The US-China trade war has been on the headlines of world media for more than two years. The 45th US President Donald Trump in keeping his campaign promises first signed two executive orders, one on tightening trade tariffs and the other on reviewing US trade deficits and causes (3-31-2017) then ordered the Section 301 probe into IP theft (8/14/2017). The U.S. started tariffs on Washing machine and solar panels (1/22/2018) and 25% on steel and 10% on aluminum products (3/8/2018) which triggered the US-China tariff war leading to 25% tariff on 128 US products and mutual threat of adding 25% tariff on $50B products to each other (April 2-4/2018). Then the trade war escalated, 10% on $200B Chinese goods (7/10/2018), increasing to 25% (8/1/2018), both sides released lists of $16B goods subject to 25% tariff (8/7/2018) in effect on 8/23/2018.

Since then to present, the trade war and trade talks began to grab headlines, impacting stock markets, and entering into a tug of war phase with 90 day halt to new tariff (12/1/2018). Trump later extended March 1 deadline and Trump-Xi conversed on the phone (6/18/19) agreeing rekindling trade talk before their G-20 Summit in Japan, resulting both sides giving concessions. From August 2018 to today, the trade war is obviously intertwined with many other issues between the U.S. and China. So far, there were tariffs on $550B Chinese goods and $185B US goods, with trade talks showing little real progress albeit concessions, exclusions, rollbacks and agreeable points in principle were raised. The US Commerce put 28 Chinese companies on its ‘entity list’ banning US companies selling to them. China won the WTO case allowing China to sanction $36B US goods. The U.S. releases new regulatory guidelines for its telecommunication networks procedure to protect US networks from national security threats openly targeting Chinese telecommunication companies, Huawei and ZTE. Then the U.S. Congress passed the Hong Kong Human Rights and Democracy Act, which was signed by Trump, all happening in the last two months with unavoidable impact to trade talk, intentional or not.

It is understandable how technology competition is related to trade conflict between the U.S. and China, since technology IP transfer and market access have a direct relationship with trade. However, Hong Kong as a free trade city should not become a pawn in the trade war, if we would recognize that Hong Kong’s role had been so beneficial to the West since the colonial days and equally beneficial to China since the end of WW II. Destroying Hong Kong stability makes no sense to the US-China trade disputes. The dispute between the U.S. and China is really on the definition of ‘market economy’. The U.S. defines market economy as an economic system in which production and prices are determined by unrestricted competition between privately owned businesses, although the U.S. Government would like to set all the regulations and rules of trading and investments including anti-trust laws for the world, benefiting the U.S. enterprises for sure. Whereas, China defines market economy as an economic system in which the government sets economic development plan, five year and long term, for the nation to follow and expects State and private enterprises all to compete in the domestic and world market, of course benefiting all Chinese citizens as a national goal.

The above different views on economic development and market economy should be practiced as a fair play under the World Trade Organization (WTO) guidelines and any multilateral or bilateral trade agreement. However, the U.S. is charging China for unfair practice and China is charging the U.S. for domination of trade and investment rules to monopolize world markets. The U.S. considers the Chinese State Owned Enterprises (SOE) engaging unfair competition with government financial support whereas China views the world-wide enterprises (American owned NGO) engaging predatory practice to monopolize foreign markets if foreign country fails to protect its market. The current US-China trade talks are basically stuck on that the U.S. demands China to reform her domestic trade and investment laws to allow foreign entities to enter China’s market freely while China insists on keeping her reform in steps to protect her market from foreign domination. The IP property dispute especially the patent protection issue is really a mute argument since China has become the world’s highest new patent owner with fast innovations in many design fields. It is to China’s benefit to have stronger IP protection for her own good. However, she would not accept any language like IP theft since all developed countries including the U.S. had engaged in technology transfer in shady ways in their development phase.

