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Thread: Xi Jinping Wanted Global Dominance. He Overshot.

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    Senior Contributor Oracle's Avatar
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    Xi Jinping Wanted Global Dominance. He Overshot.

    China wasn’t ready for the trade war with the United States.

    The endgame in the trade war between China and the United States seems near. President Trump, betting with real currency — American strength — apparently has the upper hand, and the concessions President Xi Jinping is likely to make won’t be mere tokens. When — if? — an agreement is finally announced, Mr. Trump will surely fire off bragging tweets, partly to shore up his credentials for a second term, amid personal and policy troubles. For Mr. Xi, almost any deal could mean a very serious loss of face.

    Mr. Xi assumed power when China was still riding high on its so-called economic miracle (and the United States remained mired in the aftereffects of the 2008-9 recession). He became general secretary of the Chinese Communist Party (C.C.P.) in late 2012 and president of the People’s Republic in early 2013. His anticorruption campaign was instantly popular. He championed the “Chinese Dream,” a vague vision of prosperity, strength and well-being for the country and its people, that seemed to fire up many citizens. His proposal to President Barack Obama to establish a “New Model of Major Country Relations” could only please Han-majority Chinese with imperial yearnings.

    But those were easy stunts, performed in a country with no audible opposition and that bans “reckless” talk about the government. The trade war, on the other hand, is the first real occasion to assess Mr. Xi’s leadership capabilities. And his performance might not look so good, even if one discounts the setbacks related to the trade war.

    First and foremost, Mr. Xi has utterly failed to manage the United States–Chinese relationship. In contrast, every Chinese leader since the founding of the communist state in 1949 had recognized the paramount importance of those ties, worked hard to improve them — and reaped huge benefits.

    Mao staged Ping-Pong diplomacy to break the ice in 1971, and President Nixon supported him in his standoff against the Soviet Union. Deng Xiaoping went all-out to woo the United States, and President Jimmy Carter switched recognition of China from Taipei to Beijing in 1979. During the 1980s, the C.C.P. leaders Hu Yaobang and Zhao Ziyang invited Milton Friedman and other American economists to visit and provide advice; after that, American capital and technology started flowing into China. In 1997, Jiang Zemin made an eight-day visit to the United States — at one point, while in Williamsburg, Va., putting on a three-cornered colonial hat. Bill Clinton then gave China a strong push to enter the World Trade Organization in 2001.

    The Hu Jintao years, 2003–13, saw China’s most tactful exploitation of American openness (and na´vetÚ). Cheap Chinese imports created runaway bilateral trade deficits for the United States. The Confucius Institutes, a network of language schools cum influence agencies, began to take root in American universities and high schools. (Today, there are more than 100 throughout the United States.) Chinese venture capitalists flooded Silicon Valley with money raised in American financial markets — then quietly siphoned off cutting-edge American expertise and injected it into China’s own high-tech hub.

    But Mr. Xi has been aggressively hard-line. Under him, anti-American rhetoric has spread in official media. The Chinese government has been explicit about wanting to challenge the United States’s military presence in Asia. It has made aggressive moves toward Taiwan and in the South China Sea. It has sent Chinese battleships through American waters off the coast of Alaska. (It claimed to only be exercising the internationally recognized right of “innocent passage,” but the move clearly was a show of force.)

    State authorities in Beijing try to co-opt members of China’s vast diaspora, hoping to develop a network that will facilitate political infiltration into other countries and high-tech transfers out of them. To this end, they resort to both overt schemes, like the Thousand Talents Plan, an official headhunting program, and covert tactics overseen by the C.C.P.’s influence machine, the United Front.

    These efforts have set off alarms among some Americans. In 2017 and 2018, two groups of blue-ribbon scholars and ex-officials from previous United States administrations advocated a fundamental change in America’s view of China. Their members were moderates and mostly well-disposed toward China. Yet some of their recommendations dovetailed with the views of the Trump administration hawks who consider China to be America’s number-one enemy and security threat. Mr. Xi, apparently oblivious to this sea change, was caught unprepared when Mr. Trump hit China with a tariff war.

