China Calls Out The United States Over Global Economic Principles
Beijing wants Washington to deliver on three conditions as bilateral trade declines 30% in 7 months
The Chinese Foreign Ministry Spokesman, Wang Wenbin has delivered a searing criticism of the United States ahead of the G7 summit about to be held in Hiroshima.
The G7, which includes France, the United States, the United Kingdom, Germany, Japan, Italy, Canada, and the European Union (EU) is expected to issue a statement on global economic security, which will stress the importance of countering economic coercion, maintaining supply chain resilience, ensuring fair competition, and ending dependency on China in semiconductors, critical minerals, and other sectors. Wang had this to say in a hard hitting response:
“No one is more qualified than the US to be called out for economic coercion. Japan surely knows this best from its experience with the Plaza Accord of the 1980s. (Ed: The agreement nearly destroyed the Japanese economy with benefits to the US alone). If G7 members truly care about economic security, they should ask the US to stop bludgeoning and curbing other countries in the name of national security, stop bullying others and coercing allies to form exclusive blocs, stop disrupting the security and stability of global industrial and supply chains, and stop dividing the world into two markets and systems, which is the world’s No.1 economic threat right now. The US has been browbeating relevant countries into economic decoupling from China, imposing sci-tech blockade on China, and suppressing Chinese companies. This is not about fair competition, but a serious violation of market principles and WTO rules.
If G7 members truly care about economic security, they should ask the US not to try to avoid default by keeping raising the debt ceiling, to correct its aggressive adjustment of monetary policies and not to shift domestic risks to the rest of the world.
If G7 members truly care about economic security, they should immediately find out who’re responsible for the Nord Stream pipeline blast and hold them accountable to safeguard the security of important transnational infrastructure.
We urge the US, Japan and other G7 countries – all members of the club of the rich – not to harm the interests of the many for the selfish interests of the few in the world of nations. We hope they will follow the trend of our times for inclusiveness and openness and think of tangible ways to contribute to world peace, stability and development.”
The Three Conditions
The statements made are an accurate depiction of Chinese economic thinking of this moment in time, and come as Beijing has also made public three conditions that Washington must make in order to restore political ties, described as being ‘at their lowest level in decades’. The Chinese President Xi Jinping has apparently refused to take calls from US President Biden, leaving the White House struggling to obtain influential traction and apparently threatening new economic sanctions against China if Beijing does not engage.
However, China’s Foreign Minister Qin Gang told US Ambassador Burns that the White House must meet three conditions before Beijing will engage. These are:
- Cease pressing Taiwan issues.
- Don’t overreact in cases like the balloon incidents.
- Stop imposing new sanctions on Chinese technology.
This could lead to a developing political situation where it becomes apparent that the United States needs China rather more than the other way around, and indeed, a flurry of lower-level calls have been made with a string of US-China meetings scheduled. The White House has stated it wishes to ‘move beyond’ the balloon incident, however the questions over Taiwan and sanctions on Chinese tech will still require rather more concrete discussions before Biden can presumably gain access to Xi.
Trade Ties
US-China trade ties are also deteriorating fast. According to Statistica, in August last year, total trade volumes were at US$63.26 billion. By February 2023 they had declined to US$42.24 billion, a drop of nearly 30% in 7 months.
It is a similar position concerning EU-China trade. None of the EU nations featured in China’s top trade partners last month (April 2023), with the leading trade partner for China actually being Taiwan. Clearly, China is shifting its trade patterns away from the West – trade with BRI nations for example grew by 9.2% in April.
Consequences
With the West effectively engaged in an expensive war with Russia, and the sanctions imposed by the G7 upon Russia and especially its energy products, inflation is beginning to hurt Western economies and their consumer base. For example the price of a liter of petrol in Germany is currently €1.82. In China, it is €0.95, almost exactly half the cost. It is about the same in the United States. This makes Chinese manufacturing far more globally competitive than the EU, while against the US, China continues to enjoy a lower manufacturing cost base.
The major losers in this economic battle are undoubtedly the European Union, however a decline in China trade will also start to hurt the American economy. With US Presidential elections being held next year, the strain of the situation in Ukraine and a rapidly declining China trade picture do not paint a rosy picture for Washington, nor American and European consumers at present.
China, meanwhile, is engaging in some covert decoupling of its own. That is rather more subtle than Russia’s ‘Unfriendly Country’ list, but China’s trade and investment patterns are telling their own story: Chinese Overseas Direct Investment (ODI) was up 18% in Q1 this year, with the vast majority of that going into Asia, not the West.
The G7 may find in Hiroshima – ironically a Japanese city levelled by an American nuclear bomb in 1945 – that they need China perhaps rather more than they had envisaged. If so, that will be a pivotal point in which nation has the most significant impact on global trade – China, or the United States.
Chris Devonshire-Ellis is the Chairman of Dezan Shira & Associates. He may be reached at asia@dezshira.com
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