While the former Soviet Union aimed to defeat capitalism during the cold war, Beijing is trying to convince governments, organizations and companies.
This story is being published by POLITICO as part of a content partnership with the South China Morning Post. It originally appeared on scmp.com on July 11,2018.
As Washington escalates trade tensions with threats of tariffs on another $200 billion worth of goods, China’s leadership is positioning itself as a defender of the world trade order and, in the words of a source close to decision makers in Beijing, bracing for an “economic cold war.”
The source, who requested anonymity as he was not authorized to speak publicly about Beijing’s strategy, told the South China Morning Post that China was trying to put the trade row into a global context, by illuminating whether the world should uphold the multilateral system under the World Trade Organization, as China has suggested, or let President Donald Trump’s unilateralism prevail.
While the former Soviet Union aimed to defeat capitalism during the cold war, Beijing is trying to convince governments, organizations and companies — including U. S. firms — that it is a champion of free trade, and send a message that, in contrast to Trump’s “America first” policy, China is “still open for business” and wants to keep globalization on track.
It also sees an opportunity to find common ground with others hit by Trump’s trade wrath — including the European Union, Canada and Russia — and to stand up to Washington. China has, for example, been lobbying the EU to present a united front against the United States trying to unmake the existing world order, and the two sides have agreed to set up a working group to revamp and resolve disputes through the WTO.
“The U. S. is sabotaging the global free-trade system which was initiated by Washington decades ago. This is a new cold war which threatens world peace and global development,” the source said. “China is committed to further opening up… to bring opportunities to the world.”
He added that China would try to push back against Trump’s “trade bullying” to protect its own interests as well as the free-trade system that has helped it and many other countries.
Washington and Beijing on Friday began applying 25 percent tariffs on $34 billion of each other’s goods, locking horns in what Beijing called “the biggest trade war in economic history.”
The hostilities intensified Tuesday as the Office of the U. S. Trade Representative said it was starting a process to levy 10 percent of tariffs on another $200 billion worth of Chinese products.
China’s Ministry of Commerce said in a statement Wednesday that it was shocked by the development, warning that the heightened confrontation could destroy trade between the two sides.
On Wednesday, China’s stocks fell, with the benchmark Shanghai Composite Index losing 1.8 percent and the Hang Seng Index in Hong Kong down 1.3 percent. The offshore yuan weakened to test 6.7 against the U. S. dollar — a level that Beijing defended only a week ago.
China had tried to avoid a direct clash with America by offering to buy more U. S. products, but the action was not enough to persuade Washington to drop the punitive tariffs.