    The dispute is having a knock-on effect elsewhere in Asia, Australia and New Zealand, and Europe. After a summit in Brussels last month, China agreed to grant European Union countries “improved” market access, stop the forced transfer of technology and discuss the possibility of curtailing state subsidies to Chinese companies, which, other governments say, gives them an unfair competitive advantage. Although these concessions were presented in the mild, mutual-promise language of a joint statement, they were a clear setback for China and will blunt its global ambitions.

    Why is all of this happening under Mr. Xi? History suggests an answer.

    In the late 1950s, Mao began to challenge the Soviet Union’s leadership of the international communist movement, then a potent force that hoped to overturn the United States-led world order. Mao was also seeking global dominance, in line with the traditional concept that the emperor of the Middle Kingdom was the rightful ruler of “tian xia” (天下), everything under the heavens. But Mao overreached; China wasn’t strong enough for that then. The Soviet Union’s decision to scrap aid programs to China and pull out its scientific and technological advisers there dealt a severe blow to China’s underperforming socialist economy.

    Like Mao with the Soviets, Mr. Xi may have challenged the global leadership of the United States too hard and too soon.

    Mr. Xi’s second major shortcoming has been his failure to articulate a coherent set of policies to stop the Chinese economy’s long-term weakening, after many years of stellar performance. China’s gross-domestic-product growth in 2018 was the weakest in 28 years. The figure for the first quarter of this year was 6.4 percent, compared with the record high of 15.4 percent for the same period in 1993. Even that number would be the envy of many Western states, but the decline should concern China’s leadership because it underlines the country’s structural problems — notably, a rapidly graying population, a shrinking labor force and a total debt-to-G.D.P. ratio that neared 300 percent in the first quarter of 2018. The Japanese bank Nomura has estimated that defaults on bonds denominated in renminbi (also known as yuan) quadrupled between 2017 and 2018.

    Weighed down by demographics and debt, China can hardly expand through more private investment and consumption. Worse, since its economy already has some huge excess capacities (think newly built ghost towns), government stimulus isn’t very effective. According to the International Monetary Fund, in 2008, it took one trillion yuan of credit to generate one trillion yuan of economic output; by 2017, the ratio was 3.5-to-1.

    Yet Xi has done little to address these structural issues.

    Evidence of severe demographic problems had become apparent by the late 2000s, but in 2016 Mr. Xi merely replaced the one-child policy with a two-child policy. Too little, too late. China’s number of newborns per year has dropped since the changes. The 2018 total was the lowest since 1961, a year struck by a terrible famine. Mr. Xi signed off on an economic stimulus package in 2015 that was 25 percent larger than his predecessor’s emergency plan in 2009, which had been implemented as a response to the global financial crisis. And again, in January and February of this year alone, even while Mr. Xi has been paying lip service to the need to wean the economy off state support, the government offered new loans and financing exceeding the package for all of 2015, according to an article in Forbes.

    A third criticism of Mr. Xi is that under him, China has sponsored or condoned actions by Chinese citizens and entities worldwide that have damaged the country’s international reputation while degrading its own moral fabric.

    Take intellectual property, for example. The United States seems to have hard evidence that it was the policy of Huawei, a flagship Chinese high-tech company, to reward employees for I.P. theft. And, as I have written before, such a policy is encouraged, arguably even mandatory, under China’s 2017 National Intelligence Law.

    Traditionally, the ideal Chinese state is a Confucian state that adheres to strict moral and behavioral norms. Yet for all his cracking down on corruption at home, Mr. Xi has encouraged moral turpitude abroad; his vision of China is a nation of patriotic thieves. All Chinese arguably have lost face as a result, and now innocent people overseas may be dismissed out of hand as guilty by association.

    Mr. Xi is widely seen as the most powerful Chinese leader since Mao. After the Constitution was amended last year, he could be president for life — unless his serious failures of leadership give his opponents at home enough reason to cut him short.
    Original article contains a lot of hyper links.
    Last edited by Oracle; 07 May 19, at 14:03.
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    Turbanator Senior Contributor Double Edge's Avatar
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    An op-ed by Yi-Zheng Lian for the NYT

    Mr. Lian is a former lead writer and chief editor of the Hong Kong Economic Journal.

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    Turbanator Senior Contributor Double Edge's Avatar
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    In 2017 and 2018, two groups of blue-ribbon scholars and ex-officials from previous United States administrations advocated a fundamental change in America’s view of China. Their members were moderates and mostly well-disposed toward China. Yet some of their recommendations dovetailed with the views of the Trump administration hawks who consider China to be America’s number-one enemy and security threat. Mr. Xi, apparently oblivious to this sea change, was caught unprepared when Mr. Trump hit China with a tariff war.
    They seem to be missing signals from other countries as well.

