The Difference between“China Independent” and “America First“

By Harald Buchmann

There has been a lot of talk about a trade war between the US and China. At first sight it seems like a game of chicken, both sides testing who will give in first. But looking closer, it is a very different battle at hand: While US president Trump is fighting for economic improvements by achieving better trading conditions, China is fighting for national sovereignty and national pride. We all know the American credo “we don’t negotiate with terrorists”, following the argument that negotiations would only encourage other enemies to resort to terror tactics. China has a very similar credo about bullies. Feeling bullied by the US is a sentiment that has been around for decades in China. Deng Xiaoping called upon China to keep quiet, be patient and focus on business opportunities. With the New Era Socialism, Xi Jinping has introduced the next phase. The message is clear: China is strong now, and will not be bullied. However, it is not a message about how trade agreements are made, but rather about the way negotiations take place. Why am I so convinced it is possible to argue with China about terms on trade, if the argument is based on rational argumentation and mutual respect?

Chinese President Xi Jinping (C) and his wife Peng Liyuan (7th R) pose for a group photo with foreign guests attending the Boao Forum for Asia Annual Conference 2018 in Boao, south China's Hainan Province, April 10, 2018.[Photo: Xinhua]

The Chinese premier Li Keqiang is economist by profession, and President Xi Jinping has decades of leadership experience in both politics and the economy. They understand that trade is good for the productivity of a country (one of the main goals of the CPC). Many adjustments in the terms of trade would be acceptable, because adjustments are always better than not trading at all. But if the negotiation starts with aggressive bullying then the hands of the Chinese leaders are bound. Making concessions under such circumstances would be seen as weakness, cowardice and national shame. Chinese are a people of pride, placing honor above everything. According to Deng Xiaoping, if getting rich is honorable, then people will do everything to get rich. But if some higher morals appear, then the Chinese will be very willing to accept poverty in order to win a trade war. I doubt if the US population is as determined as that.

At the Boao Forum for Asia, Xi Jinping said that “the Chinese people have been standing together for 40 years, struggling for 40 years, increasing production capacity for 40 years… The continuous repetition of “40 years” of course refers to China’s policy of “reform and opening up”. In other words, Xi clearly states that the prosperity of present day China comes from open trade and developing market economy. Again: fighting back against punitive tariffs from the US is not a matter of ideology for Xi, but a matter of necessity to defend China’s independence.

The shared destiny of humankind is mentioned several times at the Boao Forum. I have commented before that China may be the only country which has written in its constitution a responsibility for the rest of the world. Xi again emphasizes that the precondition for economic development and better lives is peace, and that all countries should work hard to establish peace together, ensure calm relations, tolerance, openness and a beautiful Asia and world.

Besides nice talk, Xi also announced concrete measures to further open the Chinese economy including: lifting on restrictions e.g. in banking and insurance sectors, improving the investment environment by improving processes, transparency and the rule of law, improving IP protection and actively increasing imports.

Admitted, China is considering higher tariffs against the US as a retaliation method, even though Chinese tariffs towards the US are currently higher than vice versa. This could be considered a part of the recent “protectionist wave”. But at the same time China is reducing taxes with many countries which signed free trade agreements with China, such as Switzerland. China is discussing massive tariff reductions in the RCEP framework, which is expected to be put in practice this year, unlike the US version TPP which has been stopped by Trump. And generally China is very open towards poorer developing countries, giving credits for infrastructure also to countries failing to get credits on regular financial markets, thereby enabling economic growth where Western economies fail to support.

Not just from facts, but also from rhetoric Xi differs greatly from the “new nationalists”: China is a reliable partner, China values peace and common prosperity, China supports cooperation. Common people cannot buy anything from such words, but other nation’s politicians should use these promises to build upon them. Trust needs to start somewhere. Europe buries old mistrust, and work for a prosperous Eurasian economic region. There will be setbacks and misunderstandings. But clearly the rhetoric of “me first” and “I force you into giving me more” is not beneficial for improved relations.

If I have to choose between Trump’s way of talking, and Xi Jinping’s way, then I will always choose Xi. It is a pity that so few Europeans understand Chinese, while most understand English. So I am afraid, Trump’s cultural influence on Europe will be stronger than Xi's. I see it as responsibility of China experts and Western journalists to not just talk about what China does, but also about the political culture that China hopes to promote.

(Harald Buchmann is a Swiss economic analyst and business advisor based in Beijing)