Is Trump Serious About Trade War? China’s Leaders Hunt for Answers
Posted April 12, 2018 6:41 p.m. EDT
BEIJING — In an elegantly furnished back room at a conference in eastern China in December, a member of the Chinese leadership asked American tech executives attending the event for help.
The official, Wang Huning, a Communist Party strategist who has spent much of his career sizing up the United States as a geopolitical rival, wanted to know whether President Donald Trump was serious about a trade war with China — and whether they could serve as a channel of communication to the White House.
He has not been alone.
For the past few months, some of the most powerful men in China — allies of President Xi Jinping with long-standing ties and deep experience with the United States — have been casting about for a better understanding of Trump and how to respond to his combative trade agenda, according to several people they have consulted.
Vice President Wang Qishan has met in recent weeks with a series of U.S. business leaders and former Cabinet officials to question them about Trump’s trade threats. Liu He, the Politburo member coordinating economic policy, has done the same. One longtime China scholar in the United States said five officials had visited him seeking advice in the past two weeks alone.
In these meetings, the Americans have warned that Trump’s complaints should be taken seriously because of widespread frustration in Washington with Chinese policies, especially a $300 billion program to dominate critical high-tech industries, known as Made in China 2025, that has alarmed the U.S. national security establishment.
It is unclear whether that message is making it through to Xi — or whether he has chosen to ignore it after concluding that Trump is bluffing and that the United States will back off, as it has in the past.
Governing with a new mandate since engineering the removal of presidential term limits last month, Xi has personally taken control of decision-making in the trade standoff, according to analysts and political insiders with ties to the leadership. His unquestioned authority, some say, has made it more difficult for the party apparatus to deliver news that contradicts him.
“When you have this kind of regime, you want to report the good story,” said Tao Jingzhou, a managing partner at the global law firm Dechert who deals with senior Chinese officials. “I have the impression the leadership is not fully briefed about the seriousness of the atmosphere against China in the U.S. establishment.”
The confusion over Trump’s stance on trade deepened Thursday when he said, in a surprise move, that he was considering rejoining the multicountry trade deal known as the Trans-Pacific Partnership, after abruptly withdrawing the United States from the negotiations last year.
Xi has elevated a coterie of advisers who have built their careers in part on their ability to interpret and handle the United States, perhaps more so than any of his predecessors. But they seem surprised and confused by Trump’s rapid-fire decisions and trade threats, most recently to impose punitive tariffs on an additional $100 billion in Chinese imports, according to many who have met with them.
These men include Wang Huning, the party’s chief ideologue, who has written a book about his visits to the United States as a young scholar; Wang Qishan, Xi’s most powerful lieutenant, who has cultivated relationships on Wall Street for decades; and Liu, the vice premier in charge of the economy, who has master’s degrees from Seton Hall and Harvard. Xi has also promoted Yang Jiechi, a former ambassador to Washington, into the party’s 25-member Politburo.
Despite this deep bench of expertise, the Chinese leadership appears at a loss, grasping for interlocutors in an American political landscape that has been scrambled by Trump. For more than two decades, Beijing has watched corporate America make the case for trade with China and one American president after another embrace that agenda. But Trump has defied that pattern.
“Chinese experts do not understand the current state of the United States,” said Jie Zhao, a professor at the China Executive Leadership Academy Pudong, which trains senior civil servants in Shanghai. “They do not understand Trump, do not understand his team and do not understand the source of his policies.”
Part of the problem is that the leadership’s usual contacts in the United States — often establishment figures with backgrounds in international finance and diplomacy — have been largely sidelined by Trump.
“The people with whom Chinese officials are familiar in Washington are mainly the enemies of Trump,” said Shi Yinhong, professor of international relations at Renmin University in Beijing. “Trump hates those people.”
Beijing has also been frustrated as potential allies have fallen out of favor, including Gary D. Cohn, the chief economic adviser who counseled against tariffs but resigned last month, and Trump’s son-in-law, Jared Kushner, who appears to have stepped back on the issue because of his family’s business interests in China.
