Fundamental analytics

War or negotiations?

According to the harsh statements that the official Chinese media publish, Beijing does not expect or interested in a peaceful way to resolve the trade conflict with USA. The tone of the official media of the Celestial Empire attracted special attention even in the USA leading business press: “China promises a“ people's war ”, and it is clear now that the economic conflict became a nationalistic topic, as Bloomberg describes these publications. One must consider that the “people's war”, proclaimed by the Chinese government media Global Times is not only a shifting from the respectful diplomatic expressions, but also the confirmation that the tension with the United States reached its peak.
Global Times noted that after China’s decision to raise tariffs the USA stock market collapsed and this is what inspired Chinese society to continue fighting. To fight with the United States and to force Trump to seek truce is the ultimate desire of most Chinese people, claims Global Times.

We must point out that it is already made public that Chinese officials and government financial advisers are eagerly elaborating schemes of dumping the US government bonds owned by Chinese Treasury. American financial media reacted with panic to these prospects. However, there is an opinion among some US politicians that China will never make such a step, since the use of such a radical tool would greatly help Donald Trump. Opponents of Trump are sure that it will only bring a lot of grief to US citizens but will support the Trump. “If China sells its bonds to the United States, Trump will win. The sale will weaken the dollar, which will help reduce the US trade deficit with China,” writes Bloomberg. These are very optimistic considerations that do not include the consequences of how rapidly this action will destroy the US stock and financial markets. In addition, the US government debt will become harder to maintain, and this is what jeopardize stability of USA economic system.

It is obvious that the continuation of the current conflict will badly hurt the American economy, while many politicians in the United States refuse to face this truth.
However, Chinese officials must understand that for their country it will be far not an easy, painless and scot-free walk. The adverse consequences will strike almost immediately: China has been developing for many years with the great help from the specific access to American leading technologies, financial resources and markets. The cutting off China from these benefits will strongly damage China development, competitive abilities on the world markets and will definitely push Chinese progress back for a very long term.

Some Chinese journalists compare this acute situation between Beijing and Washington as a confrontation of “The Art of Making Deals” (book by Donald Trump) and Mao’s theses regarding methodology of guerrilla war. In general, the Chinese strategy can be outlined as a confidence that Chinese society can tolerate huge economic problems much longer and better than that of the USA. Chinese officials bet that their nation will become more united by these problems, but the social system of the USA will be broken since it can not bear such ordeals. The Chinese strategy is to "tolerate what the United States will not tolerate."

At the same time, Trump and some American security and military officials and even some politicians from the Democratic party desire to "push China to the end." In their opinion, the question of whether the United States will maintain the status of a world super power in the 21st century depends on the victory over China.

It looks like the conflict is escalating until the negative consequences are not unbearable for either China or the United States.