What’s to Become of USA Trade Relationship and Future Chinese Reform
2018 is the 40th anniversary of the launch of China’s reform and opening policy. Chinese President Xi Jinping and the Communist Party are making a very big deal of the anniversary. Julian Gewirtz, an expert in modern Chinese history and author of a book on China called “Unlikely Partners,” on the current state of China’s market and Xi’s plan for the great rejuvenation of the Chinese nation participated in an interview, with some highlights below:
1. What is reform and opening and how has it changed over the last 40 years?
Above all, “reform and opening” means the policies of market-oriented change and international trade and investment that facilitated China’s extraordinary growth … But the new economic policies were introduced gradually and were highly contested — witnessing dramatic ups and downs in how the leadership handled major tradeoffs between the market’s scope and the Party-state’s control, as well as questions such as political reform and intellectual openness. And new changes are underway today.
2. What is Xi’s vision for China, and if he is successful what will China look like in the next 10-20 years?
Xi envisions China becoming a superpower with the Party firmly in control over all aspects of life. If he succeeds, China will be the world’s largest economy, a global leader in technological innovation with a modernized military, and the major force in Asia and beyond. He sees this as restoring its historic stature, “the great rejuvenation of the Chinese nation” that only the CCP can produce. Of course, we don’t know yet if he will succeed.
3. Some experts now say that [economic] reform is dead under Xi. He and the Party, of course, say both reform and opening are moving forward with urgency. Who is right?
Xi uses this term to mean not market-oriented liberalization prioritizing the private sector but rather strengthening China’s system on his terms: promoting more “balanced” growth with a powerful state sector enduring, and modernization led by the Party.
4. What are the politics around planning celebrations in this anniversary year?
[It] will be used to glorify Xi’s “New Era” and the path forward. Domestically, it presents an opportunity to crystallize which elements of reform and opening Xi wants to keep — and which he is discarding, such as more open intellectual debate or greater limits on the Party’s authority. Internationally, amid serious trade conflict, the anniversary gives the Party an opportunity to remind countries that they’ve benefitted from China’s growth over the past 40 years.
With respect to the China- USA trade relationship, the South China Morning Post examines Beijing’s misreading of President Trump, where they look at how Beijing may have got it wrong. Interestingly SCMP cites the crackdown on corruption as one of the contributing factors:
[T]he problem is policies introduced by Beijing — driven by a need to consolidate the party’s power — that have discouraged policy advisers from having in-depth discussions with their US counterparts that would help them to understand the latest thinking in Washington, or from speaking their minds…Six years ago, as President Xi Jinping’s major crackdown on corruption began, Beijing introduced a series of rules to curb overspending, including limits on government officials, academics and policy advisers traveling abroad. Since then, many officials have had to hand in their personal passports and instead use special government duty passports when traveling – and in most cases, they are barred from staying overseas for more than a week.
At the same time, Beijing is tightening ideological control in all aspects of life, including on university campuses, and demanding that the party line be strictly adhered to. Any unauthorized discussion of government policies can result in a reprimand for “improper discussion of a party directive. That has left Chinese advisers and Western diplomats worried about whether their suggestions will be filtered before they reach top-level officials, to ensure they are politically correct.
Mark Leonard, director of the European Council on Foreign Relations, wrote an OpEd in the Financial Times earlier this week in which he says the Chinese are wary of Trump’s creative destruction approach:
Mr. Trump is the US first president for more than 40 years to bash China on three fronts simultaneously: trade, military, and ideology. They describe him as a master tactician, focusing on one issue at a time, and extracting as many concessions as he can. They speak of the skillful way Mr. Trump has treated President Xi Jinping.“Look at how he handled North Korea,” one says. “He got Xi Jinping to agree to UN sanctions [half a dozen] times, creating an economic stranglehold on the country. China almost turned North Korea into a sworn enemy of the country.” But they also see him as a strategist, willing to declare a truce in each area when there are no more concessions to be had, and then start again with a new front.
With a trade war now underway, the finance ministry is stepping up research and policy consultation on US issues. Last week it set up an alliance of 20 think tanks to do just that, with one of its tasks to conduct fundamental research, policy studies, and prospective studies. Researchers have said China’s existing research on US affairs did not go deep enough and left Beijing ill-prepared for the trade tussle. In Beijing, plans to handle Trump’s threats were often made at the last minute, according to a source in frequent contact with senior Chinese officials. An example of China failing to analyze further measures to keep trade relations on track after the two sides agreed to a 100-day plan to improve economic ties in April last year when Xi met Trump at the president’s Mar-a-Lago estate in Florida. As trade tensions worsened, Beijing sent Vice-Premier Liu He to Washington in February and again in March, offering to buy more US products. But the list of products was prepared in a hasty manner. Added to that, the State Council’s Development Research Centre has been left out of trade policy discussions. Policy advice is vetted and submitted to the top leadership by theCentral Financial and Economic Affairs Commission. A big problem for China in handling the trade dispute with the US may be that it lacks data and detailed scenario analyses.
Contributed by Magdalena A K Muir
Sources:
Axios Newsletters on China
Did China think Donald Trump was bluffing on trade? How China got it wrong; https://www.scmp.com/news/