China’s resistance to the US trade war
China’s defensive measures
China is taking strong measures to defend itself against the trade war the
US has launched against it. For example, The Times of 30 May 2019 gives
details of how it is increasing its soya crop in order to avoid having to
import soya beans from the US. The Times reports: “Almost two years after
the first salvos of President Trump’s trade war with Beijing, the
agricultural workers of Jilin province are reaping the rewards of seeds
sown thousands of miles away.
“Their crop, soya beans, is being supported with generous government
subsidies from Beijing as part of President Xi’s attempt to move China away
from its dependence on US imports.
“As a result farmers in Jilin are diversifying. Some 60 miles northeast of
the city of Yanji, one rural co-operative planted more than 1,700 acres of
soya beans this spring, up from 1,000 acres two years ago.
“’When American bean farmers are not happy, we are quite happy,’ said the
co-operative’s head, Zhao Xianqing, a 53-year-old villager who manages
almost 5,000 acres of land…
“Soya beans are the United States’s second-largest cash crop after corn,
worth an estimated $39.1 billion a year. The vast majority of US soya bean
exports have been to China…
“In the village of Yongqing, Mr Zhao allocated 1,400 acres to bean-growing
last year. That entitled him to more than £250,000 in subsidies in the past
year from the Jilin government and net profits were more than £340,000, he
said, which was shared among the co-operative’s more than 1,000 members”
(Didi Tang, ‘Chinese farmers reap the benefit of soya bean row’).
China’s tariffs against products like soybeans and beef and a recent move
to cancel a major pork order have hit swing states, including Iowa, Ohio
and Wisconsin, especially hard.
As a result US farmers are becoming increasingly anxious over their future.
“Those worries helped spur Mr. Trump last week to suddenly drop steel and
aluminum tariffs on Canada and Mexico, which agreed in turn to withdraw
stiff levies on American farm goods.
“On Thursday [23 May], the Agriculture Department said it would provide up
to $16 billion in aid to farmers hurt by trade retaliation. …. The
financial support came after the administration handed out $12 billion in
emergency relief for farmers last year…
“The Federal Reserve Bank of New York said … that Mr. Trump’s tariffs will
cost the average American household $831 annually” (Ana Swanson, ‘Trump
gives farmers $16 million in aid amid prolonged China trade war’, New York
Times, 23 May 2019).
China in turn has apparently substantially increased its subsidies to its
companies “in a move”, according to the Financial Times, “likely to further
strain trade talks with Washington” (Tom Hancock and Yizhen Jia, ‘China
paid record “$22bn in corporate subsidies in 2018’, 28 May 2019). Clearly
the Financial Times does not partake of the view that what is sauce for the
goose is sauce for the gander! As Xie Feng, Commissioner of the Ministry of
Foreign Affairs of China in Hong Kong, points out in the Financial Times of
23 June 2019 (‘US attacks on China’s economy reflect a double standard’)
“The US tries to justify its trade war by claiming that the Chinese
government … improperly intervenes to support state-owned enterprises
(SOEs) at the expense of the free market. But any economy, be it socialist
or capitalist, needs government regulation and it is misleading to decry
China’s model just because its government plays its role.
“Even in the US, a self-proclaimed champion of free markets, the government
has never ceased to intervene. From its founding days, the US used tariffs
to protect some sectors. Since the second world war, the US has increased
state intervention based on Keynesian economic policy. The US government
fostered the growth of the internet, biotechnology and shale gas. During
the 2008 financial crisis, the US rescued banks and provided fiscal
stimulus. Donald Trump’s administration has resorted to protectionism and
measures to bring back manufacturing jobs, as part of its ‘America First’
goal”. Quite honestly, if a country as powerful as the US launches a trade
war against another country, attempting to hamper the exports that are a
lifeline on which millions of the latter’s citizens depend for their
wellbeing, what is that country supposed to do!!!
