In recent weeks the Middle Kingdom has suffered some mild diplomatic setbacks in its Belt and Road Initiative as well as its efforts to resolve the drawn out trade war with America. But all the evidence, including China’s own long history, suggests these reversals are simply temporary delays; if anything the controversies will simply help the country craft a sleeker, more palatable image and refine its diplomatic approach with an eye to long-term strategic gains.
- Unpredictable as ever, President “Tariff Man” Trump cast more confusion over the state of U.S.-China trade negotiations with accusations that the Chinese had reneged on earlier promises, paired with a threat to raise tariffs from the current level of 10% to 25% on $200 billion of Chinese goods. That’s a significant potential escalation just as many trade watchers expected the administration to move towards final resolution of the trade dispute.
- Although Chinese officials would like to minimize prospects for long-term economic damage from the trade war, at least one target looks likely to be permanently affected: electric cars, a strategic area for the future of manufacturing where President Trump is determined to break China’s growing capabilities. As one source tells Bloomberg, the tit for tat tariffs are really a proxy for a struggle over dominance in emerging technologies.
- The tariff war is hurting in other, more subtle ways: for example, some foreign companies are apparently using the tariffs as an excuse to reduce their commitments in China, for reasons that are actually unrelated to the trade war. The list of reasons for big foreign companies to pull back in China is familiar, including IP theft, state subsidies to competitors, and concerns about supply chain security.
- Meanwhile China is implicitly acknowledging concerns about the financing for its Belt and Road Initiative (BRI), a project to create a world-straddling transportation network stretching from the Pacific Ocean to Western Europe. Among other things, the Chinese government renegotiated over $50 billion of loans with participating countries.
- Europe appears to be wising up as well, judging by statements that future negotiations with China will take place collectively between China and the entire EU, rather than bilaterally between China and individual countries. But China is scoring its share of victories too, including the UK government’s decision to allow Huawei to participate in non-core parts of the country’s planned 5G network.
- There’s also no question that China’s long-term strategic trajectory is focused on regional dominance as a preeminent global power. Its latest focus: the Arctic, now becoming a viable transportation route due to the retreat of the polar ice cap. China’s ambitions here are truly global: Denmark and the U.S., for example, have both voiced concern about Chinese infrastructure projects in Greenland, much closer to Europe’s “front door” than, say, the Kamchatka peninsula.
- As Politico notes, after alienating many in the West with its aggression and meddling, Russia has little choice but to abet the rise of its previously junior partner, now a reliable customer for Russian energy. However Russia’s and China’s interests may not align in the new Arctic transportation era, and the countries could also clash in Central Asia, traditional arena of the colonial “Great Game” and now a front against Islamist extremism.