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    Quote Originally Posted by Double Edge View Post
    An op-ed by Yi-Zheng Lian for the NYT

    Mr. Lian is a former lead writer and chief editor of the Hong Kong Economic Journal.
    Thanks. I forgot to link it to the source.
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    Senior Contributor DOR's Avatar
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    Quote Originally Posted by Double Edge View Post
    An op-ed by Yi-Zheng Lian for the NYT

    Mr. Lian is a former lead writer and chief editor of the Hong Kong Economic Journal.
    Interesting evaluation, but like so many he gets the trade picture wrong.

    In 1985, US imports from East Asia – China, Japan, Korea, Taiwan, Hong Kong, Macau, and ASEAN – comprised less than 35% of total imports (34.9%, to be exact). As tried and true currency manipulators, we then (September 1985) engaged in a deliberate effort to drive down the value of the US dollar vis-Ó-vis other major currencies. The sole purpose was to promote US exports and reduce US imports at the expense of our closest allies’ economies.

    By 1987, imports from East Asia had risen to more than 39%, by 1993 to more than 40%. They would not return to the 35% level until 2001.

    At which point China enters the WTO and, as every non-economist knows, the US began importing massively more. Except, that’s not true, at least as far as the China side goes.

    Why do I keep using East Asia rather than China? Simple: East Asia relocated a huge amount of its exports facilities that were targeting the US market from their own countries into China. As a result, costs dropped and so, too, did the share of US imports coming out of East Asia.

    33.7% in 2001.
    34-35% in 2002-07.
    32.4% in 2008.
    35-36% in 2009-14.
    And, finally, beginning to approach the 40% mark in 2015-19.

    So, as lower-cost China replaced higher-cost Japan and Korea (i.e., Japanese and Korean companies, among others, moved into China), the US consumer paid less for imports and so the share of total US imports from the region actually dropped, significantly and for a long, long time.

    As always, those interested in crunching the numbers themselves can find all the data at fred.stlouisfed.org or bea.gov.
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    So, as lower-cost China replaced higher-cost Japan and Korea (i.e., Japanese and Korean companies, among others, moved into China), the US consumer paid less for imports and so the share of total US imports from the region actually dropped, significantly and for a long, long time.

    As always, those interested in crunching the numbers themselves can find all the data at fred.stlouisfed.org or bea.gov.
    doesn't necessarily invalidate Lian's assertion, though.

    substitution of broad East Asian imports for a somewhat smaller but now China-dominated share of imports represents a less-diversified Asian trade portfolio for the US.

    I agree with the overall thrust that China's "re-redding" of her economy-- outright inclusion of Party cells, etc-- is a threat that needs addressing. Trump's -method- of addressing the challenge, via tariffs, is a stupid way of doing so.
    There is a cult of ignorance in the United States, and there has always been. The strain of anti-intellectualism has been a constant thread winding its way through our political and cultural life, nurtured by the false notion that democracy means that "My ignorance is just as good as your knowledge."- Isaac Asimov

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    So, as lower-cost China replaced higher-cost Japan and Korea (i.e., Japanese and Korean companies, among others, moved into China), the US consumer paid less for imports and so the share of total US imports from the region actually dropped, significantly and for a long, long time.

    As always, those interested in crunching the numbers themselves can find all the data at fred.stlouisfed.org or bea.gov.
    doesn't necessarily invalidate Lian's assertion, though.

    substitution of broad East Asian imports for a somewhat smaller but now China-dominated share of imports represents a less-diversified Asian trade portfolio for the US.

    I agree with the overall thrust that China's "re-redding" of her economy-- outright inclusion of Party cells, etc-- is a threat that needs addressing. Trump's -method- of addressing the challenge, via tariffs, is a stupid way of doing so.
    There is a cult of ignorance in the United States, and there has always been. The strain of anti-intellectualism has been a constant thread winding its way through our political and cultural life, nurtured by the false notion that democracy means that "My ignorance is just as good as your knowledge."- Isaac Asimov

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    Quote Originally Posted by astralis View Post
    I agree with the overall thrust that China's "re-redding" of her economy-- outright inclusion of Party cells, etc-- is a threat that needs addressing. Trump's -method- of addressing the challenge, via tariffs, is a stupid way of doing so.
    I disagree. Trump is hitting Xi where it hurts the most. The loss of face. Xi, I suspect for the first time in his political life, is going up against a spin doctor who can ignore outright facts and spin any disaster his way.

