Trump’s trade war is an unintentional attack on China’s economic model
Alex He says even now, close trade ties constitute the foundation of US-China relations, and compromise is possible, even if conflict between the US-led free-market system and the Chinese model is inevitable
This challenge to Beijing’s economic model gained bipartisan support from elite groups within Washington’s China-policymaking community. It seems they are no longer under the illusion that China can be incorporated into the US’ free-market capitalism, and they think their China policy over the past two decades has failed.
Since China’s entry into the World Trade Organisation in 2001, and despite its further market reforms and booming private sector, China has retained state capitalism and even reinforced its coercive regime in the era of globalisation, thus developing into the world’s second-largest economy. The nation’s strategic transition and the growing resentment in US China-policy circles underpin the consensus on Trump’s policy: that China is succeeding at America’s expense.
But Trump’s dogged attack has hit a nerve in China. Under the growing external pressure and the internal economic downturn exacerbated by the trade war, the Chinese leadership and elite are reviewing whether they have underestimated Trump’s determination to overhaul US policy on China. In a popular view in China, existing relationships are based on the belief that close trade and investment relations are the ballast of US-China ties, and until now, never has any US president, from Richard Nixon to Obama, challenged that.
How can the trade war end? As the openness to discussion indicates, there is a sufficient overlap between Trump’s wants and China’s willingness to deepen its economic reform and further open its economy. Although the countries’ close economic ties have been overshadowed by the trade war, they still constitute the foundation of the US-China relationship. Given this reality, compromise is possible, even if conflict between the US-led free-market system and the Chinese model is inevitable.
The Chinese model could come across as less threatening to the US-led economic system if the Chinese could reverse their current approach. Beijing could tone down the bragging about its overstated economic and technological capability.
Instead of focusing on state economic growth, China should shift its attention to improving income, welfare and education investment for its huge working-class and migrant labour population. It could also upgrade poor infrastructure – medical care, education, internet, heating, hygiene, water – in underdeveloped villages and towns.
Redirecting the focus of the Chinese model would show the world that China is still a developing country.
Dr Alex He is a research fellow at the Centre for International Governance Innovation, co-author of A History of China-US Relations and former associate professor at the Institute of American Studies, Chinese Academy of Social Sciences