CEAC Commentary

June 12, 2019 

Another View on US-China Trade War

by an Overseas Chinese


The other day, I had a chance to have a conversation with an overseas Chinese with broad connections with Japan, US, and China, whose personal view on the US-China trade war I would like to share with you as follows:

Chinese economy has been in decline since before last summer, in prior to the beginning of the US-China trade war. The Korean stock price has been in decline by the pressure of the declining force of Shanghai stock price, based on the prospect that the recent sanctioning tariff on China by Trump administration has started to show the effect, and accelerating the economic decline. The Composite Stock Price Index of Shanghai was 24% decrease in December 2018 from that of the previous year, and Korea’s was 17% decrease. The higher Korea’s export rate with China becomes, the lower its stock price gets. The stock market suggests as if Korean economy should move away from China. It is no wonder the youngsters of financially insecure Korea want to be hired in Japan, where ‘Abenomics’ brought the human resource shortage domestically.

China has apparently made a tactical mistake in this US-China trade war. Against their expectation that it would be enough to deal only with US Trade Representative Robert Lighthizer, a hardliner in the US government, US has mounted relentless pressure on China. As seen in recent Chinese reports, China is almost throwing their hand up, wondering how much longer it would continue. While China is voicing that they are ready to turn to a self-sufficiency economy by raising domestic production ratio, it seems obvious that China would be helpless if US seriously blocks its technological transfer.

Meanwhile in the US, for many people, President Trump is unpredictable on this. US would settle the dispute, possibly when the Christmas sales starts, if the US stock market and the economy continues to decline. US is going to protect the North American economic zone including Canada and Mexico. As it is known, China would be ready to make some compromise with US, because the China-US trade relations is far greater than that of with EU or Japan. While Japanese businesses are relocating their production hubs in China back to Japan, or to ASEAN countries like Thailand, or further to Mexico, actually China also wants to do the same. Conversely, some Western businesses like Ford and BMW have built their production hubs in China in order to win the Chinese market.

Other than Agriculture sector, retail, shoes and apparel industries in the US are strongly calling for a settlement on the trade war with China. It will be noteworthy how President Trump would respond to such voices. Many countries’ attention, including of Japan, are given towards the next US presidential election, but Taiwan’s presidential election is as noteworthy as the US’. Depending on the result, it would be the key to realize Xi Jinping’s most earnest wish, integrating Taiwan, by initiating the Hong Kong-style ‘One Country, Two Systems’ towards Taiwan. As such, Xi Jinping’s Taiwan policy speech given earlier this year was in a strong expression to pressure Taiwan. Presumably, military pressure will increase against Taiwan.

(This is an English translation of the article written by NAKAMURA Taro, Adjunct Staff of a Nonprofit Organization, which originally appeared on the e-forum “Hyakka-Somei (Hundred Ducks in Full Voice)” of CEAC on May 30, 2019.)