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China won’t change at Washington’s behest – adviser to China’s FM

The future of US-China trade remains uncertain, as differences persist. Will Beijing bend to Washington’s pressure? We ask Chen Dongxiao, a senior adviser on economic diplomacy for China’s Foreign Ministry.

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Sophie Shevardnadze: Chen Dongxiao, senior adviser on economic diplomacy for China’s Foreign Ministry, welcome to the show, it’s great to have you with us. The recent announcement that the meeting between President Trump and his Chinese counterpart has been postponed – sort of invokes this grim parallel with the Hanoi summit, where Trump basically walked away from a done deal. Is this a hint that the U.S.-China talks have progressed about as much as those between Washington and Pyongyang?

Chen Dongxiao: The biggest difference is that both Beijing and Washington, at the working level, there has been a very substantial and very solid discussion almost on every detail of those deals, including a lot of controversial issues. So I think that at least at the working level, both sides are working even much more substantial and reach a very substantial progress. So in that regard, I think that even if there is still some room for the uncertainty... But I think that it is a reason for the optimistic that the both sides would reach a deal finally.

SS: So does having a deal agreed that Trump can support mean that the American tariffs and threat of more tariffs and a trade war actually worked, and the President has forced Beijing into backing out of the standoff?

CD: Well, if I understand your question correctly, I think that from the US perspective, they think that the biggest incentive for both sides to come to the negotiation table is the tariff. But from Beijing's perspective, I think that the biggest incentive for reaching a negotiation, to come to the negotiation table is that both sides have an incentive to settle down their differences, to iron out their differences and to remove those tit for tat tariffs so that both sides will not suffer from even further loss.

SS: The United States is demanding that China lifts its tariffs on the American products, at the same time U.S. measures may remain in place up to 2020 - even if the two countries clinch a deal any time soon, that’s according to Goldman Sachs. The Americans say it’s supposed to be done to make sure that China delivers on its obligations under the deal. Is Washington basically seeking to establish its oversight on China with a right to slap tariffs whenever it wants? And, more importantly, will Beijing agree to that?

CD: Well, I think that this is still one of the most contentious issues, and I do not know exactly what those kinds of differences will be ironed out finally, but I think that from the Chinese perspective, I think it's unfair for the... Because this is the trade negotiation, and I think any final deal would have to be accepted by both sides, if it can be called agreed deal. So any kind of unilateral actions taken by one side to have the leverage, to try to have the penalties on the other side... I think that may be one of the most difficult issues to be accepted by the others. So in that regard, I think that it will be the most contentious issue, and I tend to believe that maybe we could find out some more mutually acceptable terms that will make the enforcement likely, but it would not be decided only by one side.

SS: Washington has accused the Chinese high-tech giant Huawei of spying on behalf of Beijing. These accusations are pretty serious, and though the company’s leadership has denied all of them, do you see that this issue could actually aggravate U.S.-China tensions even more?

CD: Well, you see, I think that most of the Chinese would believe that the case of Huawei is very much politically motivated. And it is much more to do with the fact that the United States are even more increasingly concerned about the competitive edge of those high-tech industry, and particularly those flagship companies like Huawei, so they tried to take some pre-emptive measures to prevent Huawei from continuing to have increasing presence in large market share. And I think that this is very highly politically-motivated action, and those so-called charges are very groundless.

SS: So are you saying that the Americans are basically trying to get rid of competition in this very lucrative field with this whole affair? Because Huawei is one of the leading giants in G5 industry.  

CD: Yes, definitely. I think that in terms of the R&D budget investment in the past few decades, Huawei has already, coupled with some other leading China's high tech communication companies, they have already been taking quite a leadership in that regard. So I think that what Washington want to do is to try to hinder, to impede such kind of a competitive edge, by blocking Huawei or some other Chinese leading companies from continuing to have their presence in advanced economies, the United States, Europe or even Japan, and some other countries.

SS: Geopolitical strategists, and, actually, even elected officials in the White House are saying that the U.S.-China tensions are here to stay. America wants the Chinese economy to conform to what Washington wants, and China, as a rising power, is bound to try and roll back U.S. influence in the world. So is there any kind of a win-win scenario of the two countries’ relationship, or is it a zero-sum game?

CD: Well, you see, I think that any kind of a win-win prospect will be largely determined by whether both sides would accepted the fact that China, its political or economic institutions, would not be changed fundamentally as Washington wants to be. So it will not be a kind of a mirror image of what the United States want. And you see that, when we refer to those, a market economy, for instance, there's no so-called one-size-fits-all models for the market economy. And China, of course, is, we believe that we have been engaged with our opening up reform, and China's model of economic development in the past few decades has proved that it is successful, and it worked for China. And we believe that this model, with its Chinese characteristics, works for China. So if United States tried to, through those kind of a negotiation or pressure, tried to change fundamentally, based upon China's constitution, that China should change its political-economic system, it is impossible. So if the United States finally live with, live with this reality, it is likely for both sides to reach consensus, reach agreement. But if the United States continues to believe that through a continued press, and to try to transform China to a kind of systems which is totally like what the United States want, that is a kind of a mirage.

