negotiated by government fiat, it can be taken away by government fiat.”</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘On the other hand,</strong>&nbsp;it isn’t realistic to expect China to dismantle the core institutions of its mixed economic model in a trade negotiation.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘And until</strong>&nbsp;China’s state divests itself from the commanding heights of China’s economy and a lot of big investment decisions, well, China has the institutional structure to manage trade if it wants too.’</li></ul></td></tr></tbody></table></p></div></div><div id="article2" class="post-card"><div class="t2-block">2. A dash of stimulus helps stabilize China’s wobbly economy</div><div class="table-block w-richtext" data-ix="appear-on-load" style="opacity: 1; transition: opacity 1000ms ease 0s;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><table class="nl_card" id="19may0402" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><table class="multi-block" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="bg-holder" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;max-width: 100%;margin: 0 auto;padding: 0;"><img src="https://assets.website-files.com/5c864c33af62620dca1373ac/5d0938a2e2f0f2b5cb7e006d_David%20Dollar%20copy.png" alt="CHINADebate" style="width: 100%;margin: 0 auto;"></td></tr></tbody></table><p class="caption" style="font-size: .8125em;line-height: 1.75em;margin: .625em 0;display: block;color: #848484;margin-top: .5em;margin-bottom: 1.2500em;font-family: 'Lato', sans-serif;"></p><p class="excerpt" style="font-size: 1.125em;line-height: 1.75em;margin: .625em 0;margin-bottom: 1.5em;font-style: italic;text-align: center;color: #c80000;padding: 10px 5%;font-family: 'Lato', sans-serif;"></p></td></tr><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="nl-post" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;padding: 0 2.5em;overflow: hidden;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'China was a frequent topic</strong>&nbsp;of discussion at the International Monetary Fund (IMF)/World Bank spring meetings held April 12-14 in Washington,' reports&nbsp;<strong>David Dollar, a senior fellow at the Brookings Institution,</strong>&nbsp;who was the U.S. Treasury’s economic and financial emissary to China and World Bank country director for China, in '<a href="https://www.brookings.edu/blog/order-from-chaos/2019/04/23/a-dash-of-stimulus-helps-stabilize-chinas-wobbly-economy/" target="_blank" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;">A Dash of Stimulus Helps Stabilize China's Wobbly Economy.'</a></p><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>ECONOMY.</strong>&nbsp;'The IMFmarked down the 2019 growth forecasts for every major economy except China.'</p><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'In Q1, China</strong>&nbsp;clearly shifted from worrying about deleveraging to stabilizing growth.'</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'The March credit data</strong>&nbsp;— new yuan loans, total social financing and growth of the money supply — all surprised on the upside.'</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>STIMULUS.</strong>&nbsp;'The government has announced a cut in the value-added tax, which will make most goods and services cheaper for households and should spur consumption.'</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'To that stimulus</strong>&nbsp;has to be added increases in local government bond issuance to finance approved infrastructure projects'.</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'The overall stimulus</strong>&nbsp;seems to be about 1.5 percent of GDP, much smaller than the big stimulus after the global financial crisis but apparently enough to already have had a positive effect on the economy.'</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'While there was a general consensus</strong>&nbsp;on the sidelines of the IMF meetings that the stimulus would be sufficient to stabilize growth in the 6.2-6.3 range for the year, there was less optimism about the medium term.'</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'With the additional stimulus,</strong>&nbsp;even though modest in scope, leverage will naturally rise, as will financial risks.'</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>There are reports</strong>&nbsp;of medium-sized banks — mostly under the control of local governments — facing serious rising non-performing loans.'</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>BANKS</strong>. 'The big five commercial banks that make up more than half of the system seem to have adequate capital and provisioning.'</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'The Chinese government</strong>&nbsp;can afford to resolve small banks that are insolvent, but it will be a political challenge to carry this out smoothly.'</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>TRADE DEAL</strong>. 'Around Washington, attitudes toward the U.S.-China trade dispute have a similar character: optimism that a near-term deal will be struck, reducing risks for the global economy in 2019, but pessimism that a deal will stick.'</p><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'The two sides</strong>&nbsp;seem motivated to reach an agreement in the next few weeks. The parameters of a deal are likely to include Chinese commitments to':</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'purchase more</strong>&nbsp;U.S. products (the number leaked is $1.2 trillion over six years)';</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'open additional markets</strong>&nbsp;to imports and inward investment (eg, autos, financial services and now discussion of cloud computing)'; and</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'take steps to eliminate</strong>&nbsp;forced technology transfer and intellectual property rights (IPR) violations.'</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'Each element</strong>&nbsp;faces risks over the medium term: Some of the purchases may not materialize because of problems on either side of the Pacific; and/or the U.S.-China trade deficit may rise despite the purchases because U.S. imports from China have been growing rapidly (up 17 percent between 2016 and 2018).'</p><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'On market access</strong>, the sectors to be opened all involve heavy regulation, so it remains to be seen if these markets are truly opened.'</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'And strengthening</strong>&nbsp;of IPR protection is inherently a slow and institutional process.'</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'Hence,</strong>&nbsp;it is easy to imagine the U.S. declaring at some point that China is not rigorously implementing the deal.'</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'The consensus</strong>&nbsp;among China experts is that President Xi Jinping is not going to dramatically open and reform the economy, and hence the possibility of disillusionment on the U.S. side, somewhere down the road, is very high.'</li></ul></td></tr></tbody></table></p></div></div><div id="article3" class="post-card"><div class="t2-block">3. 'May 4th Movement': Happy 100th anniversary</div><div class="table-block w-richtext" data-ix="appear-on-load" style="opacity: 1; transition: opacity 1000ms ease 0s;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><table class="nl_card" id="19may0403" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><table class="multi-block" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="embed-responsive embed-responsive-16by9" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;position: relative;display: block;height: 100%;padding: 0;overflow: hidden;"><iframe class="embed-responsive-item" src="https://www.youtube.com/embed/zBN4Dk680bE"></iframe></td></tr></tbody></table><p class="caption" style="font-size: .8125em;line-height: 1.75em;margin: .625em 0;display: block;color: #848484;margin-top: .5em;margin-bottom: 1.2500em;font-family: 'Lato', sans-serif;"></p><p class="excerpt" style="font-size: 1.125em;line-height: 1.75em;margin: .625em 0;margin-bottom: 1.5em;font-style: italic;text-align: center;color: #c80000;padding: 10px 5%;font-family: 'Lato', sans-serif;"></p></td></tr><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="nl-post" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;padding: 0 2.5em;overflow: hidden;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>Today</strong>&nbsp;is the 100th anniversary of the 'May Fourth Movement.'</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>Summing up</strong>&nbsp;the event is a&nbsp;<a href="https://youtu.be/zBN4Dk680bE" target="_blank" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;">good short video</a>&nbsp;(1m 48s) with archival footage.</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>In graduate school,</strong>&nbsp;a year of 'Modern Chinese History' was required.