Damage to the world economic system
Meanwhile the US tariffs and sanctions are doing incalculable harm not only
to their intended targets but also to the rest of the world, not least the
United States itself:
“President Trump’s trade war is chilling business investment, confidence
and trade flows across the world, a development that foreign leaders and
business executives say is worsening a global economic slowdown that was
already underway…
“Weakness in China, driven in part by fallout from the trade war, has
spread to Germany, Australia and other nations, raising supply chain costs,
chilling exports and worrying political and economic leaders…
“The effects of Mr. Trump’s trade war have been particularly hard on
Germany, Europe’s largest economy, which has been bracing for a decision
about whether the United States will impose tariffs on auto imports. Trade
anxiety has led to a decline in business sentiment and spending: Overall
German industrial production contracted sharply in April, falling 1.9
percent on the month versus the 0.5 percent analysts expected…
“…Global flows of foreign direct investment fell by 13 percent last year,
to their lowest level since the financial crisis…
“The World Bank cut its forecast for global growth by 0.3 percentage points
for this year in response to unexpected weakness in trade and manufacturing
across advanced and developing economies. Global trade growth has slowed to
its lowest rate since the 2008 financial crisis as exports from Europe and
Japan have plummeted, particularly to China…
“International Monetary Fund economists estimate that if Mr. Trump follows
through on his threat to broaden the Chinese trade spat, tariffs added this
year alone will subtract 0.3 percent off global gross domestic product in
2020, with an additional 0.2 percent drag coming from tariffs the
administration put in place last year…” (Jeanna Smialek, Jim Tankersley and
Jack Ewing, ‘Trump’s war is making a slowdown even worse’, New York Times,
19 June, 2019).
As for the US itself, James Dean of the London Times tells us that:
“Recession warning lights flashed in the United States yesterday [3 June]
as Wall Street banks feared that severe economic consequences would result
from the growing trade war with China…
“Manufacturing activity in America fell unexpectedly last month to its
lowest level of the Trump presidency…
“Yields on benchmark US government bonds continued to fall, further
inverting the ‘yield curve’ in a sign that bond investors are growing more
concerned about the state of the global economy…
“Morgan Stanley said the market cycle in the US had shifted into a downturn
phase for the first time since 2007, with an increased risk of recession.
Chetan Ahya, its chief economist, said that if trade tensions continued to
escalate, “we could end up in a recession in three quarters. Is such a
prognosis alarmist? We think otherwise” (‘US recession warning as China
trade war escalates’, 4 June 2019).
Telecomms at the heart of the trade war
Henny Sender of the Financial Times wrote on 18 June 2019 (‘US-China
contest centres on race for 5G domination’): “Friction between the US and
China, which seemed to have its origins in trade disputes, has moved on.
Today telecoms and wireless technology are at the forefront of the
competitive sparring between the two countries”. As she goes on to explain
in some detail, US efforts to suppress the rise of China’s technological
superiority is for US imperialism a matter of life or death. This is the
reason US imperialism has imposed various embargoes to prevent China
acquiring the necessary components to enable it to maintain its lead in
communications technology.
Nevertheless, the momentum generated by China towards becoming the world
leader in communications technology is almost certainly unstoppable, not
only because of China’s economic vibrancy but also because of America’s
fading strength:
“Less than 10 years ago, all top 10 technology companies by revenue were
American. Global telecom standards were set by US companies such as
AT&T and Verizon. Today, by contrast, four of the top 10 internet firms
are Chinese…
“In a world where everything is dual-use technology, it is increasingly
hard to distinguish what is commercial and civilian and what is strategic
and military. And technology, unlike trade, does not easily lend itself to
concessions at the negotiating table. To have the technological edge is
existential for both countries.
“… Chris Wood, equity strategist for Jefferies in Hong Kong [notes that]
‘The origin of America’s ultra-aggressive stance remains a determination
that China will not dominate in 5G or other emerging technologies.’
“Yet if no less a source than the Defense Innovation Board, launched in
2016 to help bring innovation and independent advice to the Pentagon, is to
be believed, the US is behind in developing the latest technology and in
setting global standards for 5G. That is according to an assessment of the
prospects of the two national giants in a report on the 5G Ecosystem the
board released in April.
