China-US rivalry on brink of becoming a ‘financial war’, former minister says

Orange Wang

The growing rivalry between China and the United States is at risk of becoming a “financial war”, a former Chinese finance minister said on Saturday.

Speaking at an industry forum in Beijing, Lou Jiwei, chairman of the foreign affairs committee of the Chinese People’s Political Consultative Conference (CPPCC) National Committee, said that despite the compromises the two countries were trying to reach on trade, the dispute was likely to roll over into other areas.

“The next step in the frictions between China and the United States is a financial war,” he said. “It is characterised by the use of long-arm jurisdiction, by various excuses to block specific enterprises, such as the bans on ZTE and Huawei.”

The next step in the frictions between China and the United States is a financial war. It is characterised by the use of long-arm jurisdiction, by various excuses to block specific enterprises, such as the bans on ZTE and Huawei

Lou Jiwei

Huawei’s chief financial officer Meng Wanzhou was detained at Vancouver airport in December at the request of the US on charges related to alleged breaches of US and European Union sanctions on Iran.

Lou’s comments came after US President Donald Trump on Friday denied saying he had agreed to roll back tariffs on Chinese goods. Beijing said on Thursday that the two countries had agreed to the phased removal of additional tariffs once Trump and Chinese President Xi Jinping had signed an interim “phase one” trade deal.

“The US has been hijacked by nationalism and populism, so will do everything in its power to use bullying measures … Containment and anti-containment are inevitable and will be a long-term issue,” Lou said.

“The US has been close to the era of McCarthyism,” he said, referring to the practice of making accusations of subversion or treason without proper regard for evidence.

But Washington’s efforts to contain China would not work, Lou said, as Beijing operated a market economy that was integrated with global value chains but not reliant on the US.

“China is not the Soviet Union or Japan.”

He said also that Washington’s tactics were unlikely to disturb China’s financial markets or create volatility in the yuan’s exchange rate as the country had not fully opened up its financial account and maintained strict control on cross-border capital flows.

“Somebody suggested stepping up the internationalisation of the yuan and [moving towards] full convertibility under the capital account, [but] these are not safe options,” he said.

“The moderate control of cross-border capital movements will not change in the short term.”

China should look to cooperate with other countries to build one or two independent international clearance systems to prevent the US using long-arm jurisdiction, he said.

Yang Weimin, vice-chairman of the CPPCC’s economic affairs committee, said at the forum that although China was keen to upgrade its economic model and halt the slowdown in gross domestic product growth, local authorities should not turn their backs on traditional industries for the sake of supporting emerging ones.

“We should not rush to chase new industries like a swarm of bees,” he said.

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