</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>I don't recall</strong>&nbsp;how much class time we spent on or how many books and articles we read about the May 4th Movement. I just remember a lot.</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>I also remember</strong>&nbsp;how when we began to study May 4 it seemed that all we had learned about before May 4 was prelude and a good deal after derived from it.</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>That is to say</strong>&nbsp;that May 4 is a pivot point that some call the Birth of Modern China.</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Thousands of Chinese students</strong>&nbsp;took to the streets in Beijing 100 years ago Saturday, in a famous uprising against Western colonialism that still resonates today,' write&nbsp;<strong>NYT's Chris Buckley and Amy Qin</strong>&nbsp;in&nbsp;<a href="https://www.nytimes.com/2019/05/03/world/asia/china-may-4-movement.html" target="_blank" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;">'Why Does a Student Protest Held a Century Ago Still Matter in China?'</a></p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘The protest became known as the May 4 Movement.'</strong></li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Here is why</strong>&nbsp;the movement matters, and why both supporters and critics of the Communist Party claim inspiration from it.’</li></ul><hr style="border: 0;border-top: 3px solid #f5f5f5;height: 5px;margin: 10px auto;text-align: center;"><h2>What happened on May 4, 1919?</h2><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘China had sided</strong>&nbsp;with the Allies in the First World War.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Many Chinese expected</strong>&nbsp;that negotiators in the postwar peace talks would agree to hand back colonial territory in Shandong, an eastern Chinese province, that Japan had seized from Germany near the start of the war.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Instead,</strong>&nbsp;the Western powers let Japan keep the territory.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘That decision ignited fury</strong>&nbsp;among Chinese students, who saw it as a betrayal by Western nations and by China’s leaders, whom they accused of bowing to Japan.’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Anger spread</strong>&nbsp;in universities and colleges across Beijing, and on May 4, 1919, students from 13 campuses in the capital came together in protest.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘About 3,000 students</strong>&nbsp;joined the demonstration near Tiananmen, the “Gate of Heavenly Peace.”’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘The students marched off</strong>&nbsp;to present their demands to Western diplomatic legations nearby.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Protesters</strong>&nbsp;moved on to the home of Cao Rulin, one of the ministers they accused of acceding to Japan’s demands, and some ransacked and burned it.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Some</strong>&nbsp;protesters were arrested.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘But the upsurge</strong>&nbsp;in nationalism spread to other cities in China, inspiring strikes and boycotts.’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘The unrest forced</strong>&nbsp;the government in Beijing to release arrested students, and Chinese negotiators in Paris refused to sign the peace treaty.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>“May 4”</strong>&nbsp;entered history as a watershed for China.’</li></ul><hr style="border: 0;border-top: 3px solid #f5f5f5;height: 5px;margin: 10px auto;text-align: center;"><h2>Why does the Communist Party celebrate May 4?</h2><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘The May 4 protest</strong>&nbsp;became part of the Chinese Communist Party’s founding story.'</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘After Western powers</strong>&nbsp;ignored China’s pleas in 1919, more students and scholars looked to Russia’s Bolshevik Revolution of 1917 as a promising path toward national renewal.</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Some embraced Marxism</strong>&nbsp;and helped to found China’s Communist Party in 1921.'</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘And May 4</strong>&nbsp;has entered the party’s iconography.'</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Since Mr. Xi</strong>&nbsp;became chairman of the party in 2012, he has promoted a nationalist vision of making China a more prosperous and powerful country and restoring it to its ancient glory.'</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘The party has cast itself</strong>&nbsp;as the rightful heir to the patriotic legacy of May 4 as one way to strengthen its legitimacy.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>For a great account of this,</strong>&nbsp;see 'How the Communist Party seized the legacy of May Fourth,' in a post below.</li></ul><hr style="border: 0;border-top: 3px solid #f5f5f5;height: 5px;margin: 10px auto;text-align: center;"><h2>Why are some critics of the party also inspired by May 4?</h2><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Successive generations</strong>&nbsp;of student protesters and dissenting intellectuals have also claimed inspiration from the May 4 era, including the students who occupied Tiananmen Square in June of 1989 to demand cleaner, more accountable government.’</p><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Back in 1919,</strong>&nbsp;commentators linked the protests with the New Culture Movement, the name they gave to a flux of ideas that had spread in Chinese universities, newspapers and literary circles.</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'Such ideas</strong>&nbsp;included anarchism, socialism, feminism, artistic experimentation and reforming written Chinese.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘This iconoclastic spirit</strong>&nbsp;was summed up at the time in a slogan calling for “Mr. Science and Mr. Democracy.”</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘The idea of science</strong>&nbsp;“then stood for ‘modernity’, the ‘West’ and a generally distanced and iconoclastic way of approaching Chinese tradition,” Elisabeth Forster, of the University of Southampton said. “1919 really was a year that changed China.”</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘So the New Culture and May 4 movements</strong>&nbsp;have both been evoked by Chinese scholars and students as lodestars for intellectual independence and enlightenment.'</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>“May 4 cannot be put to rest</strong>&nbsp;because the question is still screaming out: can you have science, technology and wealth without democracy?” said Vera Schwarcz, of Wesleyan University.’</li></ul></td></tr></tbody></table></p></div></div><div class="section_title w-condition-invisible"><strong>II. POTENTIAL BACKLASH FROM THE U.S.<br></strong></div><div id="article4" class="post-card"><div class="t2-block">4. 'How the Communist Party seized the legacy of May Fourth'</div><div class="table-block w-richtext" data-ix="appear-on-load" style="opacity: 1; transition: opacity 1000ms ease 0s;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><table class="nl_card" id="19may0404" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><table class="multi-block" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="bg-holder" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;max-width: 100%;margin: 0 auto;padding: 0;"><img src="https://media-cdn.list.ly/production/712059/3478908/3478908-how-the-communist-party-seized-the-legacy-of-may-fourth_600px.jpeg?ver=0724376780" alt="CHINADebate" style="width: 100%;margin: 0 auto;"></td></tr></tbody></table><p class="caption" style="font-size: .8125em;line-height: 1.75em;margin: .625em 0;display: block;color: #848484;margin-top: .5em;margin-bottom: 1.2500em;font-family: 'Lato', sans-serif;"></p><p class="excerpt" style="font-size: 1.125em;line-height: 1.75em;margin: .625em 0;margin-bottom: 1.5em;font-style: italic;text-align: center;color: #c80000;padding: 10px 5%;font-family: 'Lato', sans-serif;"></p></td></tr><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="nl-post" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;padding: 0 2.5em;overflow: hidden;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘The march marked</strong>&nbsp;the birth of the storied May Fourth Movement, a national cultural and political awakening that, over the past century, has come to symbolize the birth of modern China,.’ writes&nbsp;<strong>Dan Xin Huang</strong>&nbsp;in a terrific&nbsp;<a href="https://www.foreignaffairs.com/articles/china/2019-05-03/chinese-enlightenment-100" target="_blank" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;">essay in Foreign Affairs.