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    Trump is hitting Xi where it hurts the most. The loss of face. Xi, I suspect for the first time in his political life, is going up against a spin doctor who can ignore outright facts and spin any disaster his way.
    yes, by all means, hit the Chinese economy.

    but tariffs aren't an efficient method of hitting the economy. for instance, highest priority US concern is PRC theft of high-tech. US can effectively sanction companies that invest in PRC high-tech-- for instance, wtf is Tesla doing opening a factory in China?

    build an international coalition, stop firms/universities/labs that work with the Chinese on stuff like surveillance technologies, etc.

    Trump's scattershot method, trying to take on allies, partners, and adversaries ALL at once, is deeply stupid. no sense of priorities, and adversaries will counter by shaping their tariffs to hurt Trump voters especially...not something I lose too much sleep over, but if Trump feels like he's going to get hurt politically, then he will not hesitate to fold. and we collectively will lose.
    There is a cult of ignorance in the United States, and there has always been. The strain of anti-intellectualism has been a constant thread winding its way through our political and cultural life, nurtured by the false notion that democracy means that "My ignorance is just as good as your knowledge."- Isaac Asimov

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    Quote Originally Posted by astralis View Post
    doesn't necessarily invalidate Lian's assertion, though.

    substitution of broad East Asian imports for a somewhat smaller but now China-dominated share of imports represents a less-diversified Asian trade portfolio for the US.

    I agree with the overall thrust that China's "re-redding" of her economy-- outright inclusion of Party cells, etc-- is a threat that needs addressing. Trump's -method- of addressing the challenge, via tariffs, is a stupid way of doing so.
    astralis,

    On the issue of trade diversification, I agree with you 100%, but only if we measure trade by the location of the ground upon which final assembly occurs. If we use other measures, such as economy in which the largest share of value is added, or the ownership of the main production facilities, it is one heck of a lot less clear cut.

    (I recognize international trade country-of-origin standards; I just disagree that they should be the basis of a trade war.)
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    Trump's trade war is not only economically ineffective, it is also directly opposed to the best interests of American consumers.

    Trade diversion has been enormously positive for the American consumer because of the dramatic reduction in the price of imports. The fact that car parts were made in the US and then production shifted to Japan and other parts of East Asia is a historical fact that both reduced the prices consumers (and original producers) paid, but also cost some US jobs. However, when that production moved from those East Asian economies into China, there was only one real impact on the US economy: lower prices. The job losses were in Japan, Korea, Taiwan and elsewhere.

    In 1999-2001, US imports from East Asia (Japan, China, and the NICs) comprised 29.1% of total merchandise imports.
    In 2016-18, it was 33.1%, a four percentage point increase.
    The fact that China’s share rose by nearly 13 points is irrelevant to the number of US jobs.
    It is, however, highly relevant to the price US consumers pay.

    How much was the savings? Massive.
    Here’s the percent change in imports prices, 1999-2001 vs. 2016-18

    Durable goods _ _ _ _ _ _ _ _ _ _ _ _ -11.4%
    Nondurable goods _ _ _ _ _ _ _ _ _ _ +69.5%
    Capital goods ex-cars _ _ _ _ _ _ _ _ -25.6%
    Computers, peripherals and parts _ _ -54.6%
    Autos, engines, and parts _ _ _ _ _ _ +10.8%
    Consumer goods, ex-food & cars _ _ -11.5%
    Consumer durables _ _ _ _ _ _ _ _ _ -11.5%
    Consumer nondurables _ _ _ _ _ _ _ -33.1%

    Sources:
    https://apps.bea.gov/iTable/iTable.cfm?ReqID=62&step=1
    https://apps.bea.gov/iTable/iTable.c...=1&1921=survey



    Why do I use 1999-2001 vs 2016-18? Three reasons:
    1. The data are consistent and easily available only back to 1999.
    2. China joined the WTO in 2001.
    3. A three-year average smooths out things like recessions.
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    the irony about all of this is, as deeply stupid as the tariffs/trade war is, i still support it...because at least -something- is being done with respect to China.

