China: Lingering Trade and Security Tensions

Published on July 8, 2019

President Xi Jinping presided over a meeting of the powerful Central National Security Commission of the Communist Party of China on Wednesday, July 3, to assess and review the country’s global security, diplomatic and economic position.

*** While President Xi Jinping and US President Donald Trump had agreed to a trade truce at the G20 meeting in Osaka, Japan, it was emphasized in the CNSC meeting that the two sides were still far from reaching an actual accord on trade and Washington could still turn the trade fight at any time into a tech, or currency war. ***

*** From Beijing’s side, the biggest differences that remain still revolve around three key issues involving China’s “core concerns:” the eventual removal of all tariffs; the volume of purchases of goods from the United States, and; the balance of the wording of any final agreement text. ***

*** The CNSC meeting also took note of a growing deterioration in relations between the two countries, and characterized Sino-US relations through the lens of an increase in hostility from Washington towards Beijing since the beginning of this year. ***

Tensions over Technology and Taiwan

The CNSC, established in 2013, represents the highest-level security body of the CPC power structure, and as such reflects a more traditionally hardline view. A summary of the meeting, particularly regarding Sino-US relations, thus makes for an illuminating if not sobering read.

The meeting reaffirmed China’s position towards the US on trade, that “China hopes to resolve issues through dialogue rather than tariff measures but that China will not bow under pressure and will fight to the end if needed, and that there will be no trade agreement unless all existing tariffs are removed.”

Regarding the broader arc of relationships with the US, the CNSC meeting characterized Sino-US relations through the lens of an increase in hostility from Washington towards Beijing since the beginning of this year. 

In addition to tensions surrounding trade, the meeting made pointed reference to a US “full-press” on China on military, nuclear security, human rights, and cultural exchanges, and accused the US of escalating tensions in Taiwan and the South China Seas. 

Indeed, while the Trump administration has steered assiduously clear of entanglement in the recent street protests in Hong Kong, and the US Commerce Department has removed eight Chinese entities from its technology blacklist in a gesture of goodwill, the White House has been inching Congress forward on the threatened sale of 66 updated “Block 70” F-16 jets to Taiwan – a sale Beijing has warned would cross a “red line,” and which was rejected by the Obama administration for being too provocative.

The security meeting attendants did nonetheless believe that Trump has not yet prepared for a “full-scale” confrontation with China, and that Beijing still has plenty of room to avoid the “decoupling” it has warned about between the two nations. 

But it was also noted that the current trade war was really about the balance of power between the US and China in the future, with a case in point made of how China’s lead in the global 5G technology race and its Belt and Road Initiative had resulted, in Beijing’s view, in the acceleration of a containment strategy from Washington.

A Focus on Europe, ASEAN, and Iran

The CNSC meeting also covered China’s geopolitical relations with other regions and countries including Russia, Central Asia, the EU, North Korea, Japan and Iran.

Xi and Russian president Vladimir Putin met already four times this year, and from what we understand will meet at least two more times again in the second half of the year. 

A month ago, the two leaders agreed to upgrade the relationship between their countries to a “comprehensive strategic partnership of coordination for a new era,” and as long as Putin and Xi remain at the helm, the CNSC assessment is that the relationship can get only grow deeper.

China’s relationship with the EU, Germany, France and the UK, as well as with five Central Asian countries, was characterized as “stable and sound,” with North Korea as that of “comrades plus friends,” and with India and Japan as “improving.” Tensions in the South China Seas were seen also to be improving, with progress accelerating in the South China Seas Code of Conduct negotiations.

The CNSC also proudly noted that China has become the largest commercial and trading partner to almost all its surrounding neighbors and cited an increase in China’s non-financial direct investment into Europe and the ASEAN countries of 18.9% and 17.6% respectively over the first five months, year on year.

And regarding Iran, the meeting concluded that Beijing must continue to maintain its normal relations with Tehran even as the Islamic Republic faces unprecedented pressure from US sanctions. Furthermore, it was noted, Beijing would continue to “properly import” oil from Iran — through military channels.

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