China’s Plan to Break off US Allies
Tao Peng
The Diplomat, January 16

“Meng’s arrest has angered China and Beijing is taking action to retaliate. However, China has adopted two different responses, approaching the issue gently with the United States – which requested Meng’s arrest – while launching strict action against Canada. In doing so, Beijing hopes to deter Canada from following the United States against China, in order to prevent Washington from forming a global and regional offensive against Beijing.”

“The Chinese official media Global Times published a particularly stern editorial entitled “Let the country that is invading China’s interests pay the price” on December 16, 2018. The article said that “for countries which do not care about China’s interests and have extraordinary behavior, China should resolutely fight back, let it pay the price, and even suffer huge losses.””

“China is deeply confident in attacking U.S. friendly forces while adopting a “soft” strategy toward the United States itself. First, China knows that almost all American allies maintain active economic and trade ties with China. China is also the largest trading partner for many of them. For example, Australia and New Zealand both count China as their largest trading partners, and Canada’s second largest trading partner is China. So China has ample measures to “deal with” these U.S. allies.”

Will China’s Economy Hit a Great Wall?
Paul Krugman
New York Times, January 15

“China’s economy appears to be stumbling again, however it is unclear whether a crisis will occur or the government will continue to prop up its economy. The core challenge to China’s economy is its unbalanced nature characterized by high levels of investment without enough domestic consumption to justify it.”

“High investment can sustain an economy for a long time due to the accelerator effect, however due to China’s technology matching or surpassing that of other countries it will be difficult to achieve rapid development through borrowing. Furthermore, the one child policy has led to slow growth in the working age population which is a detriment to future economic growth. Instead of focusing on increasing investment, China should shift its investment spending to consumption spending which is more sustainable.”

“China does not have a large trade surplus anymore, with its imports accounting for nearly three percent of world GDP. A stumble of the Chinese economy would greatly affect the world economy, especially large commodity exporters (such as the United States).”

Is China Really Cheating?
Stephen Roach
Bloomberg, January 15

“China’s theft of intellectual property is widely accepted as fact by people in both political parties – but where was this notion conceived? The IP Commission Report unveiled in 2017 that IPR theft cost the US between $225 and $600 billion with 90% of this amount due to stolen trade secrets. However, this report is flawed in its estimates as it relies upon “proxy models” which are pure estimates based on data such as US Customs and Border Protection seizures, corruption, and fraud.”

“This approach was also used in the drafting of the US Trade Representative’s Section 301 report which was used to justify President Trump’s trade war. The central argument of this report is that American companies are forced to transfer technology when they enter into joint ventures with mainland companies. In joint ventures, the agreement is voluntary and the report itself mentions that it lacks concrete evidence that this technology transfer is forced.”

“Also, Chinese economic policies (such as Made in China 2025) are viewed as ‘unfair’ yet similar criticism is given to similar policies enacted by American allies such as Japan and Germany. China should be held accountable for its unfair trade practices, however the US should not wage a trade war over ‘alternative facts.’”

China Is Losing The Trade War In Nearly Every Way
Kenneth Rapoza
Forbes, January 14

“China is still the world’s No. 2 economy and is still the monster of emerging markets, but regardless of those bonafides, Xi Jinping’s country is losing the trade war in nearly every way imaginable. Thanks in part to Huawei, China is getting beat on the public relations front in the trade war. Additionally, China has failed to woo the EU, whom China thought were its allies early in the trade war.”

““The Chinese trade numbers released today got all the alarm bells ringing,” says Naeem Aslam, chief market strategist for Think Markets in London and a Forbes contributor. “If you need any evidence how the trade spat is impacting a country’s economic health then look no further than China trade. The lower export number means lower jobs, which means another direct impact on the (Chinese) economy. Donald Trump can be pleased. His policies have brought China to its knees.” However, China’s President Xi Jinping may play the long game by waiting out Trump’s presidency.”

“Perhaps China’s biggest “win” on the trade front is Vietnam’s membership in the Comprehensive and Progressive Trans-Pacific Partnership. Vietnam has become an outpost of Chinese businesses, especially manufacturing and exporters looking for cheaper labor and less regulations.”

“Should the U.S. economy buckle further, and the stock market is taken down with it, Trump might be more inclined to end the trade war despite his team’s long-term goals to lessen China’s role in the U.S. corporate supply chain. Should this occur, Xi will have more time to adjust and ultimately keep things as they were pre-Trump.”

