Does China WANT a Second Decoupling? The Chinese Texts Say That it Does

Presidents Xi and Trump prepare for a meeting next week at the G20 event with the purported goal of restarting negotiations to resolve the Section 301 tariff dispute and other trade issues between the U.S. and China. Many analysts and business people from both countries are confident this meeting will lead to resolution. Unfortunately, this hopeful position ignores that there is a strong faction within China that does not want a resolution. This faction argues strongly for China de-coupling from the United States.

A summary of the views of this faction was recently been published in Qiushi (Seeking Truth), under the title Several Issues That Need to Be Clarified Regarding the U.S. China Trade Deficit(中美经贸摩擦需要澄清的若干问题). You can find the Essay on the Qiushi website here. Qiushi is the Chinese Communist Party’s (CCP) official ideological mouthpiece. This journal is controlled by Wang Huning, widely considered to be Xi Jingping’s one man think tank. Not everyone in China agrees with Wang Huning and Qiushi. But the current view is that Qiushi provides the guiding core policies for President Xi as he works his through China’s current set of policy disputes with the United States and Europe. For this reason, one must consider the position taken in this essay.

The first thing to note about this essay is that it brings back the standard Maoist anti-U.S. rhetoric of the Cultural Revolution. This is the stuff I read when studying Chinese during that time. I thought we were done with that, but I was wrong. The essay describes the United States as a political and technological hegemonist, a trade bully, a user of strong arm techniques against weaker nations, a unilateralist, a practitioner of fundamentally unfair trade, and a hypocrite that follows a “kick out the ladder policy” designed to keep the developing world in a subordinate state.

In keeping with this basic rhetorical position, the essay asserts that the US-China trade dispute is 100% the fault of the United States, whose sole goal is to keep China down. China will therefore resist without faltering so as to defeat the U.S. Beyond this rhetoric, I note two additional key features of the essay.

First, as has been consistent with China’s position since 2018, the essay asserts that the entire dispute between China and the United States is a balance of trade issue. The essay correctly points out that free trade economists in the U.S. (Paul Samuelson, Paul Krugman) have long argued that it is virtually inevitable developed countries like the United States will have a manufactured goods trade imbalance with developing countries like China. Though this may be true, this issue is not relevant to the Section 301 dispute or to the related disputes related to the Huawei ban or the earlier ZTE ban.  See 2019 Special 310 Report and Update Concerning China’s Acts, Policies and Practices Related to Technology Transfer, Intellectual Property and Innovation.

The essay does not address the core issues between the U.S. and China: IP theft conducted by Chinese companies and the Chinese government, China’s forced technology transfers, China’s closed cloud and network markets, China’s closed financial markets, China’s policy of exporting it overcapacity in steel and other metals and manufactured goods, China’s government subsidies to SOEs and to key industries that distort world prices, or Chinese company evasions of Iran, North Korea and other sanctions.

Stated simply, the Essay completely ignores the 301 Report issues that are at the heart of the tariff dispute. See The New Normal in US-China Relations and What to do About that. The Essay does not even bother to treat the 301 Report as lies. It could have analyzed the 301 report item by item and stated China’s position on each issue, but it did not. Instead, it follows a series of Chinese white papers that completely ignore the key issues.

China ignores the key claims in the 301 Report because those claims make China look bad and because they are all true. The EU, Germany and other market economy countries from around the world have all clearly stated they agree with the factual claims in the 301 Report. Many (most?) do not agree with the United State’s tariff approach, but they agree with the basic facts. Since the essay cannot refute the facts, it resorts to factual analyzing non-301 matters and to name calling.

Second, it is not wholly accurate for me to say the essay ignores IP completely. It does not ignore intellectual property; it denies the concept entirely. It essentially says there is nothing for China to say about IP theft since there is nothing to steal. The essay takes the position that intellectual property does not exist and that every person in every country should be free to make use of science and technology without regard to the person or company that developed the technology or made the discovery. Science and technology cannot be owned and countries that assert ownership of IP is fundamentally wrong. This is Maoist rhetoric from the 60s. Property is theft (Pierre-Joseph Proudhon). Moreover it is a form of theft designed to keep China and other developing countries down.

Lest you think I exaggerate, here is the lead sentence from Section 4 of the essay: “Science and technology are the crystallization of human civilization and is the common wealth of human society.” ( 科学技术是人类文明的结晶,是人类社会的共同财富.) “Common” is used here to mean something that cannot be owned or appropriated by any single country or individual. The essay then goes on to say that the U.S. government and its companies seek to illicitly appropriate property from human society. The United States is seeking to block the free flow of science and technology to China.

The essay points out that access to modern technology is essential for China’s economic development/ The U.S. exercises technological hegemonism by not allowing China free access to that technology. It then concludes by stating that “opposing technology hegemonism is our [China’s] mission and that is our right.” (反对科技霸权,这是我们的使命,也是我们的权利). This position justifies Chinese government IP theft, cyber-hacking and forced technology transfer and though these acts violate all international rules relating to intellectual property protection , they are okay. In fact, these acts are part of China’s glorious mission.

This is a long standing Maoist argument, usually made by outsiders, not CCP insiders. By allowing China into the WTO, WIPO and other international trade and IP organizations, these sorts of arguments by the Chinese government were supposed to stop. But here they are again in 2019, expressed by the CCP’s “flagship” policy organ. So the take away from this essay has to be that the Chinese government plans to continue maintaining its closed economy to protect China from unfair trade and it will continue stealing IP from other countries so as to combat technological hegemonism. China will do this because it is morally right and right for China and it will do this unless and until it is forced to do something different.

The rest of the essay focuses on the damage to the U.S. economy that comes from tariffs, trade barriers and isolationism. The essay assumes the United States is so dependent on “China priced” products that it will soon back down in its trade dispute with China. The strong opposition to the tariffs shown at the recent tariff hearings and recent complaints from Google about the Huawei ban are seen  by China as evidencing the weakness and decadence of the U.S. government and its citizens. If China simply holds the line, China will prevail. Not only is China in the right, but China is on the side of history.

Is this the message Xi Jinping will be taking to the G20 meeting? Many analysts think essays like this are just bluster written in Chinese for a Chinese audience. I am far less sure. It is important not to underestimate what the CCP is willing to do and how much pain it is willing to have the Chinese people endure. China has a history of decoupling from the rest of the world and it could do it again. It is a real threat that should not be discounted just because of the pain it will cause to China.

China’s first decoupling was from the Soviet Union. The Soviet Union was the CCP’s main supporter and largely responsible for creating the People’s Republic after 1949. But by 1966, the Soviet Union completely de-coupled from China, withdrawing its technology, advisors and financial support. This decoupling led to the Cultural Revolution and to decades of chaos in China, right up to the Deng reforms of 1992. President Xi is openly opposed to the Deng reforms and many of his closest advisors long for the ideological purity represented by the Cultural Revolution.

The complaints being made about the U.S. in this essay are the same complaints made about the Soviet Union before that decoupling. The result was that the Soviet Union could not take it any longer and it decoupled. The same thing could happen with the United States and China, and the impetus would come from within China. It is a mistake to assume President Xi is unwillingly to see China endure a second decoupling. More troubling perhaps is that there is little the United States can do to influence China’s decision to capitulate to U.S. demands or to decouple. Forcing China to do what the United States (and to a somewhat lesser extent, the EU) want is not a real option. If you disagree with the above, I urge you to read what is written in China in Chinese, not the pablum and propaganda China feeds to outsiders. And trust me when I say that Robert Lighthizer’s team has read this essay (and more).