</a></p><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>Beginning in the Qing Dynasty,</strong>&nbsp;through the 1911 revolution, and then into the Republican Era, ‘For the fledgling nation’s educated and elite, saving China was foremost on everyone’s mind.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Once conceived</strong>&nbsp;as the center of human civilization, the Chinese empire had entered the twentieth century limping, crippled by an unrelenting succession of crises.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Barely a decade</strong>&nbsp;into the new century, the Qing dynasty collapsed, replaced by a flawed republic that quickly succumbed to corrupt warlords and foreign aggressors.’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Out of these conditions,</strong>&nbsp;however, rose a generation of writers and scholars, trained in Japan and the West, who balked at the shackles of Chinese tradition and looked abroad for tools of progress.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Beginning in the 1910s,</strong>&nbsp;hundreds of new journals and magazines printed their first issues, wrestling with the most pressing subjects of their time, their insatiable appetite for modernity reflected in titles such as&nbsp;<em>New Youth, New Tide, New Life, New Epoch, New Society, New Literature and Art</em>—new everything.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘The collective fervor</strong>&nbsp;came to be known as the New Culture Movement, a swirl of ideas and activity that spurned the past, contested the future, and elevated the individual to a prominence not seen before or since.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Culture was politics,</strong>&nbsp;and politics was culture.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘The nation brimmed</strong>&nbsp;with new plans for structuring life and society, while systems that had dominated for millennia were left in the dust.’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘If the visionaries of New Culture</strong>&nbsp;readied the kindling, the students on May 4, 1919, lit the fire.’</p><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Out of the movement’s bonfire</strong>&nbsp;leapt one ember that would catch and ignite into its own great flame.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Taking inspiration</strong>&nbsp;from the Russian Revolution, China’s early Marxists began as a fringe study group on the campus of Peking University, steadily disseminating the language of class struggle and revolution to a national audience.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘In July 1921,</strong>&nbsp;around a dozen Marxists gathered for a secret meeting in Shanghai.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Buoyed by support</strong>&nbsp;from the Soviet Comintern, they formally established the Communist Party in China and presided over its first party congress.’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Among the delegates</strong>&nbsp;was a local cell leader named Mao Zedong.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>May Fourth had catalyzed</strong>&nbsp;a turn in Mao’s worldview: sensing the need for a more structured politics, he abandoned his previous anarchism and plunged into Marxist¬-Leninist theory.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘It was,</strong>&nbsp;he later reflected, “a critical period of my life.”</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Ever since,</strong>&nbsp;the Chinese Communist Party has rooted its origin story in the romance and defiance of May 4.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘The party’s official history books</strong>&nbsp;trace a direct line from its founding back to the movement, which is credited with “wakening the Chinese national consciousness” and “preparing the fundamental conditions of the founding of the CCP.”’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Mao hailed the movement</strong>&nbsp;as the party’s “chief landmark,” which produced in China “a brand-new cultural force . . . that is, the communist culture and ideology guided by the Chinese Communists.”’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘According to party lore,</strong>&nbsp;the spirit of May 4 was finally realized in 1949, when the communists declared victory in the nation’s civil war, announcing the establishment of the People’s Republic of China.’</li></ul></td></tr></tbody></table></p></div></div></div>

<div id="NLpost" class="nl-post-wrapper" style="margin:0 auto;"><div id="NLHeader" class="post-card"><div id="Page-header" class="mainheader"><h1 class="t1">Xi's Belt and Road Reboot</h1><div class="date">May 1, 2019</div><a href="https://www.linkedin.com/in/malcolmriddell/" target="_blank" class="date" style="color: inherit;border-bottom: 0px solid #008dc8;text-decoration: none;">by Malcolm Riddell</a></div><div class="table-block w-condition-invisible w-dyn-bind-empty w-richtext" data-ix="appear-on-load" style="opacity: 1; transition: opacity 1000ms ease 0s;"></div></div><div class="section_title w-condition-invisible"><strong>I. THE LAW AND THE PROTESTS</strong></div><div id="article1" class="post-card"><div class="t2-block">1. Xi Jinping's Second Belt and Road Forum: Three Key Takeaways</div><div class="table-block w-richtext" data-ix="appear-on-load" style="opacity: 1; transition: opacity 1000ms ease 0s;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><table class="nl_card" id="19may0101" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><table class="multi-block" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="bg-holder" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;max-width: 100%;margin: 0 auto;padding: 0;"><img src="https://assets.bwbx.io/images/users/iqjWHBFdfxIU/ie1De8Zu1xcM/v5/-1x-1.jpg" alt="CHINADebate" style="width: 100%;margin: 0 auto;"></td></tr></tbody></table><p class="caption" style="font-size: .8125em;line-height: 1.75em;margin: .625em 0;display: block;color: #848484;margin-top: .5em;margin-bottom: 1.2500em;font-family: 'Lato', sans-serif;">Bloomberg</p><p class="excerpt" style="font-size: 1.125em;line-height: 1.75em;margin: .625em 0;margin-bottom: 1.5em;font-style: italic;text-align: center;color: #c80000;padding: 10px 5%;font-family: 'Lato', sans-serif;">A kinder, gentler Belt and Road?</p></td></tr><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="nl-post" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;padding: 0 2.5em;overflow: hidden;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>Daniel Kliman of the Center for a New American Security:</strong> 'It’s clear that Xi sought to use this year’s Belt and Road Forum as a platform to pursue multiple objectives':</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘to rebrand</strong> the Belt and Road’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘to telegraph</strong> to the United States that he is prepared — rhetorically, at least — to address American concerns that have led to the current trade confrontation.’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Chinese President Xi Jinping</strong> hosted some 5,000 delegates from across the globe at the Belt and Road forum in Beijing from April 25 to 27,’ <a href="https://www.bloomberg.com/news/articles/2019-04-28/xi-jinping-s-wins-and-losses-at-his-second-belt-and-road-forum" target="_blank" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;">reports Bloomberg.</a></p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘This year’s gathering eschewed</strong> the pageantry of the inaugural summit in 2017, as Beijing tried to address international criticism by toning down its rhetoric and tightening oversight.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Here are three takeaways</strong> from the summit, and how Xi fared in the international spotlight.’</li></ul><hr style="border: 0;border-top: 3px solid #f5f5f5;height: 5px;margin: 10px auto;text-align: center;"><h2>‘1. A Chastened Xi’</h2><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Compared with his keynote speech</strong> two years ago, Xi was more muted on the Belt and Road initiative’s growing presence in other countries.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘The president stuck</strong> to discussing steps China is taking to clean up the project, and vowed “zero tolerance” on corruption.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘People’s Bank of China Governor Yi Gang</strong> said the central bank would “build an open, market-oriented financing and investment system,” and the government released its analysis framework for debt sustainability.’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Xi didn’t announce</strong> new numbers on upcoming investment into the program, though he said $64 billion worth of deals were signed at last week’s forum.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘In 2017, he said China</strong> would add 100 billion yuan ($14.8 billion) to the Silk Road Fund and two state-owned banks would provide special loans for BRI projects worth 380 billion yuan in total.'