China’s economy is fine, Trump and Xi won’t fight a trade war and the Fed is a friend
Dr. Michael Ivanovitch
CNBC, January 14

“China’s economy is fine, U.S. President Donald Trump and Chinese President Xi Jinping won’t fight a trade war and the Federal Reserve is a friend. The triad of China’s economy, trade war and the Fed’s policy is a false alarm. China’s economy has plenty of active demand management instruments to prevent a major growth slowdown.”

“For two years now, Trump got nowhere with China on trade. In fact, Trump put trade negotiations on a wrong path. The main problems are America’s dangerous security challenges around the world involving military confrontations with China and Russia. American forays into what China considers its territorial waters are sovereignty challenges Beijing is unlikely to tolerate. At the moment, the chances of a nuclear Armageddon hinge on the U.S., China and Russia military hotlines to prevent “accidents and miscalculations.””

“Barring an unlikely inflation flare-up, or price tensions in energy markets, the Fed can leave the economy in an adjustment process under conditions of full employment and easy credit terms.”

“The White House should not be pushed by its domestic adversaries to raise those tensions. A constructive relationship with China and Russia is in the interest of America and the rest of the world.”

Is The China-US South China Sea Struggle Becoming Unmanageable? – Analysis
Mark J. Valencia
Eurasia Review, January 14

“The China-US military face off in the South China Sea is dangerous. With escalating incidents and burgeoning bellicose rhetoric on both sides, it may be on the verge of getting out of control.”

“The US-China disputes in the South China Sea are driven by the much deeper contest to dominate the future Asian regional order. At base the dialectic is simple and stark. America wants to remain the leading strategic power in Asia and China wants to replace it. With their respective influential domestic nationalists prodding them towards confrontation, neither leadership is likely to back down.”

“The strategic context is that both see each other as a potential threat and an enemy. Contributing to the increasing tension, the U.S. has stepped up the frequency of its provocative Freedom of Navigation Operations (FONOPs) challenging China’s claims.”

China’s Grand Strategy
Daniel Araya
Forbes,January 14

“Through its infrastructure and expansion of its supply chain, China’s grand strategy is centered around developing new markets for advanced Chinese technology. China is reimagining the current world order as a series of trade routes and supply chains which is best illustrated through its Belt and Road Initiative.”

“The Belt and Road Initiative serves as a platform for China to dominate advanced technologies such as artificial intelligence, electric vehicles, clean energy technology, and others. Aside from the vast investments in infrastructure, China is also investing billions of dollars into science and technology focusing on quantum computing, robotics, and materials sciences. Huawei and ZTE, Chinese technology firms, are becoming global market leaders employing hundreds of thousands and leading the way in industry research and development.”

“Policymakers around the world are concerned that China’s pivot to advanced technologies threatens to dismantle existing global supply chains and that their technology companies could act as an extension of their government. Despite strong US opposition led by President Trump, China continues to expand its BRI initiative throughout the Eurasian supercontinent. In addition, China’s ‘neo-colonialism’ in Africa and Latin America leads to market expansion and increased global influence.”

China is a Dangerous Rival, and America Should Treat It Like One
Derek Scissors and Daniel Blumenthal
New York Times,January 14

“The Trump administration is understanding of the threat China poses through their military buildup, attempts to undermine American influence abroad, and its economic actions. Previously the US would respond through rounds of talks and deals which ultimately had no effect, however now the United States should seek to begin cutting its economic ties with China.”

“Although not an easy task, if the US cut exports to China by half it would only account for <0.5% of GDP and curb the continued infringement of intellectual property rights. Reducing Chinese imports would be more difficult, however there are other countries that do not use predatory trade practices which we could shift our manufacturing to.”

“Intellectual property theft not only hurts American businesses but also helps the Chinese military-industrial complex. Tariffs wrongly hurt American workers and consumers and are not the appropriate reaction to China’s unfair trade practices. Beneficiaries of stolen American intellectual property should be sanctioned and firms receiving/facilitating the theft of intellectual property should not be allowed to do business with American firms. America needs to appropriately react to China’s economic aggression instead of treating it like other friendly trading partners.”

Is North Korea a player in the U.S.-China trade war?
Adam Taylor
The Washington Post,January 10

“Kim Jong Un’s visit to Beijing this week was brief. After a 20-hour journey to the Chinese capital aboard his armored green train, the young North Korean leader spent barely a day at his destination. But it was still an important visit — and the target audience appears to be President Trump, who’s pursuing ambitious foreign-policy goals with both North Korea and China.”

