Much Ado About Everything No 38: Is Xi Jinping Digging In?

Donald Trump may want, and probably needs, an early trade de-escalation more than Xi Jinping does.

In my 13 May article on the China/US trade war, I warned of the risk of underestimating the importance of the domestic politics of both countries when it comes to determining whether or not we are going to see further escalations or an early (if, probably, temporary) defusing of tensions. In the case of Beijing I pointed in particular to:

“China's history with 'the West' during the ‘century of humiliation’ from 1839 to 1949 and Beijing's consequent total inability to sign up to anything which smacks of the ‘unequal treaties’ (which is, effectively, what Washington is demanding)”.

Writing in the Financial Times (subscriber access only) on 20 May, Tom Fleming went one stage further — citing ongoing ‘events’ in China in support, including references by President Xi Jinping to a new Long March (see image above) — as follows:

“Reluctant to accept humbling terms demanded by Donald Trump to end the two countries’ year-long trade spat, Xi Jinping, the Chinese Communist president, is preparing to lead his country into an all-out trade conflict with the world’s leading economic and technological power, just as Mao Zedong sent Chinese ‘volunteers’ to take on US forces during the Korean war for four long, bloody years in the 1950s”.

Acknowledging that, at first blush, this may not seem a wise course of action for Xi Jinping to be taking given the relative trajectories of the Chinese and US economies, Mr Fleming continues:

“…just as Chinese forces ultimately fought the US to a stalemate in Korea by pitting sheer troop numbers and a far greater tolerance for mass casualties against superior American firepower, Mr Xi reckons he can direct a successful, society-wide struggle in the trade dispute”.

Furthermore, he highlights the importance of the unequal treaties in the individual and collective Chinese psyche as one of a number of reasons why Xi Jinping can reasonably expect popular opinion to get behind him — whereas President Donald Trump may well find himself under increasing domestic pressure to de-escalate tensions even at the expense of something of a climbdown by Washington.

I have a good deal of sympathy with Mr Fleming’s thinking, which is broadly consistent with what I am hearing from my own sources. However, I have two caveats, as follows.

  1. As far as I am aware, Xi Jinping has, to date, not explicitly linked his Long March references to the trade war per se. It could be, therefore, that Robyn Dixon, writing in the LA Times on 23 March, is correct in suggesting that he is, in fact, digging in for a bigger struggle than trade war — which is very probably where China and the US are now inevitably headed.
  2. As Alexandra Stevenson makes clear in an article in the 21 May edition of The New York Times, there is copious evidence to suggest that China’s citizens today may be less inclined to make personal sacrifices than was the case in the mid-1930s (ie the time of the original Long March) and the first half of the 1950s.

Meanwhile, signals from Washington have (inevitably?) been less clearcut. Certainly, the US is looking to tighten the screw on the technology front (notably over Hikvision); but, equally, Mr Trump’s offer to include Huawei in a trade agreement coupled with his 23 May prediction of a swift end to the trade war could reasonably be interpreted as something of an incentive for a deal to be struck at the meeting he has confirmed he will be having with Xi Jinping at the 28/29 June G20 summit.

Where does this leave us?

In short, although I still regard a deal around the time of the G20 as a better-than-50% probability, I also have to concede that Xi Jinping’s seemingly increasing willingness to dig in means that the US is going to have to abandon a fair chunk of its ‘wish list’ and, in all probability, cancel the Trump tariffs on Chinese exports entirely. This will not be an easy call for Mr Trump to make. But it is still one which may serve him less badly domestically than would the impact of a prolonged and even deeper trade war, the Chinese domestic consequences of which would almost certainly be easier for Xi Jinping to manage.

Alastair Newton

www.alavan.biz

Image credit: www.chinadaily.com.cn

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