On February 18, 2019 Alexel Gladkikh writes on Quora:
I would suggest something I believe, based on all Chinese statements and my understanding of the economy.
China intent to “loose” Trade war.
China self-proclaimed purpose is to become a consumer society. It’s leaders constantly express that in statements and actions. China median wages grow very fast and policies of government encourage that growth.
China trying to balance its payment surplus by mass foreign investment, in a way they do their marshal plan. Yes, they do try to secure a market for there raw materials and consumer goods, but that is only one component. Prolonged payment surplus of one country on others is unsustainable and destructive to both, surplus and deficit countries. It accumulates debt and eventually, this debt becomes unsustainable, customers can not borrow any longer and can not continue to be customers. So, you have to recycle your surplus, most helpful for both sides in form of direct investments. This way, the recipient country does not accumulate debt and you got a reliable source of raw materials and customer for your goods.
Keynesians economists understand that. Keyness propose auto balancing worldwide payments system, based on an international currency not linked to any country, Banker. The US rejected this system, in favor of $US become the world reserve currency. That was based on believing that the US will never lose it’s trade and payments surplus. It’s manually recycled their surplus in form of Marshal plan and other investment actions and by using the money to impose its political order on the rest of the world.
in 1971 this system collapse and the US establish a new system. It does not matter who’s surplus we recycling, so long we do recycling. Using petrodollar the US forced the rest of the world to use $US as the world reserve currency. That let the US continue to finance its economy by printing money for the rest of the world, in form of US government debt and pure printing. That continues to feed the US as a consumer society and US military power.
In 2008 that system collapse. That show the Chinese that they can no longer rely on the US to recycle its trade surplus. They have to do it’s manual, themselves. One belt one road was born + all other investment projects. Chinese foreign investments jump. But that can not continue forever. The Chinese need to jump up their own consumption. Increase their worker wages, make economy mostly internal and balance their international payments.
So, China and Trump will do there dance, the show must go on. China will “cave” on technology transfer. They do not need it anymore, they develop enough to do there own development. Huawei case is an example. All bans are just reflected fact that west lost the technological competition. Huawei 5G smartphones already on market and for 2/3 of the price of Apple 4G smartphones. 5G networks 10 times faster than 4G, entering the world in a new jump of innovation.
And by banning Huawei west will lose it’s technological edge even faster.
Now, Chinese have to do a very fine balancing act, something no country ever has done, convert their economy in like 10 years into the balanced consumer economy. All that western antagonism does not help, but the world economic future depends on how China does this transformation.
In 2008 the world avoided 1929 depression by global coordinated actions. The Chinese did their part and increased their internal consumer debt by 40% in 1(ONE) year, building “Ghost” cities. So, their workers continue to produce, industries continue to consume raw materials and buy them from the rest of the world. That eventually pull out the world economy from recession. They can not repeat this trick and in 2008 roots of economic problems were not resolved, but just postponed.
The incoming recession will need a globally coordinated response and all these trade wars do not help. I am afraid that the world will regress into isolationism and repeat the pain of 1929–1941 great depression, with all other negative aspects you can see in history.
On January 14, 2019, Kenneth Rapoza writes on Forbes:
China is still the world’s No. 2 economy and is still the monster of emerging markets, but regardless of those bonafides, Xi Jinping’s country is losing the trade war in nearly every way imaginable.
The arrest of Huawei CFO Meng Wanzhou in Canada last month for breaking U.S. sanctions law, followed by the firing of Huawei sales executive Wang Weijing in Poland last week shows China can be a bad actor, exactly as Washington believes. The Poland story centers around spying allegations, where Wang allegedly sought trade secrets from the government. Huawei’s latest bad headlines show how China tech companies may have risen to prominence by copying foreign technologies in joint venture deals or through white-collar criminal actions such as intellectual property theft and corporate espionage. Huawei is one of China’s most important, private tech firms. It rivals Cisco Systems worldwide.
Thanks in part to Huawei, China is getting beat on the public relations front in the trade war.
Early in the trade war, China thought it get the Europeans as allies. They hate Trump, too. China failed to woo the EU.
The Shanghai Composite is down around 30% in the last 12 months. Only Turkey is doing worse.
The stock market is a terrible way to measure China growth. Investors know it. So they look to the economic data. Industrial production is still positive but in decline. Quarterly GDP growth is in decline. On Monday, China released weak exports data for the month of December.