“The report portrays a technological world in which the US, far from
dominating, is in danger of becoming ever more marginal. ‘The country that
owns 5G will own many innovations and set the standards for the rest of the
world. That country is currently not likely to be the United States,’ the
report concludes starkly. ‘Chinese equipment is cheaper (and) in many cases
is superior to its western rivals.’…
“The introduction of 5G is a big deal, both in itself and because of its
multiplier effect on a range of other technologies including autonomous
vehicles, the internet of things, smart cities, virtual reality and,
battlefields, whether physical or in cyber space. The companies or
countries that are the first movers will set global standards. That in turn
brings hundreds of billions of dollars in revenues, substantial job
creation and leadership in any other technologies that require ever swifter
transmission of data, the board notes”.
And why has the US fallen to such an extent behind from a situation of
world dominance only ten years ago?
The same Financial Times article cannot help but blame the decay of the
capitalist system:
“American companies including Verizon and AT&T have too much debt to
undertake the huge investment necessary to build out the numbers of base
stations required…” Why do they have this debt when they have been so long
in a position to rake in monopolist profits? Because in a capitalist system
the investors demand a return on their investment, and the profits have
been distributed as dividend, leaving too little for effective
reinvestment. These monolithic companies surged ahead in the past on the
basis of massive borrowing, but these debts have now become shackles
impeding their further progress. The US military machine, that is so
expensive to maintain, has also hindered the progress of US telecoms
because “in the US, the government and the military appropriate most of the
spectrum being used by the rest of the world for commercial purposes,
leaving the US market isolated” (ibid.). Although the ‘spectrum’ in
question, the C spectrum, is a mid-range spectrum a great deal of which is
unused and is therefore available for reallocation to the commercial
sector, the Trump administration has apparently been anxious that the
private sector – starved as it is of avenues of profitable investment in
this era of overproduction crisis – should benefit from its deployment and
to that end has been proposing to devolve the auctioning process from the
government controlled Federal Communications Commission (FCC) to the
private sector. This has resulted in interminable squabbling about if and
how the process should proceed, which has grossly delayed the holding of
the auction:
“A year ago, the Trump FCC announced a proposal to reallocate such C-band
spectrum for 5G. With much fanfare, the FCC trumpeted a plan to outsource
to the satellite companies the process of auctioning these airwaves. Rather
than the kind of open and transparent auction process the agency has
followed since the first spectrum auction in 1994, the Trump FCC declared
it would be ‘faster’ to embrace what they called a ‘marketplace approach’
in which the licensees took over the job traditionally done by the FCC.
“The tradeoff for moving ‘faster’ was that the licensees—rather than the
American taxpayer—would keep the money the auction generated. …
“It has been a year since that announcement and the ‘faster’ process has
yet to bear fruit. The current goal of the Commission is to decide whether
to proceed with the outsourcing, or adopt another solution, by the end of
2019. Over a year and a half will have been wasted as the Trump FCC tried
to find a way to pass off its essential public interest determinations to
private interests.
“It’s hard to win a ‘5G race’ when you’re stuck in the starting blocks. The
UK auctioned 5G spectrum last spring. Italy held its 5G auction in October.
Germany’s 5G auction ended this week. France’s 5G auction starts this fall.
All the while, the Trump FCC has been considering a ‘faster’ solution for a
year” (Tom Wheeler, ‘How the FCC lost a year in “the race to 5G”’,
Brookings Institute, 14 June 2019).
As a result of this, the Financial Times (op.cit.) concludes:
“By themselves, the US markets, both civilian and military, are no longer
big enough to dictate to others or to prevent Chinese 5G from continuing to
increase market share globally.
“The larger question of course is whether what is true in telecoms becomes
true on a wider scale”.
“Meanwhile, the effect of any US sanctions against Huawei or others is
likely to only accelerate Beijing’s efforts to achieve self-sufficiency.”