</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘This year’s joint statement</strong> — released after Xi chaired a round table with participating leaders — repeatedly called for “high-quality” projects and standards.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘The 2017</strong> communique didn’t use the phrase.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘The document</strong> also encouraged developed nations to invest in “connectivity projects” in developing countries, and said cooperation “will be open, green and clean.”’</li></ul><hr style="border: 0;border-top: 3px solid #f5f5f5;height: 5px;margin: 10px auto;text-align: center;"><h2>‘2. Rehabilitation Signals’</h2><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘China’s efforts</strong> to rehabilitate the Belt and Road’s image did have some success, drawing eight more heads of state to this year’s conference.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Malaysian Prime Minister Mahathir Mohamad,</strong> previously one of the biggest critics of the initiative in Southeast Asia, said his country is fully supportive and and stands to benefit from its BRI project.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Earlier this month,</strong> Malaysia struck a deal with China to resume the East Coast Rail Link project for 44 billion ringgit ($10.7 billion) — down from 65.5 billion ringgit — after deciding to terminate it in January.’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘In March</strong>, Italy became the first Group of 7 country to sign up for the BRI, a big win for Beijing that also raised alarm bells in the region.'</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘At last week’s forum,</strong> developed countries including Austria, Switzerland and Singapore signed up for so-called third-party market cooperation.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Japan, France,</strong> Canada, Spain, the Netherlands, Belgium, Italy and Australia have already signed the document, agreeing to help build infrastructure in developing countries.’</li></ul><hr style="border: 0;border-top: 3px solid #f5f5f5;height: 5px;margin: 10px auto;text-align: center;"><h2>‘3. Trade Message’</h2><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘While Xi</strong> made no mention of the ongoing trade war with the U.S. in his speech on Friday, a large part of it alluded to the major issues in negotiations — such as cleaning up state subsidies, reducing non-tariff barriers, boosting imports and protecting intellectual property.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘China won’t engage</strong> in currency devaluation that “harms others,” Xi said in the speech.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘The phrase mirrors</strong> language he’s used to describe China’s diplomatic policies.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘In the trade deal negotiations,</strong> the U.S. has asked China to keep the value of the yuan stable to neutralize any effort to soften the blow of U.S. tariffs.’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘While he reiterated Chinese</strong> talking points about opening up, Xi specifically highlighted the significance of implementation, another sticking point in the China-U.S. trade talks.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘“We will establish</strong> a binding enforcement system for international agreements,” Xi told the forum.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘U.S. Treasury Secretary</strong> Steven Mnuchin has said the two sides have “pretty much agreed on” a mechanism for sticking to the trade deal.’</li></ul></td></tr></tbody></table></p></div></div><div id="article2" class="post-card"><div class="t2-block">2. Brooking's David Dollar on praise and criticism of Belt and Road Initiative</div><div class="table-block w-richtext" data-ix="appear-on-load" style="opacity: 1; transition: opacity 1000ms ease 0s;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><table class="nl_card" id="19may0102" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><table class="multi-block" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="embed-responsive embed-responsive-16by9" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;position: relative;display: block;height: 100%;padding: 0;overflow: hidden;"><iframe class="embed-responsive-item" src="https://www.youtube.com/embed/rnFUixSZZIs"></iframe></td></tr></tbody></table><p class="caption" style="font-size: .8125em;line-height: 1.75em;margin: .625em 0;display: block;color: #848484;margin-top: .5em;margin-bottom: 1.2500em;font-family: 'Lato', sans-serif;"></p><p class="excerpt" style="font-size: 1.125em;line-height: 1.75em;margin: .625em 0;margin-bottom: 1.5em;font-style: italic;text-align: center;color: #c80000;padding: 10px 5%;font-family: 'Lato', sans-serif;"><strong>‘China is being</strong> flexible and pragmatic in trying to make Belt and Road more successful.'</p></td></tr><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="nl-post" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;padding: 0 2.5em;overflow: hidden;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>David Dollar,</strong> a senior fellow at the Brookings Institution, was the U.S. Treasury’s economic and financial emissary to China and World Bank country director for China.</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'He talks</strong> about Xi's speech and the Belt and Road Initiative in a <a href="https://www.youtube.com/watch?v=rnFUixSZZIs&amp;feature=youtu.be" target="_blank" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;">4m 26s &nbsp;interview.</a></li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘The Belt and Road</strong> is mostly about financing infrastructure, and developing countries need infrastructure.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘That's why</strong> 40 heads of state are going to Beijing for this year's Belt and Road Forum.’</p></li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘But some of these countries</strong> are also concerned some projects have been expensive - with interest rates quite high and worries about debt sustainability.’</p></li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘For example,</strong> Malaysia has been worried about the cost of the high-speed rail, so they scaled back the project, but they're going ahead – and Prime Minister Mahathir was one of the speakers at the Forum.’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘It was interesting</strong> that President Xi Jinping basically anticipated and pre-empted this kind of criticism.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘In his speech</strong> he talked about high quality, debt sustainability, more competition in giving out contracts for projects.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘China is being</strong> flexible and pragmatic in trying to make Belt and Road more successful.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘And,</strong> this Belt and Road Forum shows this.’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘About</strong> a hundred and fifty countries that have basically endorsed the Belt and Road.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘In Africa alone,</strong> 37 countries have signed up.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘About half</strong> of the European Union countries with smaller economies have signed up.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘So developing countries</strong> in particular see this is an opportunity to improve their infrastructure.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘But only Italy</strong> is the first really big G7 economy to sign up,’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘This shows that</strong> – unlike in developing countries - there's differences of opinion about the Belt and Road within the advanced capitalist countries.’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Everyone recognizes</strong> the need for infrastructure.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘The critics</strong> of the BRI are focused on the negative, saying that the glass is not even half full.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘The supporters</strong> are focusing on the positives and saying the glass is more than half full.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘I think</strong> what we can all agree on is that if there are improvements made over time, then that glass is going to be fuller and fuller.’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘If China</strong> can strengthen some of these processes we just talked about, you're going to get a lot of good outcomes.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘I think</strong> China's right: this is win-win.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘If the projects</strong> are good projects that are implemented properly, then it's going to be win-win.’