The dilemma of trade dispute between the U.S. and China perhaps can be resolved if we use the two free trade cities, Singapore and Hong Kong, as two cases to examine “the market economy” and economic policies. Singapore’s economy has been accepted as market economy by the West. Singapore has had a growing economy in terms of GDP since the 1960’s. In fact, China has diligently studied Singapore’s economy and her economic development model. Although, the West has accepted Singapore as an ally and treated her as a trading partner, Singapore’s economic system and its policies are essentially guided by a one-party dominated government (authoritarian). So is China with two caveats: one, China’s leader selected within the Chinese Communist Party might serve longer than two terms (ten years) if his performance passed mustard (Singapore’s leader Lee Xian Long has been elected as the premier for 15 years so far by the same dominating People’s Action Party) and two, China’s market is huge and fast expanding (population, territory and size of economy are much bigger than Singapore). Singapore’s needs in imports and her market protection are very different from China’s. The West can easily overlook Singapore's small domestic market but not China's. However, it is unreasonable to expect China to adapt the same economic development model (although many policies are similar) as Singapore does.

Hong Kong has always been accepted as a free trade city and market economy by the West as well, in fact being a strong competitor to Singapore. Since the return of Hong Kong to China, China has kept her promise to let Hong Kong people to govern Hong Kong. China has also diligently studied Hong Kong’s economy and its economic development model and policies. China felt confident enough to leave Hong Kong absolutely alone to manage its economy, even currency, and focus on Mainland’s economic development. In the past two decades, in China’s economic development planning, China has deliberately made sure that Hong Kong’s economy will not be impacted negatively by China’s aggressive development. Hong Kong enjoyed several decades of growth, although not as fast as Mainland China in terms of GDP and less evenly distributed across her social strata. (Wealth gap exists in China as well but not as severe.) Thus, it is no surprise that China is continuing searching and modifying a unique economic development model that is suitable for China.

China’s success in sustaining a high economic growth and the weakness in the U.S. economy for the last decade do cause the U.S. to be concerned. However, the two great nations have their own unique economic development problems, very different from each other, small countries and free trade cities. The big nations cannot emulate the success of free trade cities nor demand each other to comply to one definition of market economy or to accept any one economic development model. The rational thing for the U.S. and China to do is stopping their trade war and focusing on their own economic development issues, accepting competition and cooperation as necessary facts of life. Prolonged trade war leads to real war, and real war leads to mutual annihilation!

 
Abstract

“China Threat” has been touted long and often by politicians that seems to make it a true gospel. Have you ever wondered whether or not 'China Threat' is really true? What may be the real China threat? This article attempts to answer these questions and clarify why politicians especially during presidential elections like to focus on foreign threats rather than on solutions to our domestic problems. 

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There is a real “China Threat”, however, which can be easily observed and understood by a few examples. Again, this threat is self-inflicted in my opinion. The examples are clearly observable in the U.S.-China trade war. The U.S. initiated the trade war starting from applying tariffs on hundreds to thousands of Chinese imports. The tariffs were added on the consumer prices hurting mostly the lower income American citizens. That hurt was translated to threat then even to hate by politicians. But wiping China out of the world trading system is not a solution but adding more hurt and threat to Americans. In retaliation, China countered with tariffs on American goods, that hurt American exporters and China importers both. Needless to say, it is not a good solution. Then the U.S. extended the trade war to technology sanctions and more tariffs. That again is hurting both nations’ tech industries and economies, slowing down China’s rise in technology industry perhaps but bleeds the U.S. hi-tech industries as well. (Hi-tech products need a large market to thrive) This hurt is also translated to threat then hate by politicians even leading to war plots involving alliances. This is exemplified by policy statements made by Pompeo and hostile rhetoric by Rubio and Ted Cruz the like. China either did not like to escalate the sanction war or realize that it will hurt both and not helping anyone. She chose to sanction the individuals who promoted the hurt-threat to US-China relations while in-power but now out of power, an interesting move we shall understand later. 
 
