BEIJING: The Chinese government has not pressed the panic button yet.
Despite some media reports claiming the Chinese economy has already been severely impacted by increasing trade tensions, given that it has experienced the slowest growth this quarter in almost a decade, do not expect Chinese President Xi Jinping to raise the white flag anytime soon.
In fact, do not expect him to surrender when he next meets with US President Donald Trump on the sidelines of the G20 Summit in November in Buenos Aires, Argentina.
President Xi intends to save face for the Chinese people and surely recognises that calling for a truce on Sino-US trade talks anytime soon would give the impression the country has lost big time, appearing weak and doing the bidding of Big Business interests based in the US.
That is not a good image for Xi or the rising economic stature of the Chinese nation. Xi must hold out, waiting for better terms from Washington, even at the risk of higher tariffs and stiffer trade protectionist measures.
TRADE IS NOW POLITICISED
The challenge Beijing and its trade officials struggle with is that the White House has politicised bilateral trade negotiations, while granting greater prominence to John Bolton, White House national security advisor, a self-proclaimed China and Russia basher, who is also cheerleader of the neo-conservative movement.
To make matters worse, Vice-President Mike Pence had delivered a scathing speech against China when he appeared at the Hudson Institute earlier this month. According to White House transcripts, Pence is quoted as saying that:
Beijing is also using its power like never before. Chinese ships routinely patrol around the Senkaku Islands, which are administered by Japan. And while China’s leader stood in the Rose Garden at the White House in 2015 and said that his country had, and I quote, “no intention to militarise” the South China Sea, today, Beijing has deployed advanced anti-ship and anti-air missiles atop an archipelago of military bases constructed on artificial islands.
Do these remarks sound like a strategy to peacefully engage Beijing in trade talks?
Instead, Pence raised the stakes, blasting the Chinese government and hinting at the potential of war if Democrats retake control of Congress and Trump gets impeached, an outcome that would see Pence in the White House.
Surely, Beijing does not wish for Pence to become the US President in the near future, and therefore would not meddle in the US’s mid-term elections to help the Democrats, contrary to Pence's claims.
GETTING A HANDLE ON THE US
Additionally, White House Director of Trade and Policy Peter Navarro has refused to hold talks with Chinese trade officials in a polite manner. A hawk and author of the book Death by China, accounts suggest he has little experience of the country and cannot be said to have visited it frequently or have a deep, first-hand appreciation of China.
He has no real experience in the business world, with regard to the negotiations process. He has never been involved in the give-and-take of deal-making, unlike his top boss, President Trump. He had spent much of his professional career in academia as a professor emeritus at the University of California, Irvine.
And yet, President Xi and his aides are at the mercy of Bolton and Navarro in trying to reach an agreement with President Trump on a trade agreement.
Such circumstances do not bode well for Beijing and hence they hold no real incentive for seeking compromise and hammering out a deal, since both Bolton and Navarro remain stubborn and unfriendly in their dealings with China.
Indeed, even high-ranking Chinese official struggle to get a handle on their American counterparts.
In Chinese Ambassador to the US Cui Tiankai’s recent interview with the National Public Radio in Washington, he said he was “confused” about US policy statements and does not know how to improve dialogue between Beijing and Washington.
His admission is shocking considering that he had been appointed to understand and work with the White House and America in a more insightful and informed manner.
Yet, it should come as no surprise since Trump has pledged to endorse an “America First” policy, but flashpoints between the two have grown more salient, including issues related to the South China Sea and Taiwan.
Accordingly, if President Trump persists in putting forward politics above economics on Sino-US trade talks, President Xi will not likely budge or compromise - even if that means the Chinese economy will face hard times.
There are some issues that are non-negotiable for Beijing, and the trade war is not one that will see easy compromise.
It is true that the Chinese have the upper hand, given its massive trade surpluses with the US and as the US trade deficit with China is on track to increase this year, notwithstanding Trump’s tariffs on a greater number of Chinese imports.
So President Xi does not need to surrender at this stage, even as both sides try to reach compromise and areas of agreement on certain trade issues in negotiations.
What does compromise look like? Beijing could demonstrate its willingness for compromise by allowing American farmers to ship soybeans to China, as well as re-opening US LNG (liquefied natural gas) shipments to the country.
Such gestures of conciliation might persuade President Trump to rein in the trade war hawks, including Navarro and Bolton.
But most importantly, Xi should make a phone call to the White House, so the two leaders can become personal friends again and make continued progress on bilateral trade talks.
In doing so, both China and the US can move forward with win-win trade agreements.
Tom McGregor is a commentator on Asia-Pacific affairs based in Beijing.