Business leaders and officials from China indicate that Beijing is prepared for a long-term trade conflict with the United States.
The Trump administration has initiated its most extensive round of tariffs just as leading executives and policymakers convened for a World Economic Forum event in Tianjin, China, on Tuesday. Subsequently, China announced plans for additional tariffs in response.
Discussions at the “summer Davos,” as the event is referred to, have been heavily focused on the trade war, and few attendees foresee a quick resolution to the ongoing issues.
“China is increasingly worried that the US’s intentions are to suppress and contain it,” remarked Timothy Stratford, managing partner at Covington & Burling law firm in Beijing. “I anticipate that we will experience a stalemate for a significant period.”
The US government seeks to compel China to alter practices it believes unfavorably impact American businesses, charging Beijing with facilitating the theft of US intellectual property and supporting Chinese firms through assertive industrial strategies. The Chinese government dismisses these allegations as baseless, although US and European firms operating in China regularly express grievances about such issues.
‘This is a test for us’
Chinese officials at the event in Tianjin asserted that the nation could endure the tariff conflict, despite its effects on financial markets.
“The trade tensions do not significantly impact China’s economy directly, but they might affect public sentiment,” explained Liu Shijin, a government advisor and member of the People’s Bank of China’s monetary policy committee.
He noted that declines in Chinese stock and currency values indicated that investors had “overreacted” to trade concerns.
“This is a test for us, and we must adhere to our course and remain steadfast,” Liu stated in reference to the trade war.
Fang Xinghai, vice chairman of China’s securities regulation authority, remarked that the new tariffs imposed by the US would not compel Beijing to yield. He expressed hope that the two nations would resume talks and reach an agreement soon.
One of China’s notable entrepreneurs is skeptical that a resolution is imminent.
Jack Ma, founder and executive chairman of the leading Chinese e-commerce platform Alibaba (BABA), stated during a separate event in Hangzhou that the trade war “is going to be prolonged and complicated,” predicting it could continue for as long as 20 years.
American companies operating in China claim that the ongoing waves of tariffs are already impacting their operations. One casualty includes US semiconductor giant Qualcomm (QCOM), which saw a $44 billion merger with Dutch firm NXP Semiconductors (NXPI) blocked by Chinese regulators in July.
Additional businesses could be caught in the ensuing turmoil. JPMorgan Chase (JPM) is eager to participate in China’s efforts to liberalize its financial services sector and has recently sought approval to establish a brokerage in the country.
When asked if he was concerned that Beijing might delay approval for this venture due to the trade conflict, JPMorgan China CEO Mark Leung stated in Tianjin that it’s “not within our control.”
He added that the bank is “engaging constructively” with the regulatory bodies.
US economy could overheat
While China may currently be bearing more of the burden, it may not be advantageous for the US administration to maintain tariffs for an extended period.
“We’ve observed a warming in the US economy,” stated Helen Zhu, head of China equities at investment firm Blackrock. “If tariffs escalate to 25% later this year on $200 billion worth of imports, it could lead to inflationary pressures that would adversely affect US consumers.”
“There is a growing impetus for both parties to negotiate a resolution in the upcoming months,” she suggested.
If a solution is not reached, the repercussions could be global.
“Trade wars consistently end poorly,” asserted Carlos Moedas, the European Union’s Commissioner for Research, Science, and Innovation.
“Every time protectionist measures have been enacted, the outcomes have been detrimental,” he noted, referencing the global trade downturn of the 1930s. “Economically, it seems politicians have failed to learn from history.”
— Jethro Mullen contributed to this report.
UJ (Tianjin, China) First published September 18, 2018: 9:04 AM ET
