Xi’s on the Phone, Again

Xi on the Phone

It’s important to understand, if we can, what kind of game China is playing with Trump. I have had some things to say on the topic. Unlike me, Richard McGregor is an actual China specialist. And, unlike me, Mr. McGregor has some high level sources in China. His views: sort of a first cousin of my own speculations, I believe. The Chinese don’t want anything to do with xiao ren.

Richard McGregor, Trump wants China to help him win. China wants nothing to do with him: What Xi Jinping and his top Communist Party deputies think of the U.S. president:

It is hard to pinpoint the moment when the relationship between Trump and Xi soured. Mostly likely it was in May, when a nationalistic debate inside the top Chinese leadership prompted Xi to tear up a draft trade agreement with the United States that had been painstakingly mapped out by his handpicked negotiator. …

There were many stops en route to the U.S.-China rupture: Trump’s tweetstorms attacking China as a currency manipulator and a thief of “Hundreds of Billions of Dollars a year” in intellectual property; his bans, and occasional reversals, on Chinese tech companies such as Huawei; and of course the mutually destructive trade war, which punishes both countries without yet yielding the United States any meaningful edge. Beijing does not believe that it can do business with the U.S. president, let alone strike a permanent, far-reaching trade deal that might restore trust between the two superpowers.…

Trump’s unpredictable methods and blithe willingness to dispense with long-standing taboos (such as those against phoning the president of Taiwan) initially worked well in laying the groundwork for trade negotiations. His tactics threw Beijing off balance. The Chinese liked the old way of doing business, when the two sides mixed public diplomacy with discreet back channels to reach understandings on difficult issues, out of the glare of the media. …

Trump has no interest in back channels; he blasts his Twitter foghorn, no matter what the issue or its sensitivity. He has also been tougher on China than any other president in the modern era. In China, for a while, many scholars extolled Trump as a master strategist for his ability to shape the agenda and bully the Chinese leadership. For Xi, this was especially disruptive. Xi is his nation’s most powerful, ambitious and assertive leader in a generation, someone who is used to riding roughshod over critics in his unapologetic embrace of a bigger role for China in the world.

Like any leader, Xi also has to manage domestic politics. He is the most ideological Chinese leader since Mao Zedong, placing the Communist Party, and himself as its head, at the center of governance and power while sidelining all his rivals. Trump has presented a challenge to his vision of an ever more powerful China. Many senior officials portrayed the U.S. draft trade deal in May as humiliating, a lethal charge in a country with a history of capitulation to foreigners. Faced with mounting condemnation in the Politiburo, Xi abruptly abandoned his chief negotiator, Vice Premier Liu He, and led the nationalist charge against the agreement himself. (Liu also led the tentative deal announced Friday; it’s unclear whether this one will stick.) Xi has also faced heavy internal criticism for his assertive foreign policy, which many Chinese scholars blame for triggering a backlash against Beijing in much of the West.

The reason Chinese leaders decided they see little value in engaging seriously with Trump is that they don’t believe a trade deal would solve their problems with the United States. The two sides might be able to finalize the mini-deal in coming weeks, but Chinese scholars and officials I have spoken to over the past year recognize that any accord will just be a stopover on the way to the next fight.

There are plenty of Chinese hard-liners who don’t want a deal at all. “I hope that the negotiations will break down,” said one of the best-known hard-liners, Dai Xu, a colonel in the People’s Liberation Army, before the May rupture. Hu Xijin, the hawkish editor of the Global Times, the tabloid mouthpiece of the Chinese Communist Party, tweeted that “a trade deal, even if reached, will be limited in actual meaning and could be broken constantly.” As a result, he added, many Chinese “support being tough on the US, giving up any illusion.”

Beijing knows that if Trump loses, the next president might be a more stable interlocutor, though it’s not expecting sudden and miraculous relief. Democratic presidential candidates have broadly criticized Trump’s trade war tactics as counterproductive but have sided with the overall strategy of constraining and punishing China. But even if the Chinese consensus is right — that the two countries’ broad, systemic rivalry is here to stay — Beijing is not that interested in sitting across the table from Trump. Not because officials fear he’ll out-negotiate them. They believe that the United States is not interested in negotiating at all. Instead, Xi is returning the party-state to its communist roots, telling his colleagues that they should be prepared for a decades-long “struggle” with their enemies in the West.