</li></ul></td></tr></tbody></table></p></div></div><div id="article3" class="post-card"><div class="t2-block">3. Three ways of looking at the Belt and Road Initiative</div><div class="table-block w-richtext" data-ix="appear-on-load" style="opacity: 1; transition: opacity 1000ms ease 0s;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><table class="nl_card" id="19may0103" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><table class="multi-block" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="bg-holder" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;max-width: 100%;margin: 0 auto;padding: 0;"><img src="https://www.washingtonpost.com/resizer/V3lxK2sj5eDdlYFdZQPHaIn-930=/1484x0/arc-anglerfish-washpost-prod-washpost.s3.amazonaws.com/public/6KAF6UTKJEI6TO7HDR4Y7OAFGY.jpg" alt="CHINADebate" style="width: 100%;margin: 0 auto;"></td></tr></tbody></table><p class="caption" style="font-size: .8125em;line-height: 1.75em;margin: .625em 0;display: block;color: #848484;margin-top: .5em;margin-bottom: 1.2500em;font-family: 'Lato', sans-serif;">Washington Post</p><p class="excerpt" style="font-size: 1.125em;line-height: 1.75em;margin: .625em 0;margin-bottom: 1.5em;font-style: italic;text-align: center;color: #c80000;padding: 10px 5%;font-family: 'Lato', sans-serif;">‘The question about whether China will learn from its mistakes is the known unknown about Belt and Road.’</p></td></tr><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="nl-post" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;padding: 0 2.5em;overflow: hidden;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>Pay special attention</strong> to 'Camp 3: BRI as a learning curve.'</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>That, coincidentally, is what</strong> I was thinking just a couple of hours before reading this article.</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>In over 40 years</strong> of working on China issues, I have seen a pattern. (And, I've been involved in dealing with the panicked aftermath that hit foreign companies.)</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>China</strong> tries something new.</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>Screws</strong> it up.</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>Then figures</strong> it out and is successful.</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>Think</strong> several iterations before success.</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>The three Camps</strong><a href="https://www.washingtonpost.com/outlook/2019/04/30/three-ways-looking-belt-road-initiative/?utm_term=.dcdbe58ded24" target="_blank" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;"> suggested by Daniel W. Drezner,</a> professor of international politics at the Fletcher School of Law and Diplomacy, are useful.</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>Next time</strong> you hear or read a pundit telling you about the BRI, put him in his Camp.</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>And remember</strong> there are two other Camps that disagree.</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'BRI</strong> has inspired a lot of takes in the foreign policy community,' <a href="https://www.washingtonpost.com/outlook/2019/04/30/three-ways-looking-belt-road-initiative/?utm_term=.dcdbe58ded24" target="_blank" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;">according to Daniel Drezner.</a></p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘BRI takes</strong> can be divided into three camps.'</li></ul><hr style="border: 0;border-top: 3px solid #f5f5f5;height: 5px;margin: 10px auto;text-align: center;"><h2><strong>‘CAMP 1: #OMGChina!</strong></h2><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'The members of this camp</strong> believe that China can do no wrong.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'They therefore look</strong> at Belt and Road and see it as a brilliant coherent plan of quasi-coercive economic statecraft that ensnares all its participants into a Chinese web of influence.’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘As it turns out,</strong> an awful lot of official U.S. actors fall into this camp. Both the 2017 National Security Strategy and 2018 National Defense Strategy reference China’s economic statecraft.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘The Defense Department’s</strong> 2018 report on China’s military power warns that the BRI “is intended to develop strong economic ties with other countries, shape their interests to align with China’s, and deter confrontation or criticism of China’s approach to sensitive issues.”’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘It’s not just official actors</strong>. The Council on Foreign Relations describes BRI as “the most ambitious infrastructure investment effort in history” and “an unsettling extension of China’s rising power.”’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Most of the writers</strong> in this camp uses phrases like “debt trap diplomacy” and point to China’s newfound control over Hambantota Port in Sri Lanka as a result of that country’s failure to pay as the paradigmatic example.’</p><hr style="border: 0;border-top: 3px solid #f5f5f5;height: 5px;margin: 10px auto;text-align: center;"><h2>‘CAMP 2: BRI blowback.</h2><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>This camp,</strong> which consists of an awful lot of China watchers, points out the myriad ways in which China’s aggressive promotion of BRI has had negative feedback effects.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘They point to the way</strong> that China’s entry into South Asia triggered pushback from India.’ ‘They highlight the fact that even countries dependent on Chinese foreign direct investment, such as Pakistan or Malaysia, have objected to BRI terms they found rather onerous.’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘This camp</strong> also does not think that BRI is the development of some radical alternative order.</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘For them,</strong> the top-line figures of BRI funding are mostly a mirage.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘The branding of BRI</strong> has been too haphazard.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘The funding priorities</strong> have been at the mercy of Chinese domestic politics.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘This is not a recipe</strong> for creating alluring investments.’</li></ul><hr style="border: 0;border-top: 3px solid #f5f5f5;height: 5px;margin: 10px auto;text-align: center;"><h2>‘CAMP 3: BRI as a learning curve. [my take]</h2><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>And now</strong> we arrive at the interesting possibility.</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘This camp thinks</strong> of BRI the same way that Americans should think about all of China’s economic statecraft: Beijing is experimenting with how to convert its resources into influence.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘BRI</strong> is one of those experiments.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘With each failed experiment</strong> Beijing learns how to do economic statecraft better.’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Camp 2</strong> is correct to point out all of the BRI screw-ups.</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘What is interesting,</strong> however, is that Xi Jinping, the leader who coined BRI, is admitting this.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>Regarding Xi’s Belt and Road Forum speech:</strong> ‘According to the New York Times’s Jane Perlez, even Xi is willing to admit error’: "Xi stressed the importance of ‘high quality’ and ‘reasonably priced’ infrastructure as the way to help developing countries and said China would follow international rules on bidding and procurement for projects."'</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘In an apparent nod</strong> to past mistakes, Mr. Xi said: “Everything should be done in a transparent way, and we should have zero tolerance for corruption.”'</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘If China</strong> is successful in its efforts, then Camp 3 will collapse into Camp 1. If not, Camp 2.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘The question</strong> about whether China will learn from its mistakes is the known unknown about Belt and Road.’</li></ul></td></tr></tbody></table></p></div></div><div class="section_title w-condition-invisible"><strong>II. POTENTIAL BACKLASH FROM THE U.S.