Escalating the US trade war is not in China’s interest. Reform is what it must do
Andy Xie says China could easily absorb the tariffs the US has proposed so far, but may face disaster if the conflict escalates. The best course of action for Beijing would be to use the opportunity to enact the economic reforms it must carry out eventually
China’s successful development is a result of continuous reform and opening up, hard work and patience, not confrontation or expedience. Even if the US tariffs stick, China’s economy can easily absorb them.
The trade dispute between China and the US is threatening to get out of control. It could lead to a collapse in confidence that could trigger a global financial crisis. The Trump administration is unlikely to change its behaviour because it subscribes to the madman theory in foreign relations and is not sophisticated enough to understand the chain reaction from a confidence crisis.
Only China’s restraint could calm the markets and avoid a crisis.