Xi’s on the Phone

Xi on the phone

Know Yourself

Chad P. Bown and Douglas A. Irwin, Trump’s Assault on the Global Trading System and Why Decoupling From China Will Change Everything

From Foreign Affairs, a deep dive into the “thinking” of Trump and his enablers. Here’s one passage, sure to lull you to sleep tonight:

If Trump becomes a one-term president, the next administration will have an opportunity to reverse many of its predecessor’s trade policies—eliminating the steel and aluminum tariffs, repairing relationships with the United States’ NAFTA partners, joining the CPTPP, and improving the WTO. That would not only help restore U.S. credibility on the world stage but also enable other countries to lift their retaliatory duties on U.S. exports, helping suffering farmers. If Trump wins reelection and continues down the path of economic nationalism, however, the prospect of continued, and perhaps intensified, trade conflict is likely to destroy the world trading system. That would do incalculable damage to the world economy.

Know Your Enemy

Anna Fifield and David J. Lynch, A year into the trade war, China learns to ride out Trump’s turbulence

A deeply reported piece on what the Chinese leaders are thinking in regard to Trump and the trade war. Hint: they’ve got his number:

“They’ve decided Trump is a vacillating guy who can’t figure out what he wants and gets spooked every time the stock market goes down or someone accuses him of not being tough,” said Arthur Kroeber, managing director of Gavekal Dragonomics, a consultancy in Beijing. “Although there are problems in China, they believe they have their economy under control, more so than Trump. They think he is more vulnerable to a slowdown and that they can afford to wait him out.” …

Chinese officials were initially mystified by Trump’s unconventional style, and Xi is said to have faced criticism for underestimating Trump’s resolve to tackle China’s trading practices.

But emerging last week from this year’s Communist Party confab at the beach resort of Beidaihe, China’s leadership appears to have decided to hunker down. …

The longer this pattern continues, the more China becomes concerned that any deal won’t stick.

 “Now China understands him thoroughly and knows that inconsistency is his nature,” said Wang, of Renmin University. “Even if an agreement is signed, he may not implement it well. But, without an agreement, he does this over and over again, which is also very annoying.”

Many analysts expect the dispute to continue to at least November, when the two leaders are likely to meet at a summit of Pacific Rim nations in Chile.

Xi, meanwhile, confronts domestic political challenges that likely reduce his willingness to make concessions under foreign pressure. The authorities in Beijing face a growing crisis in Hong Kong, where protests aimed at preserving the city’s special status continue, and are preoccupied by preparations to celebrate in early October the politically charged 70th anniversary of the Communist Party’s takeover of China.

Over a Barrel

Over a Barrel

Several recent posts have raised the question, what is the Chinese strategy in the current trade war? I have offered my views and commented on those of Paul Krugman and Thomas Friedman. Today, Morning Joe weighed in, prognosticating that in the next few months, Xi Jinping will use his negotiating strength and Trump’s negotiating weakness to cut a really good deal—from China’s perspective.

I disagree. I do think Xi might be tempted by a deal so transparently one sided that it would expose Trump, even to those of the meanest intelligence, as a weak, incompetent charlatan, and thus cost Trump reelection.

But I do not believe Xi will be tempted by a deal that leaves Trump any wiggle room to claim victory and thus to escape the consequences of his own folly.

Here is why I reach that conclusion. Some people are obnoxious, but you can do business with them. Others, you cannot do business with. Mainly because, if you reach a deal, the deal with not stay pinned down. They will enter into a contract to sell Blackacre for a million dollars—and then demand a hundred thousand more at the closing.

I believe Xi wants, and desperately needs, Trump to lose in 2020. Because if he wins, any deal that Xi does in 2019 or 2020 will be up for renegotiation in 2021.

For several millennia, Chinese statecraft has consisted mainly of understanding the barbarians and manipulating the barbarians. They are still at it today.

China has a strong motive to create a recession that will cost Trump the election. It has the means to accomplish this result. And Trump has offered China a wonderful excuse to use its abundant means in support of the goals that motivate it.


And the Winner Is …

smiling man

There were three entries in the recent Why is This Man Smiling? caption contest. They were,

1) “I’M SMILING BECAUSE I stayed at a Holiday Inn Express last night.”

2) “I’M SMILING BECAUSE I’m still tasting that outrageous chocolate cake I was eating when he told me about the missiles he had fired at a country he couldn’t remember.”

3) “I’M SMILING BECAUSE I’ve got this nitwit by the short hairs.”

And the winner is …

Everyone who submitted an entry.

There are no winners and losers anymore.

short hairs