China announced a sanction list of 28 U.S. individuals and their immediate families to be prohibited in doing businesses in China, Hong Kong and Macau. I must say, this action is a real “China Threat” to the individuals (it really hurts financially at least) but not the U.S. industries. Pompeo is on the top of the China sanction list. China announced this at the juncture when Pompeo is relinquished his official duty as the Secretary of State to take on a private job to plot his political future. This announcement of forbidding him and his wife to do business in China has little to do with ordinary American citizens or the U.S. government but it hurts Pompeo badly (finally picking up a $80,000 job at Hudson Institute versus being denied $10,000,000 CEO job hurts and hurts badly). Pompeo would surely feel what a real China threat is like now, no corporation would write off China market to support Pompeo’s political ambition built on “China Threat”. Another example is former U.S. U.N. Ambassador, Kelly Craft who is also on the sanction list for her anti-China deeds, such as dishonoring a one-China principle the U.S and 100+ more nations pledged. Craft’s husband, Joseph Craft III, CEO of Alliances Resources Partners, allegedly has very significant businesses in China which would be affected by this sanction. According to an unverified source on the Internet the China sanctions may have a collective impact of $3 billion dollars of personal interests to the 28 individuals and their close families.
 
The Trump Administration played every card to provoke China including lies and twisting facts. For example, Pelosi is calling Hong Kong’s riots (crashing her legislators’ building) as a beautiful scenery of democracy but calling our protestors (storming into our Capitol building) as mobs and insurrectionists. (An obvious double standard) The U.S. is selling offensive weapons to Taiwan clearly encouraging Taiwan’s independence movement (no one in the right mind would think that it is in the interest of our national security or world peace). Pompeo’s criticizing China’s domestic policies dealing with her Muslim religious extremists’ terrorism using extremely hurtful terms like “concentration camps” and “genocide”. The purpose of providing compulsive 15 year free education to Muslim children so they would not be forced into extremists’ religious studies is not a ‘concentration camp’ idea nor there is ever a genocide happening to the 12% Uighur in Xinjiang. (In fact, Han people (80%) often complained that the Uighurs got more benefits from the government than they did.) Minority issues exist in our country as well, we would not accept any foreign criticism or do anything in response, but yet we expect Chinese people to accept our accusation and protest against their government. What for? If not an interference.
 
China sanction came after the U.S. sanction against some Chinese (and Hong Kong) officials forbidding their travel to the U.S. might seem to be just a symbolic retaliation, but in reality it hurts these individuals on their pocket books perhaps also their political careers. Although Pompeo may claim the China sanction is his badge of honor (Anti-China or Anti-Communism), but realistically it hurts his pocket book. One wonders whether he will be able to write a million dollar book at the Hudson Institute reflecting on why some people Americans call him the worst U.S. Secretary of State in history and some world citizens call him the biggest liar and cheater in politics. China did not put any on-duty U.S. official such as Pelosi on the sanction list is probably out of their adherence to never interfering with any country's domestic affairs. However, China’s sanction list is a real threat never the less. In my opinion, this China sanction may be a real threat, at least, to young politicians currently on-duty or not, who must care about their post-government career in the private sector later in life. Since in the business world people are used to competition. China does present a competition to the world, but any competent business executive would not be afraid of competition and give up the China market. So 'China threat' is never real to U.S. corporations or the U.S. if we don't give up competition. However, China sanctions against individuals are real threats! 



