China: Shrugging at APEC Fireworks

Published on November 19, 2018

In reading the weekend press traders might be forgiven for thinking the tough cross-talk between US Vice President Mike Pence and China’s President Xi Jinping at an APEC summit was setting the stage for a new war of sorts between the countries. Indeed, one financial news outlet ran the same headlines over the tit for tat for three days running as its top news of the day.

*** But for all the verbal acrimony, senior officials in both Washington and Beijing are perfectly capable of separating out the heated long term strategic rivalry and rhetoric that has now marked President Trump’s broader bilateral strategy towards China for two years running, from the near term objective of working towards progress on the trade front at the upcoming G20 summit meeting in Buenos Aires between Presidents Donald Trump and Xi at the end of this month. ***

*** Indeed, while the more highly visible visit of China’s Vice Premier Liu He to Washington may not now occur before the summit as envisioned before, senior officials in Beijing continue to expect enough concessions on offer in Buenos Aires to set the stage for a cease fire in the automatic escalation in January of tariffs on existing, or new, Chinese exports to the US as threatened by Trump, at least through the first quarter of 2019, as negotiations go on (see SGH 11/16/18, “China: Negotiating a Truce with Trump”). ***

*** Chinese officials clearly do not expect the trade wars to end suddenly, or for existing sanctions to be rolled back or lifted, certainly in this round. They believe, however, as the Federal Reserve hikes rates, and as the US, and global, growth momentum perhaps slows, the China-US trade wars could be concluded in full by 2020 – which of course would also represent the year for new US Presidential elections. ***

Pence the Hardline Voice

When it comes to the Pence speech at the East Asia and APEC summits, China is indeed, not surprisingly, angered at his direct, as well as veiled, attacks on Beijing’s behavior, past and present.

But this is not the first time the Vice President has been dispatched to deliver the toughest of messages to China, and they note that Trump himself has refrained from such direct attacks on Beijing, and most especially on Xi himself. Rightly or not, they see Pence as a voice comparably in the same camp as other hard liners such as National Security Adviser John Bolton, White House Trade Adviser Peter Navarro, and US Trade Representative Robert Lighthizer.

They furthermore suspect Pence’s remarks may represent part of a coordinated effort to pile the pressure on Beijing right before the summit. And so while on high alert for any sudden U-turn of sorts, Chinese officials are looking beyond the verbal spats of Papua New Guinea, and do not believe these particularly impact the current state of China-US relations or the existing trade discussions either way.

In the meantime, Beijing admits the current trade tensions have hurt China more than the US in the first year. But they maintain, if they are to be escalated, that they will hurt both countries equally in 2019, and, for what it’s worth, the US more so — in 2020.

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