China Conference 2018

Warning to China and US: tread carefully to avoid collision course

Rivalry and trade spats between the economic giants could deal further blow to globalisation and have broader impact, say experts at SCMP China Conference

PUBLISHED : Thursday, 11 January, 2018, 10:54pm
UPDATED : Friday, 12 January, 2018, 11:38am

Beijing and Washington need to tread carefully to avoid dangerous confrontations in an era of change and uncertainty amid mounting tensions over trade and structural competition between the two powers.

That was the conclusion at the annual China Conference hosted by the South China Morning Post on Thursday, where policymakers, government advisers, business leaders and academics expressed concerns over the looming rivalry between the world’s top two economies, which they said would deal a further blow to globalisation and have broad repercussions.

Sino-US relations and globalisation top the bill at China Conference in Hong Kong

While the United States continues to withdraw from its global leadership position under President Donald Trump amid rising protectionism and anti-globalisation sentiment, Beijing looks poised to take a greater role in shaping the international geopolitical and economic landscape.

“A key issue for 2018 is whether we can avoid international conflicts and confrontation, and the relationship between China and the US will largely decide if the world can move past the current globalisation interlude,” said Zhang Yansheng, former secretary general of the Academic Committee under China’s National Development and Reform Commission.

Following his decision to label China as a strategic competitor, Trump might soon take executive action against the country in the form of punitive tariffs, which would inevitably set in motion a cycle of retaliation from Beijing, warned Daniel Russel, the former US assistant secretary of state for East Asian and Pacific Affairs.

In a panel discussion on US-China economic relations, he warned that the two economic giants could be on a collision course amid signs that bilateral ties were moving from complementary to competitive.

“The warning signs that point toward some sort of tough trade actions by the Trump administration towards China are unmistakable,” said Russel, who is now diplomat in residence and senior fellow at the Asia Society Policy Institute.

Donald Trump ‘may be ready to press’ the punitive China tariff button

While noting a widespread concern among Americans in general over China’s economic and military rise, he said the change of attitude among the US business community was more worrisome.

“The US business community has been … a major bulwark against protectionist measures in the United States. What we’re hearing widely is that we’re approaching a point of no return, that it’s too much, that American companies simply cannot operate in the Chinese environment in a way that’s remotely equivalent to the way that Chinese companies can operate in the US,” he said.

He urged Chinese decision-makers to take Trump’s warning signs seriously.

“Everybody loses by taking that step. When you factor in the prospect of retaliation, the situation gets a lot worse,” he said.

Former chief executive of Hong Kong Tung Chee-hwa agreed that a trade war must be avoided. “In such a big relationship, there is bound to be disagreement, but rash action on either side will only create the environment for a very serious trade war, which is not good for any country. Patient discussion and negotiation, particularly considering the long-term prospects of the relationship, will be very important,” he said.

According to Zhang, now an adjunct professor at Renmin University of China, the top leaders in Beijing have no intention of displacing the US in the region, a situation Trump warned of in his national security strategy.

‘Big questions remain’ for China taking leadership role on the world stage

Although President Xi Jinping spelt out his ambitions for China to play a central role on the global stage at the Communist Party congress in October, Zhang warned that Trump’s isolationist policies might not be an opportunity for Beijing as many observers have claimed.

“We need to figure out whether it is a trap or an opportunity,” he said, adding Beijing would not seek a global leadership role by 2050.

He said that China’s economic growth model over the past 30 years, which relied heavily on exports, was undergoing profound changes as it was no longer sustainable and if maintained would strain relations with the rest of the world.

“The next stage is an open economy that focuses on the balance of trade. Expanding imports is a very significant part of China becoming a big global power,” Zhang said.

Russel also said that despite China’s economic success and rapid rise to regional prominence, Beijing had yet to narrow the trust deficit – especially among its neighbours – over how it would project its military and economic clout within internationally accepted global governance norms.

“I don’t think anybody doubts that China has the material capacity to achieve President Xi Jinping’s ambitious [global] agenda, but there are some big questions that are outstanding,” he said.

Get ready for a trade deficit, China, top economist warns

A recent poll in Asia by the Pew Research Centre showed some major countries in the region had very little confidence in an expanded and sustained Chinese leadership role in global governance despite Beijing’s attempts to portray itself as a benevolent power.

In her opening remarks, Hong Kong Chief Executive Carrie Lam Cheng Yuet-ngor described China as a champion for globalisation and multilateral cooperation on trade, while Washington had aggressively promoted the politics of protectionism under the flag of localisation.

“Such an approach [by Washington] would undermine global efforts in promoting free trade, something which has served the world economy so well in the past,” she said.

Lam was upbeat about the city’s economic prospects and its role in the “Belt and Road Initiative”, Xi’s pet project to promote trade and infrastructure development around the world.

“Hong Kong, traditionally an open and externally oriented economy, and enjoying unique advantages under ‘one country, two systems’, fits perfectly with that vision and is well placed to contribute what we are good at to what the nation needs,” she said.

Additional reporting by Robert Delaney, Sidney Leng and Kinling Lo