<br></strong></div><div id="article4" class="post-card"><div class="t2-block">4. A Slimmer Belt and Road Is Even Scarier</div><div class="table-block w-richtext" data-ix="appear-on-load" style="opacity: 1; transition: opacity 1000ms ease 0s;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><table class="nl_card" id="19may0104" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><table class="multi-block" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="bg-holder" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;max-width: 100%;margin: 0 auto;padding: 0;"><img src="https://assets.bwbx.io/images/users/iqjWHBFdfxIU/ivCmpuU53.ZU/v2/800x-1.jpg" alt="CHINADebate" style="width: 100%;margin: 0 auto;"></td></tr></tbody></table><p class="caption" style="font-size: .8125em;line-height: 1.75em;margin: .625em 0;display: block;color: #848484;margin-top: .5em;margin-bottom: 1.2500em;font-family: 'Lato', sans-serif;">Bloomberg</p><p class="excerpt" style="font-size: 1.125em;line-height: 1.75em;margin: .625em 0;margin-bottom: 1.5em;font-style: italic;text-align: center;color: #c80000;padding: 10px 5%;font-family: 'Lato', sans-serif;">'A leaner version of the Belt and Road will potentially be far more potent.'</p></td></tr><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="nl-post" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;padding: 0 2.5em;overflow: hidden;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘China’s</strong> globe-spanning infrastructure initiative is shrinking,’ <a href="https://www.bloomberg.com/opinion/articles/2019-04-24/a-slimmed-down-belt-and-road-will-increase-china-s-influence" target="_blank" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;">says Andrew Small</a> of the German Marshall Fund of the United States.</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘The rhetoric</strong> at the second Belt and Road Forum, being held in Beijing this week, has been less triumphalist — and new plans for roads, pipelines, bridges and rail lines more modest — than at the first’:</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘On Friday,</strong> Chinese President Xi Jinping pledged high standards and “zero tolerance” for corruption in the program.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Unfortunately</strong> for the U.S. and its allies, though, a downsized program could pose more, not less of a competitive threat to the West.’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘There are limits</strong> to Beijing’s ability to fix' the Belt and Road Initiative.</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Some of the Belt and Road’s flaws</strong> are endemic to the way the Chinese economic and political system works: Beijing’s deep sensitivity to political embarrassment around the scheme, for instance, is only increasing its lack of transparency.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Nor is China</strong> willing to make the initiative genuinely multilateral, which would slow it down and erode any bilateral leverage Beijing hopes to gain over individual countries.’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Still, 'this leaner version</strong> of the Belt and Road will potentially be far more potent. China will still be able to deploy its many advantages in the new scheme':</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'its capable</strong> infrastructure firms,'</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'large-scale subsidies</strong> for its major companies,'</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'speedy</strong> decision-making,'</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'increasingly</strong> cutting-edge technology, and'</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'willingness</strong> to finance non-bankable projects that fit broader strategic goals.’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘At the same time</strong>, a more measured approach, better attuned to political and economic risk and more responsive to local demands, will give China greater scope to entrench its presence in the economic sectors that matter.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Most important</strong> of these will be digital infrastructure projects, where China’s advances — from fiber-optic cables to telecoms networks — will likely do more to affect U.S. security and commercial interests than any number of roads, railways or dams.’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘A rebalancing away</strong> from the most toxic aspects of the Belt and Road would certainly limit China’s ability to ensnare smaller countries in debt and gain access to such strategic assets.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘But, it will also force the U.S.</strong> to compete against China’s underlying strengths and most compelling appeals rather than on the Belt and Road’s most obvious — and fixable — flaws.’</li></ul></td></tr></tbody></table></p></div></div><div id="article5" class="post-card"><div class="t2-block">5. Expert Insights | 'China&amp;rsquo;s Belt And Road: The New Geopolitics Of Global Infrastructure Development'</div><div class="table-block w-richtext" data-ix="appear-on-load" style="opacity: 1; transition: opacity 1000ms ease 0s;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><table class="nl_card" id="19may0105" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><table class="multi-block" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="pdf-container" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;max-width: 100%;padding: 0 2%;background-color: #ccc;"><iframe src="https://docs.google.com/viewer?url=https://www.brookings.edu/wp-content/uploads/2019/04/FP_20190419_bri_interview.pdf&amp;embedded=true" style="width:100%; height:500px;border:none;"></iframe></td></tr></tbody></table><p class="caption" style="font-size: .8125em;line-height: 1.75em;margin: .625em 0;display: block;color: #848484;margin-top: .5em;margin-bottom: 1.2500em;font-family: 'Lato', sans-serif;"><a href="https://www.brookings.edu/wp-content/uploads/2019/04/FP_20190419_bri_interview.pdf" target="_blank" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;">open in a new window</a></p><p class="excerpt" style="font-size: 1.125em;line-height: 1.75em;margin: .625em 0;margin-bottom: 1.5em;font-style: italic;text-align: center;color: #c80000;padding: 10px 5%;font-family: 'Lato', sans-serif;"><em>'Ahead of China’s second Belt and Road Summit, Brookings convened seven Brookings scholars to interrogate popular perceptions of the initiative, as well as to evaluate the future of BRI and its strategic implications.'</em></p></td></tr><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="nl-post" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;padding: 0 2.5em;overflow: hidden;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>The 28-page report </strong><a href="https://www.brookings.edu/wp-content/uploads/2019/04/FP_20190419_bri_interview.pdf" target="_blank" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;">'China’s Belt And Road: The New Geopolitics Of Global Infrastructure Development' </a> contains an edited transcript of the discussions.</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>Here</strong> are a few of the insights delivered by the experts.</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>The 'Director's Summary</strong>' is right below this post.</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>But</strong> the whole report is worth a read.</li></ul><hr style="border: 0;border-top: 3px solid #f5f5f5;height: 5px;margin: 10px auto;text-align: center;"><h2>1. THE ORIGINAL RATIONALE FOR THE BELT AND ROAD INITIATIVE</h2><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;">⚡<strong>DAVID DOLLAR</strong></p><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘President Xi Jinping</strong> branded the Belt and Road Initiative.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘I call it a branding</strong> because I see it as a global program.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘A lot of its activities</strong> are in Latin America or Western Africa, which are clearly not part of any geography of the Belt and Road.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘But I think</strong> the branding has proved to be quite brilliant.’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘If I were going</strong> to make the positive case for BRI, I would say that many developing countries have very serious infrastructure deficiencies.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘You can try</strong> to attract private investments, but they generally require a very high rate of return, so that’s expensive.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Originally, the World Bank</strong> and other development banks were set up for this core function, but frankly, they’ve gotten out of the business.’</p></li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘China is offering</strong> to finance infrastructure, not at highly concessional terms, at what we would generally call commercial terms, but frankly at interest rates that most of these countries could not get from any other lender, unless they jumped through the hoops to go with the World Bank.’</p></li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Aside from money,</strong> the Chinese have underemployed construction companies so they have a lot of excess capacity.