    Trump's conflation of standard protectionism and much more legit PRC IP theft issues is not ideal, but if it is the means by which the latter can be addressed, then that's the price that needs to be paid.

    the worst type of deal, which I'm glad the administration did not take, would be for China to just fob Trump off with some lousy additional wheat/soybean sales.
    There is a cult of ignorance in the United States, and there has always been. The strain of anti-intellectualism has been a constant thread winding its way through our political and cultural life, nurtured by the false notion that democracy means that "My ignorance is just as good as your knowledge."- Isaac Asimov

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    Quote Originally Posted by astralis View Post
    yes, by all means, hit the Chinese economy.

    but tariffs aren't an efficient method of hitting the economy. for instance, highest priority US concern is PRC theft of high-tech. US can effectively sanction companies that invest in PRC high-tech-- for instance, wtf is Tesla doing opening a factory in China?

    build an international coalition, stop firms/universities/labs that work with the Chinese on stuff like surveillance technologies, etc.
    Bill introduced to ban Chinese military scientists from American labs

    Tesla is in China because of cheap labour, not because the Chinese have opened up their economy to American goods, which we all already know. Now, for Tesla to not move to China, there should be domestic incentives. Tax breaks et al. America can't expect to not help US companies, and US companies not moving their bases abroad. From a business perspective, it doesn't make sense. If I start a business someday, I know where I'll register my company (Singapore or Delaware), low corporate tax and ease of doing business. I agree that all like-minded democratic countries should form an alliance and corner China. It's the seemingly only effective way to bust the China myth.

    Trump's scattershot method, trying to take on allies, partners, and adversaries ALL at once, is deeply stupid. no sense of priorities, and adversaries will counter by shaping their tariffs to hurt Trump voters especially...not something I lose too much sleep over, but if Trump feels like he's going to get hurt politically, then he will not hesitate to fold. and we collectively will lose.
    In other places, when I support President Trump's policies w.r.t the trade war with China, I get a lot of opposing views from Chinese as well as Indians. Some call me American (I remain anonymous). Lol, not an insult anyway. POTUS, when it comes to trade is acting like a child. Some GSP (tax rebate for developing countries) which the US used to give to India has been stopped. The total tax income for the US now is 100+ million USD w.r.t GSP (India). I just don't get Trump's worldview. 100+ million USD is next to nothing for India, and peanuts for the US. There is just no gain. Then why do it. Who's advising POTUS in things like that. I said it before, and to be clear I'll say it again. I don't mind an arm and a leg, if the China problem can be fixed.

    India to an extent remains a closed economy. For all purposes push India to open it. Has forcing India ever got US results? I want US Chicken legs in Indian stores (will make tangri kebab). American dairy products, hell yeah. But it's done through diplomacy, not twitter. After a lot of lost decades our 2 countries are working together on a host of things, I personally doesn't want ego's to ruin this relationship.

    First stop China, then think about Russia. India still has another 30 years (if those corrupt thieves who run the government in India do something for the country) for America to take notice. Taxes, are not making me lose sleep too, what is worrying is what you've said. If Trump folds. This guy is transactional, and as days pass my trust gets lesser and lesser.

    Quote Originally Posted by astralis View Post
    the irony about all of this is, as deeply stupid as the tariffs/trade war is, i still support it...because at least -something- is being done with respect to China.

    Trump's conflation of standard protectionism and much more legit PRC IP theft issues is not ideal, but if it is the means by which the latter can be addressed, then that's the price that needs to be paid.

    the worst type of deal, which I'm glad the administration did not take, would be for China to just fob Trump off with some lousy additional wheat/soybean sales.
    I read somewhere some months back that China has said it will buy additional soyabean. So that was just in the news.

    PRC as the global policeman gives me nightmares.
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    Quote Originally Posted by astralis View Post
    yes, by all means, hit the Chinese economy.
    Trump? He understands economic war? This is a PR war. Pure and simple.

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    Quote Originally Posted by WABs_OOE View Post
    Trump? He understands economic war? This is a PR war. Pure and simple.
    Hmmm. Fully concur. It's a PR war for Trump. Such an idiot.
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