As trade war bites, China should keep calm and remember Deng Xiaoping, former adviser says

Frank Tang
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As trade war bites, China should keep calm and remember Deng Xiaoping, former adviser says

China should remember the words of its late paramount leader Deng Xioaping and “cope with affairs calmly” to avoid any further escalation of its trade and technology war with the United States, a former government adviser has said.

Speaking at a seminar at Tsinghua University in Beijing recently, Jia Kang, a former head of research at China’s finance ministry, said the country also needed to be realistic about its ability to prevail in the long-running dispute.

“To be honest, China is still far from being able to rival the United States,” he said.

“Trade is just the tip of the iceberg, and what lies below sea level – manufacturing, technological innovation, finance, military power and global influence – must also be taken into account.”

Beijing’s leaders would be wise to remember what Deng, who is credited with masterminding much of China’s economic reform, said about the need for patience and modesty, Jia said.

“We must revisit Deng Xiaoping’s advice to ‘observe calmly, secure our position, cope with affairs calmly, hide our capacities, bide our time, keep a low profile and never claim leadership’,” he said.

Now chief economist at the China Academy of New Supply-side Economics, a think tank he helped to establish, Jia does not hold any public positions but his views echo a rising concern among academics and policy advisers that Beijing’s dispute with Washington is getting out of hand.

That view, however, goes against the staunch government line and has led to them being labelled “capitulationists”.

The seminar at Tsinghua University was given some coverage by China’s state broadcaster CCTV, but Jia’s comments were made public via his WeChat account.

“In the face of the US-led international sanctions after 1989 [because of the crackdown on pro-democracy protesters in Tiananmen Square], Deng Xiaoping said it was just a ‘small disturbance’ in history and China still needed to maintain a good relationship with the US and other Western countries,” he said.

“We must have the same strategic thinking because we have no choice but to do our own things well.”

The country should continue to push ahead with its development and expansion but seek to do so through cooperation rather than conflict, Jia said.

“We have to admit that we are in a defensive position and have fewer cards to play than the US … Countermeasures are necessary, but they should be used to achieve a compromise. We should continue the struggle over core interests, but don’t let it go so far as to break down the relationship. We should strive for a new equilibrium, even if it’s a temporary one,” he said.

Speaking at the St Petersburg International Economic Forum in Russia last week, Chinese President Xi Jinping said he could “hardly imagine” a decoupling of the US and China.

“This is not the case that I would like to see, and I don’t think our American friends want to see it, and my friend [US President Donald] Trump wouldn’t want to see it either,” he said.

The two leaders may meet at the G20 Summit in Osaka, Japan later this month though neither side has committed to such talks and tensions between them continues to grow.

Such has been the pressure on its economy that China has already this year introduced tax cuts worth an estimated 2 trillion yuan (US$288.4 billion) and promised further government spending as it pursues a growth target of 6 to 6.5 per cent, compared with the 6.6 per cent expansion achieved last year.

Jia said that despite its obvious downsides, the trade dispute could also be a positive for China if policymakers used it as an opportunity, however painful, to further open up and push ahead with structural reforms. And easing the restrictions on Google’s operations might be a good place to start, he said.

“We could have more opening up in areas like films and the internet. Google has a good academic search facility, and it is miserable for [students and scholars] returning from overseas not be able to access Google Scholar easily.”

The US tech giant pulled out of the online search business in China in 2010 but still has a presence in the country through its other businesses, like Android. In recent months it has come under pressure from Washington to sever ties with Chinese tech company Huawei and might also be hit by Beijing’s plan to compile a list of “unreliable [foreign] entities”.

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