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘So, if they can</strong> get some business abroad, it’s not just financing.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘They’re going to sell</strong> you the generator, they’re going to build the generator in their factories in China, and their construction companies are going to go execute the project.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Their construction companies</strong> are very competitive globally.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘They win a majority</strong> of civil works contracts from the competitive bidding process in the World Bank and other banks.’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;">⚡<strong>HOMI KHARAS</strong></p><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘We also should not</strong> mistake BRI for an aid program.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Sometimes people</strong> try to compare BRI with the Marshall Plan, or something like that.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘From a Chinese point of view,</strong> BRI is a way of making money, principally for their banks.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘China has</strong> one of the largest financial systems in the world.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Chinese banks</strong> in aggregate have maybe $35 trillion worth of assets.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘They’ve</strong> got almost no foreign assets.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘So, how are you</strong> going to get a better balanced portfolio?’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘One way</strong> is to go abroad and try to have dollar-denominated assets.’</li></ul><hr style="border: 0;border-top: 3px solid #f5f5f5;height: 5px;margin: 10px auto;text-align: center;"><h2>3. THE TRACK RECORD OF BRI</h2><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;">⚡<strong>HOMI KHARAS</strong></p><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘China</strong> has a very different way of resolving debt.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Some of it</strong> is direct debt forgiveness.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘But very often,</strong> you also have contracts that say in return for debt forgiveness, China will accept payment in commodities instead of cash, or in return, China will accept a lease of the asset.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Beijing is prepared</strong> to take payment in many different forms other than just cash.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘That’s actually quite different</strong> from a financial institution like the World Bank that, as far as I know, has only ever taken payment in the form of cash.’</li></ul><hr style="border: 0;border-top: 3px solid #f5f5f5;height: 5px;margin: 10px auto;text-align: center;"><h2>6. (UN)SUSTAINABILITY OF BRI</h2><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;">⚡<strong>HOMI KHARAS</strong></p><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘China</strong> is actually modifying the initiative.’</p><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘We are going to hear</strong> a lot from Xi Jinping at the BRI Summit this month.’ </p><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘But everything</strong> he’s going to say was already, to some degree, previewed last year at the fifth anniversary of the Belt and Road Forum, where Xi gave a speech about how China is going to learn from its mistakes.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Xi made arguments</strong> there about high quality, and about the importance of smaller projects with greater local impact.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘He talked about</strong> how Belt and Road has been the big calligraphy; it’s time for the fine brush work.'</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘He talked about</strong> more supervision.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘He talked about</strong> how corporations represent China’s image when they’re abroad and they need to be more ‘strictly supervised, which is kind of the logical solution in the Chinese system, both through the party and ‘through the state.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>And there</strong> are new state institutions to engage in that supervision.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘So all of this suggests</strong> that there has been a recognition that there is a problem.’</li></ul></td></tr></tbody></table></p></div></div><div class="section_title w-condition-invisible"><strong>III. CONGRESS &amp; THE PRESIDENT REACT<br></strong></div><div id="article6" class="post-card"><div class="t2-block">6. Director's Summary | 'China&amp;rsquo;s Belt And Road: The New Geopolitics Of Global Infrastructure Development'</div><div class="table-block w-richtext" data-ix="appear-on-load" style="opacity: 1; transition: opacity 1000ms ease 0s;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><table class="nl_card" id="19may0106" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><table class="multi-block" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody></tbody></table><p class="caption" style="font-size: .8125em;line-height: 1.75em;margin: .625em 0;display: block;color: #848484;margin-top: .5em;margin-bottom: 1.2500em;font-family: 'Lato', sans-serif;"></p><p class="excerpt" style="font-size: 1.125em;line-height: 1.75em;margin: .625em 0;margin-bottom: 1.5em;font-style: italic;text-align: center;color: #c80000;padding: 10px 5%;font-family: 'Lato', sans-serif;"></p></td></tr><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="nl-post" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;padding: 0 2.5em;overflow: hidden;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>Here is the Director's Summary</strong> of Brookings' <a href="https://www.brookings.edu/wp-content/uploads/2019/04/FP_20190419_bri_interview.pdf" target="_blank" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;">'China’s Belt And Road: The New Geopolitics Of Global Infrastructure Development.'</a></p><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>Originally conceptualized</strong> as a “going out” strategy to develop productive outlets for domestic overcapacity and to diversify China’s foreign asset holdings, Beijing later branded the effort as its “Belt and Road Initiative.” While the initiative began with a predominantly economic focus, it has taken on a greater security profile over time.</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>China’s initiative</strong> has attracted interest from over 150 countries and international organizations in Asia, Europe, the Middle East, and Africa. This is due, in part, to the fact that the initiative is meeting a need and filling a void left by international financial institutions (IFI) as they shifted away from hard infrastructure development. But there is a real possibility that the BRI will follow in the footsteps of the IFIs, encounter the same problems, and falter.</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>China has been responsive</strong> to requests from recipient countries. This adaptability has made BRI resilient and attractive to recipient governments in spite of popular concerns expressed through the ballot box in multiple countries.</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>BRI shouldn’t be seen</strong> as a traditional aid program because the Chinese themselves do not see it that way and it certainly does not operate that way. It is a money-making investment and an opportunity for China to increase its connectivity.</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>The initiative has a blend</strong> of economic, political, and strategic agendas that play out differently in different countries, which is illustrated by China’s approach to resolving debt, accepting payment in cash, commodities, or the lease of assets. The strategic objectives are particularly apparent when it comes to countries where the investment aligns with China’s strategy of developing its access to ports that abut key waterways.</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>Japan has long played</strong> a quiet but leading role in providing alternative options for recipient countries in need of capital-intensive infrastructure investment. Recently, Tokyo has undertaken significant reforms to elevate its ability to both compete with and complement BRI projects.</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>China’s investments</strong> in strategically sensitive ports and its development of an overseas military base in Djibouti are of great concern to the United States. Additionally, BRI projects have caused unease in Washington and elsewhere due to their impact on democratic governance, debt sustainability, and existing international environmental and labor standards. Internationally, a growing number of developing countries are themselves expressing concern about Chinese intent.