Markets were cheered yesterday by the announcement that China would cut tariffs on $75 billion dollars’ worth of imports from the United States, a step that was agreed to already in the “Phase-One” trade deal between the two countries in January of this year.
With doubts still lingering over China’s ability to perform its trade deal obligations due to the novel coronavirus crisis, China’s President Xi Jinping and US President Donald Trump then took those assurances one step further in a phone call last night, reaffirming their commitments to the trade agreement, and pledging continued cooperation in the battle against the deadly virus.
*** But beneath those reassuring public signals, President Xi, from what we understand, blasted Washington’s response to its coronavirus epidemic in a meeting of the highest-level Standing Committee of the Political Bureau of the Communist Party of China’s Central Committee that was held in Beijing, on February 3. ***
*** In addition to the swift restrictions on travelers from China that were imposed by the US, the renewed stepping up of pressure from Washington at this point in time over Huawei appears to have also ruffled feathers in Beijing, even as there has been little comment on either matter in public. And that will most certainly have played no small part in the characterization by President Xi at the Politburo meeting of the Phase-One trade accord as no more than a “temporary expedient” within the larger backdrop of unstable bilateral trade and economic relations with the US, particularly over technology. ***
*** Meeting its trade deal commitments will be seen by the Xi regime as a signal of economic and national strength, stability and pride. But we suspect that beneath that, perceptions in Beijing – right or wrong — of US efforts to undermine China’s position in its hour of crisis will cast a cloud over the de facto implementation of the Phase-One accord beyond the bare minimum, if that, and if even feasible. ***
Four Diplomacy and Security Priorities
The February 3 Standing Committee Politburo meeting followed a January 16 meeting of the Politburo at large to review China’s diplomatic and security priorities for 2020, and all members of China’s Central National Security Commission (CNSC) were invited to attend both.
The meeting outlined four top diplomacy and security priorities for 2020. Those were:
1 – To speed up economic relations and deepen ties with neighboring countries as well as countries along the “Belt and Road;”
2 – To continue to consolidate and strengthen China’s “comprehensive strategic partnership of coordination” with Russia;
3 – To continue to work with the European Union towards “multilateralism and the basic norms of international relations,” and;
4 – To maintain the “basic stability” of bilateral relations and avoid strategic misunderstanding or miscalculations with the United States.
“Friends in Need”
Not surprisingly, the novel coronavirus epidemic was also a major topic of discussion at both the broad, and the narrower Standing Committee, Politburo meetings.
From what we understand, at the highest level, February 3 conclave, President Xi expressed appreciation for the many countries that had expressed understanding and provided support to China since the outbreak of the novel coronavirus through various means.
Whether literally or figuratively, Xi is said to have expressed the sentiment that “a friend in need is a friend indeed”.
But while vowing to remember those who had befriended China, Xi exhorted his fellow party members to also remember those who were “gloating” about China’s struggle – namely the United States.
The United States, he maintained, was the first to ban foreign nationals, not just Chinese citizens, from entering its borders, and the first to evacuate its diplomats from China, while offering no substantive support to China in return. What the US had done, Xi said, was to help create and spread panic.
Turning to economic and trade relations, the Phase-One trade deal, Xi said, was just a “temporary expedient.” It would not lead to stability in bilateral economic and trade relations, especially with the US looking to further tighten restrictions on technology exports to China.
Furthermore, Beijing would always be fully braced for continued pressure from Washington on issues regarding its “territorial sovereignty,” presumably Hong Kong, Taiwan, Xinjiang, etc.
From Russia, With Love
The China-Russia relationship, on the other hand, was held up as a prime example of “harmonious coexistence and win-win cooperation” between two countries.
President Xi and Russia’s President Vladimir Putin will, from what we understand, be meeting six times in 2020, with Xi traveling to Moscow in the spring, and Putin to Beijing in the autumn.
It was noted, rather glowingly, that to help China fight the epidemic, in addition to a personal letter from Putin to Xi, Russia had provided China with medical supplies, and even sent an expert team of five epidemiologists and infection prevention experts into Wuhan itself.
On a more alarming note, the meeting also noted that Russia’s constitutional changes would pave the way for Putin to retain outsize political influence in Russia, ostensibly as Prime Minister, even after his six-year term as President was slated to end in 2024 — all of which would ensure China-Russia relations remain “at the highest level ever in history.”
EU, UK and Huawei
The meeting also stressed the continued need to strengthen and consolidate relations with the European Union, noting that the 22nd China-EU summit will be held in Beijing in the spring, and that the China-EU bilateral investment treaty should be signed some time in 2020. China has also accepted Germany’s offer to attend a summit of leaders of China and the 27-member EU that is to be held in Leipzig, in September.
As to the EU’s recently departed 28th member, Beijing’s understanding is that UK Prime Minister Boris Johnson will be looking to start negotiations on a free trade agreement with China this year.
But the battle with the Trump administration over Huawei technology licensing appears to have run barely below the surface of discussions over China’s strategic relations with the EU.
The meeting noted, rather pointedly, that Germany, France, Italy, Spain, Portugal, and the Netherlands were all likely to approve Huawei as a supplier of equipment for their 5G mobile networks.
Furthermore, after allowing it to participate in trials, India it was noted will also allow Huawei to build out part of its 5G network.