China’s advance to technological self-sufficiency
Foreign Affairs, published by the influential US foreign policy thinktank,
the Council on Foreign Relations, also considers that current US policy is
merely hastening China’s moves to self sufficiency, which will hit US
imperialism hard:
“But within China, the administration’s moves have created a powerful new
consensus in support of ‘self-reliance’ and ‘indigenous innovation,’ two
mantras of the Chinese Communist Party that the country’s tech industry has
reluctantly taken up. Washington has underestimated China’s ability to
‘tighten its belt,’ as Xi put it …, and to develop replacements for foreign
technology. …
” …China has a long tradition of defying international embargoes. During
the Cold War, China succeeded in developing an atomic bomb even after the
Soviet Union had cut off its technical support. Throughout the 1990s, China
developed sophisticated satellites and rockets despite comprehensive US
sanctions on space-related technologies. In 2015, when the Obama
administration prevented Intel from selling processors to China for its
latest supercomputer, Chinese researchers quickly developed a local
replacement. Less than a year and a half later, China unveiled TaihuLight,
then the world’s fastest supercomputer, which ran entirely on Chinese-made
processors…
”’The biggest challenge for indigenous innovation is not technology,
talent, or capital, but the market,’ Gao Xudong, a researcher at Tsinghua
University, said in a 2017 interview. ‘Even if we produce a good product
through indigenous innovation, it will not succeed if there is no market.’
China’s technology industry illustrates the problems markets pose to
Beijing’s self-reliance push. The wide availability of superior foreign
software and hardware has hampered progress…
“Blacklisting Huawei, however, has turbocharged the indigenous innovation
effort. As a result of the blacklisting, the company plans to launch a
replacement for Google’s Android operating system later this year. It is
also working to replace a myriad of US components and software to which it
will soon lose access. Last week, Bloomberg reported that Huawei has up to
10,000 developers working around the clock in three cities to ‘eliminate
the need for American software and circuitry.’“ (Lorand Laskai, ‘Why
blacklisting Huawei could backfire’, 19 June 2019).
The author’s conclusion? “The Trump administration may well be paving the
way toward a more technologically independent, and possibly more powerful,
China”.
Moreover, China is also cooperating with Russia in this matter, thus
greatly increasing its ability to overcome problems caused by the US
embargo in the shortest possible time:
It will be recalled that under pressure from the US government, Google cut
Huawei off from in its future products using its android platform on which
Huawei phones are currently based. Huawei is therefore exploring the
possibility of using Russia’s Aurora platform that could work just as well.
“Aurora is a mobile operating system currently developed by Russian Open
Mobile Platform, based in Moscow. It is based on the Sailfish operating
system, designed by Finnish technology company Jolla, which featured a
batch of Russians in the development team. Quite a few top coders at Google
and Apple also come from the former USSR – exponents of a brilliant
scientific academy tradition” (Pepe Escobar, ‘Say hello to Russia-China
operating system’, Asia Times, 13 June 2019).
Moreover, Huawei is also “turbo-charging the development and implementation
of its own operating system, HongMeng, a process that started no less than
seven years ago. Most of the work on an operating system is writing drivers
and APIs (application programming interfaces). Huawei would be able to
integrate their code to the Russian system in no time.
“HongMeng, for its part, is a key project of Huawei 2012 Laboratories, the
innovation, research and technological development arm of the Shenzhen
colossus.
“No Google? Who cares? Tencent, Xiaomi, Vivo and Oppo are already testing
the HongMeng operating system, as part of a batch of one million devices
already distributed.
“… HongMeng is rumored to be 60% faster than Android.
“The HongMeng system may also harbor functions dedicated to security and
protection of users’ data. That’s what’s scaring Google the most; Huawei
developing a software impenetrable to hacking attempts”.
In these circumstance Google has apparently been “actively lobbying the
Trump administration to add another reprieve – or even abandon the Huawei
ban altogether” (ibid.). And as we go to press it has been annouced that
Trump has relented sufficiently to allow US companies to export
non-strategic components to China. Trump is quotd as saying at a meeting
with Xi Jingping at the G20 meeting taking place in Japan: “I like our
companies selling things to others, very complex things. These are not
things easy to make. Our companies were very upset. So if it is not a
national security issue, we are allowing them to sell.” It would appear
that attempts to ban the adoption of Huawei systems round the world still
stand, however.
