For three years, the Trump administration has been trying to pressure China to stop its economic aggression and unfair trade practices, using tariffs, negotiations and measures to protect U.S. industries. Beijing has hated this strategy from the start and only reluctantly struck a “Phase One” trade deal that addresses few of these issues.
Now, several Chinese government agencies and officials are talking publicly about how China can take advantage of being the first country to start recovering from the novel coronavirus (because it was the first country to contract it) to take over the industries of the future.
“They have a post-virus strategy, and it is already underway,” said Nate Picarsic, co-founder of Horizon Advisory, a consultancy that tracks Chinese government and economic activity.
Horizon issued a new report Sunday, drawn from official Chinese government and media sources, that spells out how Beijing is planning to use the downturn in Western economies to its benefit. China intends to seek out more foreign direct investment, seize market share in critical industries and try to stop the West from confronting its bad behavior.
“Beijing intends to reverse recent US efforts to counteract China’s subversive international presence; at the same time to chip away at US-Europe relations,” the report states.
After the 2008 financial crisis, Beijing filled the economic void by building up its national champion companies using huge government subsidies and gross intellectual property theft. Twelve years later, and now home to some of the world’s largest and most capable firms, China is planning to overproduce various goods to flood the market and increase its market share while Western companies are on their backs. China is also setting itself up to be a haven for foreign capital if its markets bounce back before ours.
“China has a long-standing strategic plan that’s focused on co-opting nodes and systems in which it thinks it can claim coercive power over the United States and the global system,” said Emily de La Bruyere, the other co-founder of Horizon. “Now that the world is shutting down, China sees its opportunity to move in much more quickly and aggressively to those nodes and systems.”
Some of China’s actions seem benign or even helpful. China is ramping up production of medical supplies and ingredients for pharmaceuticals. One commentary in China’s state media threatened that if China withheld drug ingredients, it could plunge the United States into “the mighty sea of coronavirus.”
But in the longer term, Chinese commentators in state media are calling for post-coronavirus expansion of Chinese companies abroad, especially in key sectors like 5G, high-speed rail, new energy vehicles, artificial intelligence and the industrial Internet.
“It is possible to turn the crisis into an opportunity — to increase the trust and the dependence of all countries around the world of ‘Made in China,’” Han Jian, of the Chinese Academy of Sciences and director of the Ministry of Civil Affairs’s China Industrial Economics Association wrote on March 4, according to the Horizon report.
It’s ironic, but because China was the first country to deal with coronavirus, it is now ahead of most of the world in terms of containment and recovery. Chinese workers are already returning to factories, while the United States and European economies are shutting down. We don’t even have a plan for today, while Beijing already has a plan for tomorrow.
“In COVID-19, Beijing sees the chance to win. This time, China benefits from a near-peer strategic position. It also benefits from first-mover status,” the Horizon report states.
Meanwhile, back in Washington, some lawmakers who never liked President Trump’s China tariffs are trying to help Beijing undo them. The New York Times reported Sens. Patrick J. Toomey (R-Pa.) and Charles E. Grassley (R-Iowa) are pushing for the administration to remove steel and aluminum tariffs that were imposed on national security grounds.
United Steelworkers President Thomas Conway wrote in a Friday letter to lawmakers that eliminating tariffs now would hurt U.S. producers at the worst possible time and help Chinese companies dump their products to gain market share unfairly.
“As our steel and other manufacturers all suffer, when the bottom hits, China is poised to come back in,” said Michael Wessel, a commissioner on the U.S.-China Economic and Security Review Commission. “China is now looking at ways of taking advantage of everyone else’s suffering.”
The Trump administration’s strategy is not to divorce our two economies, but to compel China to play by the rules and compete fairly, while protecting our industries from their malign activities. We can’t sacrifice the long-term economic competition with China because of this serious but temporary health crisis.
Beijing is trying to manipulate the situation to unfairly take even more control of the industries of the future. We must be smart and not let that happen, by dealing with the crisis without losing sight of the longer game.