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“China Threat” is a political slogan coined by hawkish anti-China “expert” or “strategist” and widely quoted by politicians to build a halo over their head beaming patriotism. This patriotism is not based on the fact that the politicians have served in the military, sacrificed for the country or wounded in a war. Many who shouted “China Threat”, like Mike Pompeo, former Secretary of State or Senator Marco Rubio, a Cuban immigrant, who simply saw Donald Trump’s victory of presidential bid in 2016 was due largely to Trump’s strong messages on anti-China and blaming China for U.S. domestic and international problems. Unfortunately, this has become a trend in the U.S. Presidential election, diverting voters attention on domestic problems away from searching for solutions and shifting to blaming foreign countries. Rubio, as a young politician and a Cuban immigrant and a local politician in Florida, he knows so well that China is no more “communist” (China reforms rigorously from orthodox Communism) than Cuba, no more socialist (China embraces more capitalism) than Cuba and thus no more a threat than Cuba to the U.S. Rubio and the like with a big ego and presidential ambition who never traveled to China and had little real foreign affairs experience other than hosting political dissenters’ testimonies at the Senate hearing, really don’t know what China Threat really is. As a political analyst traveled many times to China, I will devote this column to explain what real “China Threat” is to general Americans and in particular to politicians like Rubio (Republican), Pompeo (Republican) and Ocasio-Cortez (Young Democrat, 30), all future Presidential Candidates in the brewing.
 
This column will not discuss the schemed “national threat” which to a large extent is created by the self claimed national security experts. They hypothesize a “nation threat” (for example, Russia/Soviet Union, Japan, EU or China) under three axes, ideology, military and economy, then devise corresponding counter measures, rarely related to how average citizens feel about 'national threat'. In reality, ideological threat is never a real national threat, since if the majority of people in a nation accept an ideology, it is hardly a threat to the U.S. other than to some politicians. Military threat is a self inflicted mutual threat since military spending (especially for expansionist) is an expensive and non-productive investment, rarely bringing a positive return but a crippling economy. So rationally, nations would not initiate military threat to each other and none would escalate unless being obviously threatened first. The economic threat, however, may seem to be real simply because the Earth has limited resources and all people/nations desire to live better lives which means that every nation will  consume more resources with time unless humans invent their way out of scarce resources. Therefore, the economic threat is really just a competition for resources (and innovation for conserving resources) to support a better life. A competition is not a threat when it is resolved by a fair trade and competitive effort against each other. Just like participating in an Olympic game, a fair competition is not a threat; win or loss, you can try again, generation after generation.
 
So what is the real “China Threat” then? The fair answer is that China presents an economic competition to the U.S. China does not pose any ideological threat to the U.S. and her democracy. If anything the threat is the other way around that the U.S. is insisting on an ideological war, exporting the U.S. brand of democracy, which is persisting even long after the collapse of the Soviet Union. History clearly showed us, any country that is left alone with no ideological confrontation fared rather well economically. It is peace that is needed in a fair economic competition. For country like the U.S., blessed with rich resources, there is less need for her to worry about fair economic competition since no other nation is richer than her or can pose an ideological or military war against the U.S. Other nations would be busy enough to struggle and compete economically with the ever developing world. So the best interpretation of so called ‘China Threat’ is economic competition, which may be perceived as a threat only when one gives up competition and resort in rhetoric. We may give a few examples to illustrate this point.
 
China has become a nation of world manufacturing. She plans her economy methodically to first build her basic economic needs in terms of living; that is supplying enough food, clothing and shelter to her vast population. Then she strengthens her national infrastructure to sustain her economic development. Through her economic scale, she manages to make household products efficiently with low cost. Thus through hard work and ever expanding export, she became the main supplier of most household products to the world. Many nations depend on Chinese goods, especially the U.S. who chooses to move away from those low-profit mass production industries and moving into high profit and quick return hi-tech and financial industries. Is China a threat to the U.S.? Yes, if China were wiped out of the Earth. But who would want to wipe China out of the Earth? The “China Threat” sayers. Obviously, that kind of ‘China threat’ holds no logic. Trade had become freer since the colonial days were over, the World Trade Organization (WTO) has done a reasonable job for maintaining a free trade system that supported decades of supplying inexpensive goods to advanced and rich countries such as the U.S. and Western Europe and lifted hundreds of millions of people out of poverty. If China made the most significant contribution to world trade and lifted half of her population above poverty, I would not call that “China Threat”. I would rather think, whoever wants to wipe China out of the world is creating a threat to the world!