Dilemma for governments around the world
US imperialism is unilaterally forcing the rest of the world’s governments
to choose: either do business with China (which may lead to us subjecting
you to sanctions) or do business with us. Either option is likely to cause
harm to the economies of the countries in question. For minor imperialist
countries such as Britain choosing America will probably be the less
damaging of the options, although the loss of Chinese business that would
probably result would also cause a great deal of economic pain, as London’s
Chinese ambassador, Mr Liu Xiaoming, hinted in an interview on the BBC’s
Newsnight :
“… action [against Huawei] would damage Britain’s reputation as ‘business
friendly’. He said: ‘Chinese investment is booming in this country. Even
last year it increased by 14 per cent, but if you shut the door for Huawei,
it sends a very bad and negative message to other Chinese businesses.’
“Britain was the largest western recipient of Chinese investment last year,
at $4.94 billion…” (Lucy Fisher, ‘Britain risks billions if it bans Huawei,
warns China’, The Times, 14 June 2019).
Chinese people also contribute massively to Britain’s tourist industry and
its education industry, and a recent trade agreement between Britain and
China that has come as a much needed boon to British farmers could also be
compromised if Britain jumps to America’s command:
“A £230m trade deal for the export of British beef to China is at risk if
the government freezes out Huawei, a Chinese diplomat has suggested.
“Earlier this month the Chinese government agreed to lift its 20-year-old
ban on British pork and beef, imposed during the 1990s BSE crisis.
“The deal, which followed Theresa May’s 2018 visit to Beijing, is estimated
to be worth £230m to British farmers over the next five years and
represents a coup for the Conservative government.
“However, the agreement could be pulled into the tense negotiations over
whether the UK will use Huawei technology to upgrade its telecoms networks
to 5G.
“Mrs May agreed to deploy ‘non-core’ elements from the world-leading firm,
but that decision is under review amid concerns for national security and
pressure from the US, which is fighting a trade war with China, not to do
business with a company deeply tied to Beijing.
“Ma Hui, a minister in the Chinese embassy, warned that any decision to
drop Huawei could harm UK-China trade.
“It would ‘send a very negative message to Chinese investors,’ said Mr Hui
in comments to the Telegraph after a discussion of the trade deal signed on
June 18th,
”’If you want to trade with China, trade with Huawei,’ the minister said”
(Memphis Barker and Charles Hymas, ‘£230m British beef exports could be at
risk if the UK government freezes out Huawei, China warns’, The Telegraph,
21 June 2019).
Round the world, many other governments face difficult choices, including
many countries which have, with China’s help, been able to break the
imperialist stranglehold on their economies, and which are continuing to
benefit from China’s Belt and Road Initiative, for whom choosing China
above the United States may well prove the less disadvantageous option,
except for the threat of being subjected to regime-change manoeuvres from
Washington that would prove costly to counter.
Building anti-imperialist unity
Sooner or later, however, the countries that are subjected to US bullying
will perforce need to come together to defend themselves, a process which
is now in fact beginning with the rapprochement between Russia and China.
The Financial Times is reporting: “With both Moscow and Beijing under fire
from the US — whether through sanctions or President Donald Trump’s trade
war — Mr Putin and Mr Xi have struck up a warm friendship that defies
decades of mistrust between their countries…
“The risk of new US sanctions on Russia have accelerated efforts by Moscow
and Beijing to safeguard deals through measures such as non-dollar payment
systems…
“The two countries’ militaries… trained side-by-side last September in
Russia’s largest war games since the cold war. This was the first time that
China had been invited to take part in Russia’s flagship annual exercise.
The first gas pipeline between Russia and China is set to start pumping in
December, joining an already-operating oil supply link.
“Bilateral trade rose 24.5 per cent last year to hit a record $108bn,
surpassing forecasts. Chinese officials say they are aiming for $200bn…”
(Henry Foy and Christian Shepherd, ‘Russia strengthens China ties in
defiance of bellicose Trump’, 5 June 2019).
It is clear that the countries that the US is bullying or attempting to
bully do have an armoury at their disposal to enable them to defend
themselves. US imperialism should not be surprised when that armoury is
unleashed.