Looking for answers, Vice President Wang has met instead in recent weeks with three former Treasury secretaries — Timothy Geithner, Henry M. Paulson Jr. and Lawrence H. Summers — as well as Robert B. Zoellick, the former U.S. trade representative, and William S. Cohen, the former defense secretary.
Business leaders who have met with Chinese leaders in the same period include Tim Cook of Apple, Jamie Dimon of JPMorgan Chase, Chuck Robbins of Cisco, Stephen A. Schwarzman of the Blackstone Group and David M. Solomon of Goldman Sachs.
“They ask, ‘Who can we talk to?'” said David M. Lampton, the scholar who has recently hosted five Chinese officials. “They don’t see a stable structure.”
But Lampton, of the Johns Hopkins School of Advanced International Studies, added that despite their frustration, the Chinese seemed satisfied that they can “outlast a U.S. administration that alienates its allies, erodes its own political base and has a public with a low threshold for pain.” There are vague hints of disagreement in Beijing over how to respond to Trump’s trade threats. Some in the elite have emphasized the potential impact of a trade war on the Chinese economy and urged negotiations, while others have argued that the dispute is part of a broader effort to thwart China’s rise — and that Beijing must respond accordingly.
“On the trade war issue, the hawkish atmosphere in China is quite strong right now,” said Chen Jieren, a political commentator in Beijing.
Although the tariffs Trump has enacted thus far hit only a small segment of China’s steel and aluminum sector, the pain of a proposed additional set would be spread across manufacturers of more than 1,300 goods.
Given the party’s tight control of the media, there has been no outcry against Xi’s policies like that by some U.S. business leaders against Trump’s tariffs. It helps that no single sector or region in China stands out as especially vulnerable, though the aerospace industry could be stung and Chinese automakers eyeing exports to the United States would be disrupted.
The mood at a conference in the southern city of Boao this week that brought together Chinese business leaders was upbeat after Xi addressed the gathering and urged “dialogue rather than confrontation.”
But speaking at the conference, Fan Gang, director of China’s National Economic Research Institute, warned of “systematic risk” to manufacturing supply chains. And Jack Ma, the founder of e-commerce giant Alibaba, suggested that a trade war could destroy 10 million jobs. One sensitive question in Beijing is the fate of the Made in China 2025 plan, which has been the focus of the Trump administration’s complaints. The program would provide subsidies and loans to help Chinese firms acquire foreign competitors, develop advanced technologies and dominate key sectors such as alternative energy, robotics, telecom and artificial intelligence.
The military and security apparatus, and the industries close to them, regard the program as essential to China’s strategic ambitions. But discerning the attitude of China’s economic policymakers is more difficult, and not simply because it would be politically taboo to back away from a plan that Xi has blessed.
Premier Li Keqiang, for example, has tended to take more conciliatory positions in trade disputes than colleagues in the leadership who favor asserting China’s clout as a global power. But Li also leads a cluster of government ministers who are the main architects and advocates of the Made in China 2025 program.
They include Miao Wei, the minister of industry and information technology, and Wang Zhigang, the minister of science and technology. Like Li, both grew up in central China’s impoverished Anhui province and favor an extensive role for the state in upgrading Chinese industries, acquaintances said.
On the other hand, the policymakers closest to Xi — men with finance backgrounds including Liu and Vice President Wang — are more interested in seeking geopolitical parity with the United States and less enthusiastic about industrial policy in general.
They worry that state intervention may distort markets and exacerbate the problems of China’s already debt-laden financial system, people who know them said.
Yet such concerns have not translated into a willingness to retreat on the Made in China 2025 program in the face of Trump’s threats.
“I don’t think China is willing to compromise Made in China 2025,” said Da Wei, a professor at the University of International Relations in Beijing. “This is the core of the competition.”
Xi has charted a moderate course so far, retaliating in equal measure when the Trump administration has imposed tariffs, while urging that the dispute be resolved through negotiation.
But talks have stalled since Chinese officials rejected U.S. demands that Made in China 2025 be rolled back. A Chinese spokesman said Thursday that no actual trade negotiations were underway.