</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>U.S. policymakers</strong> should adapt American strategy to respond to BRI. Some scholars believe that the right strategy is to multilaterize efforts, while others argue that it is to promote a race-to-the-top dynamic vis-à-vis China. Either strategy requires working proactively with allies and partners to regain the initiative on infrastructure programs, and to pre-emptively ring-fence areas of strategic concern from future Chinese investments. And there need to be increased efforts to foster an independent media in recipient countries that is capable of scrutinizing BRI projects</li></ul></td></tr></tbody></table></p></div></div><div id="article7" class="post-card"><div class="t2-block">7. QUIZ: How much do you know about the Belt and Road Initiative?</div><div class="table-block w-richtext" data-ix="appear-on-load" style="opacity: 1; transition: opacity 1000ms ease 0s;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><table class="nl_card" id="19may0107" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><table class="multi-block" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="bg-holder" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;max-width: 100%;margin: 0 auto;padding: 0;"><img src="https://media-cdn.list.ly/production/709321/3468193/3468193-briquiz_600px.jpeg?ver=8308243311" alt="CHINADebate" style="width: 100%;margin: 0 auto;"></td></tr></tbody></table><p class="caption" style="font-size: .8125em;line-height: 1.75em;margin: .625em 0;display: block;color: #848484;margin-top: .5em;margin-bottom: 1.2500em;font-family: 'Lato', sans-serif;"></p><p class="excerpt" style="font-size: 1.125em;line-height: 1.75em;margin: .625em 0;margin-bottom: 1.5em;font-style: italic;text-align: center;color: #c80000;padding: 10px 5%;font-family: 'Lato', sans-serif;"></p></td></tr><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="nl-post" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;padding: 0 2.5em;overflow: hidden;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>China's CGTN</strong> has created a BRI quiz - that has some great graphics.</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>I only</strong> got a B+</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>Let me</strong> know how you do.</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'The second Belt and Road Forum</strong> for International Cooperation (BRF) will take place this April and all eyes will be on Beijing for the event.'</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>''Do you know how fresh crayfish</strong> got transported to Russia during the 2018 World Cup?'</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>''What kind of benefits</strong> will the BRI bring to Belt and Road countries?'</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'And how did</strong> the BRI transform from the ancient "Silk Road" into the giant trade and infrastructure network that it is today?'</li></ul><h2><a href="https://news.cgtn.com/event/2019/BRIQUIZ/index.html" target="_blank" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;">'Click here</a> to test your knowledge and find out more!'</h2></td></tr></tbody></table></p></div></div><div id="article8" class="post-card"><div class="t2-block">8. 'Durian "Little Thai" takes us on a journey along the Belt and Road'</div><div class="table-block w-richtext" data-ix="appear-on-load" style="opacity: 1; transition: opacity 1000ms ease 0s;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><table class="nl_card" id="19may0108" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><table class="multi-block" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="bg-holder" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;max-width: 100%;margin: 0 auto;padding: 0;"><img src="https://media-cdn.list.ly/production/709321/3468068/3468068-durian-little-thai-takes-us-on-a-journey-along-the-belt-and-road-belt-and-road-forum-for-international-cooperation_600px.png?ver=1134222179" alt="CHINADebate" style="width: 100%;margin: 0 auto;"></td></tr></tbody></table><p class="caption" style="font-size: .8125em;line-height: 1.75em;margin: .625em 0;display: block;color: #848484;margin-top: .5em;margin-bottom: 1.2500em;font-family: 'Lato', sans-serif;"></p><p class="excerpt" style="font-size: 1.125em;line-height: 1.75em;margin: .625em 0;margin-bottom: 1.5em;font-style: italic;text-align: center;color: #c80000;padding: 10px 5%;font-family: 'Lato', sans-serif;">Thanks to the Belt and Road Initiative "Little Thai," the durian, has a smoother journey from Thailand to China.</p></td></tr><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="nl-post" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;padding: 0 2.5em;overflow: hidden;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>Watch</strong>: <a href="http://www.beltandroadforum.org/english/n100/2019/0419/c40-1121.html" target="_blank" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;">'Durian "Little Thai" takes us on a journey along the Belt and Road</a>' 3m video - life changing.</p><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><a href="https://supchina.com/2019/04/24/a-recalibrated-belt-and-road/" target="_blank" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;"><strong>Jeremy Goldkorn of SupChina:</strong></a> 'Love weird Belt and Road propaganda?'</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'You’ll enjoy this video</strong> “about a durian called ‘Little Thai’ who thanks the Belt and Road Initiative for helping its ‘durian brothers and sisters’ get a smoother ride to China to be eaten in ‘durian hot pot,’” as described by <a href="https://twitter.com/neilthomas123/status/1121110138897817601" target="_blank" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;">MacroPolo associate Neil Thomas.'</a></li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><a href="https://www.euromoney.com/article/b1f454l3d7j33f/belt-and-road-uses-a-durian-in-hope-of-better-pr" target="_blank" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;"><strong>Euromoney:</strong></a> 'Belt and Road uses a durian in hope of better PR'</p><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'China</strong> has been having a hard time convincing the world of its noble intentions for the Belt and Road Initiative. </p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>So, for the second Belt and Road Forum</strong> for International Cooperation, it has enlisted an unlikely ally: an animated durian fruit called Little Thai.'</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘For the unfamiliar,</strong> durian is considered a delicacy in Asia, but is not universally beloved, much like Belt and Road itself.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Its smell is so rank</strong> and potent that it is banned on Singapore public transport, for example.’</p></li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘While it tastes</strong> – to Euromoney anyway – like antiseptic cheese-infused custard with an aftertaste of a burnt-out hairdryer motor.’</p></li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Anyway, in <a href="http://www.beltandroadforum.org/english/n100/2019/0419/c40-1121.html" target="_blank" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;">a three-minute animation,</a></strong> Little Thai shows us around her durian orchard in Thailand and explains how the Belt and Road has helped to improve the ability for her to be sold in China and turned into durian hot pot and durian pizza.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>"How wonderful</strong> the life is in China!” says Little Thai.</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>"We are hailed</strong> as the king of fruits by our Chinese friends."</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Little Thai</strong> also helpfully points out that durian exports from Thailand to China went up 700% last year, “as flourishing as my durian home.”’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Breaking somewhat</strong> from its children’s cartoon persona, our durian friend continues in a sing-song voice’:</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>"Little Thai heard</strong> that the government of Thailand is actively seeking greater complementarity between the Belt and Road and Thailand’s strategic planning."</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Beijing needs</strong> all the good PR it can get for the initiative which has attracted concerns of asset-grabbing in markets like Sri Lanka, Ethiopia and Djibouti.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘That said,</strong> it seems a mothballed project emblematic of the problems, a high-speed rail link in Malaysia, may now be going ahead.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Which</strong> will be good for durians.’</li></ul></td></tr></tbody></table></p></div></div></div>