“Xi could potentially use China’s leverage over North Korea as a valuable concession in trade talks with the United States, trading flexibility from Washington for more support in pressuring Pyongyang. As for North Korea, Kim could play China against the United States, turning to one for relief whenever the pressure from the other got to be too much. Trump continues to talk about his summit with Kim as a key foreign-policy victory, and the promise of further wins will be a potent bargaining chip for Pyongyang.”

“Despite their proximity and potentially shared interests, though, Xi and Kim can still seem like distant neighbors. But for now, the two leaders may hope that their democratically elected peer, facing domestic political scandals, economic uncertainty and the start of the 2020 U.S. presidential campaign, may be eager to reach a deal that pleases all parties.”

China’s slowdown is the biggest threat to the world economy
Matt O’Brien
The Washington Post,January 9

“Despite not receiving much media coverage, China’s benchmark stock index dropped twenty-five percent making it the world’s worst-performing in 2018. While the US-China trade war did play a role in this drop, it was not the primary cause.”

“During the 2008 Great Recession, the Chinese government unleashed stimulus amounting to over nineteen percent of its GDP. Besides being over three times the amount of President Barack Obama’s stimulus package (estimated to be five or six percent of US GDP), this stimulus was also unique in the way it was distributed. The central government pushed local governments and state-owned enterprises to borrow money instead of taking on debt itself. The result is a wide net of debt which is difficult for the government to manage due to the use of ‘shadow banks’ by the local governments and SOEs.”

“China has relied on this strategy in the past and it has allowed the country to avoid a recession for nearly 25 years. However, the difference is that new debt today is primarily being used to pay back old debt or being spent on questionable development projects. Beijing is now reverting back to tested stimulus strategies such as tax cuts and infrastructure spending. If China’s industrial profits continue to fall, it could put the rest of the world’s economies at risk of decline also.”

Why the World Needs America and China to Get Along
Robert E. Rubin
New York Times,January 2

“American business, military, and political leaders are adopting a confrontational stance towards China due to legitimate concerns such as military aggression and unfair trade practices. However, now is the time that both the US and China should be increasing their cooperation to tackle pertinent global issues such as climate change and nuclear weapons.”

“Neither country can solve these issues alone, which is why they should come together to lead the world in developing a solution. As the two largest economies, they could cooperate to invest in clean energy and enforce strict environmental regulations while encouraging their trading partners to do the same. Both the United States and China also have a vested interest in ensuring security on the Korean peninsula which means they could also work together to combat the proliferation of nuclear weapons.”

“Most of America’s frustration with China is concerned with aspects of China’s economic model such as the subsidization of exports and requiring foreign companies to share intellectual property. These aspects are unlikely to change as they are at the center of their economic model and Washington needs to accept this just as Beijing needs to understand the consequences it leads to in the trade arena. The US and China need to cooperate just as they have in the past for the future of humanity, not just immediate economic gain.”

Serbia: China’s Open Door to the Balkans
Philippe Le Corre and Vuk Vuksanovic
The Diplomat,January 2

“The Serbian government, which has been knocking on the EU’s door for some years without much success, is now turning to China as an economic partner. “It would not be immodest or wrong to call Serbia China’s main partner in Europe,” stated Minister for Construction Zorana Mihajlovic. Trade between China and Serbia tripled between 2005 and 2016, to $1.6 billion, but it is a very unbalanced relationship: China exports $1 billion in goods, whereas Serbia exports $1 million of goods to China. Investments are rising because the Belgrade government is able to move quickly as a non-EU member.”

“In addition to trade, the political relationship between China and Serbia is growing as well. In 2019, Xi is expected to pay his second visit to Serbia as China’s top leader. It will be a statement of China’s strategic interest for southeast Europe, where it has been building a strong presence. Serbia, Montenegro, Northern Macedonia, Bosnia-Herzegovina, and Albania (all former socialist countries) are all members of the 16+1 forum, China’s main platform in Central and Eastern Europe (CEE).”

“With an important presence in Greece, China now aims to open a transport route through Central and Southeastern Europe, and south all the way to the Mediterranean Sea. To the north, in Central, Eastern, and Southeast Europe. The Balkans have become a top priority of China’s Belt and Road Initiative, on which 16+1 meetings now center, even though most projects over the past few years have been the result of strong bilateral links — for example, between China and Serbia.”

“There is obviously an EU concern — including in Berlin — that China will use the Balkans as a new entry point into the European market and try to promote its own political model in countries with weaker governance as opposed to the EU model of liberal democracy. But as the EU is facing increased divisions over a large number of issues, it looks unrealistic to envisage the Balkans joining the Union anytime soon – leaving China and others to occupy a somewhat empty space.”