In eight days, on April 10, President Xi Jinping will deliver a keynote speech at the opening ceremonies of the Boao Forum for Asia in Hainan, China’s home-grown version of the World Economic Forum in Davos, in which he will highlight new reform measures and the further opening up of China’s financial services markets.
*** But Xi will also use the forum to take an indirect shot at the Trump Administration, condemning “protectionism” of any kind. Even though Xi will refrain from calling out the US or President Trump by name, a senior State Council source tell us the message should not be taken lightly: “China is not afraid and will not recoil from a trade war,” adding a warning that, if not careful, the US could be “self-closing the door to China’s market.” ***
*** Xi will also call for “cooperation and for the advancement of economic globalization and free trade,” emphasizing that trade disputes must be resolved through consultations, and specifically, within the WTO framework. While not new per se, the remarks are meant as a clear, and continued, pushback against the US pursuit of trade disputes on a bilateral level including seeking relief on intellectual property right violations through Section 301 of the US Trade Act of 1974. ***
*** In parallel, Beijing is also in consultations with Moscow to finalize a series of six summit meetings between President Xi and Russia President Vladimir Putin. While nominally unrelated to the ongoing trade disputes with the US, the timing on the heels of the West’s isolation of Putin over the poisoning of Russian dissident Sergei Skripal in London, and North Korean Supreme Leader Kim Jong-Un’s train trip to Beijing, is intended to deliver a message of geopolitical strength to Washington. ***
Retaliation, and Negotiating Tactics
Xi’s continued insistence that all disputes and negotiations over trade issues go through the WTO represents a clear pushback on the Trump administration pursuit of relief on intellectual property right violations and other bilateral disputes through national security and other channels, including Section 301 of the US Trade Act of 1974 (see SGH 3/15/18, “China: Bristling at Trade Threats”).
Beijing’s position will be presented in Hainan as an effort to mobilize “coordinated global efforts to address and fix the flaws in the global economic system.” But the objective, and subtext, will be to roll back the somewhat successful bilateral efforts to date by the White House to enlist international cooperation in pressuring China on measures such as, for example, the transshipment of Chinese steel exports through third countries on their way to the United States.
The European Union, through EU Trade Commissioner Cecilia Malstrom, has also drawn a red line around protecting the WTO, at least in theory. In reality, the potential success of the “divide and conquer” strategy of the Trump administration is being eyed warily in capitals from Ottawa to Seoul, and has raised eyebrows in Beijing.
In a shot across the bow, the Customs Tariff Commission of the State Council announced yesterday that China will, as of today, suspend “tariff reduction obligations” on seven categories of 128 imported goods originating in the United States.
That move drew the assertion by the State Council source that “China is not afraid and will not recoil from a trade war,” and a warning that, if not careful, the US could be “self-closing the door to China’s market.”
While nominally small, the very targeted retaliation over the weekend by Beijing was also in anticipation of the release by the US Trade Representative this week of a list of Chinese imports, including high technology products, targeted for new U.S. tariffs.
That release has been threatened almost daily for the last week or more by the White House, but is scheduled to hit a self-imposed deadline for release on Friday of this week.
Flexing Geopolitical Muscle
Senior sources in Beijing also flag the upcoming summit between President Xi and Russia’s President Vladimir Putin as “of great significance.”
Coming at a time when Putin is deeply isolated by the West, the outreach is to show “the solid and close relationship between both leaders and their states” – an outreach that may explain some of the vague leaks coming out of the White House today over a potential summit, in turn, at some point, between President Trump and Putin.
To underscore the unity between them, Beijing and Moscow have agreed, from what we understand, to six meetings this year between Xi and Putin. Xi will send two senior officials to Moscow before the first of these, his own trip to Moscow in the second half of April.
General Wei Fenghe, a State Councilor and China’s Defense Minister, is visiting Russia now, between April 1 and 5. And Wang Yi, China’s high profile Foreign Minister and also a State Councilor, will pay a working visit to Moscow from April 4 to 5.
On the heels of Trump taking the strongest diplomatic actions against Russia to date, and the beginnings of “hostile acts” towards China, the summits between Xi and Putin, in the words of a source in Beijing, will be a declaration to the world “that these two strongmen have enough strength to deal with any challenge from Trump.”