SS: So, in your opinion, what we have right now, this U.S.-China standoff, is it more about economics or geopolitics at its foundation?

CD: Both, I think, both. Because from Beijing's perspective, China's approach to the U.S., or China's understanding of a bilateral relationship is quite stable in the past four decades. Beijing always regards the bilateral relationship as very complex. It has the elements of cooperation, it also contains elements of competition, and even some conflicts. But the bottom line is that both sides need to find a good way to manage those differences and to prevent them from being escalated into a head-on confrontation. But from the United States perspective, I think that there is a growing consensus, I would say, a bipartisan consensus that they think that their so-called past decades of engagement with China just doesn't work, and they hope that they are going to, through even much more tougher or even, some people call it a new containment policy or new Cold War strategy towards China, they would press China to kowtow to Washington's needs. That is another kind of... I think it's, kind of, an unreasonable assessment of the situation. And so, in that regard, from Washington's perspective, those competition is not only on the front of economic aspects, they also regard China as a a rising competitor, or even a rivalry from a geo-strategic perspective.

SS: The World Bank says that China’s growth will slow down to 6.2% in 2019, with India set to overtake it, if the trend continues. Does this mean that the era of Chinese economic domination will be over before it got a chance to actually really begin?

CD: I think that you are right, on the one side, the economic growth rate in China has relatively downed, compared with the past decade. But at same time, as I think that, if compared with some other advanced economy, considering the fact that China has already been the number two, the biggest economy in the world, the growth rate of China is still very impressive. This is the first point. The second point, I believe that the more important thing is, China is now more focused on how to improve its economic structure, and by shifting from what we called a quantitative-oriented, only to the mode of development, to a qualitative-oriented growth model. So I think that in the past year, in the past few years Chinese government as well as the business community as a whole believe that nowadays it is more important for China to invest more on those high-tech innovative industries as well as the service industry, and also to improve the consumption side of China, so that to shift China's economy from the traditionally export-related one to a more a consumption-related one. And with regard to that of India, I think that India is still in the case of, also in the phase of transformation, and it also takes a long time for Indian economy to transform from relatively low-income towards a relatively middle-income economy with focus on manufacturing as well as the high-tech industry. So I think that both China and India in that regard are... It's a transitional period with a different level, different degree.

SS: So, China is a major donor to the World Bank, but also the largest borrower from it. Now, the Bank is to get new leadership very soon, and Trump’s pick for the position has said that China shouldn’t get any more funds from this institution. If the American candidate gets to head the institution, will China be cut off from its loans?

CD: Well, you see, this is a quite... It’s still debatable issues. I think that sooner or later, China included and some large number of other countries, they will graduate from the so-called low-income or least developed economy to a more middle or even upper middle-income status. So I think this is a kind of achievement that the world economy has made in the past few decades, and the World Bank as well as other multilateral financial institutions, should reconsider their strategy: how to shift their focus from those traditional... Supporting those least-developed economy to a more large number of a economy which have graduated from that traditional, conventionally-defined low-income status, and how to deal with a large number of middle-income economies, economic development demands.

SS: China itself launched its own Asian Infrastructure Development Bank, and it is also a member of the New Development Bank launched by the BRICS nations, and both institutions are in some sense competitors for the World Bank. Why is China still even borrowing from it, wouldn’t it be more logical to direct those funds to the nations that are at the bottom of the list of world’s largest economies, not at the top?

CD: In terms of that funding, including the funding supported by the World Bank, I think that gradually the World Bank will contribute increasingly… The total proportion of the fund supporting China's development will be smaller than in the past. So in that regard, I think that China will not think the World Bank will be the biggest fundraiser for China's development. At the same time, the World Bank, for its past decades of knowledge as well as expertise supporting the global development issues, it still has an important function and a role to play for the global development strategy, and its expertise and knowledge are more important nowadays than its funds or money itself. So I think that in the past few years, during Mr. Kim's presidency of the World Bank, it has actually quite successfully transformed from World Bank from the money, only money bank, towards a more, like, a knowledge bank. So in that regard I think China still appreciate a lot of expertise and knowledge of the World Bank.

SS: Though the U.S.-North Korean summit in Hanoi that we mentioned earlier failed to bring any results,  President Trump said that President Xi Jinping was very helpful in dealing with North Korea. Only a year ago, Washington was accusing Beijing of sabotaging the talks. How do you explain this change of tone from Washington?

CD: I think his previous accusation, it's been quite groundless, because Beijing has, for the past few years, has been playing a very stabilizing role to try to calm down the tension over the Korean peninsula, and always play a very active role to try to bring all the parties, including the United States and North Korea, to come to the negotiation and dialogue table. So when President Trump, two years ago, when he accused Beijing of trying to sabotage the talks, I think that it is an unreasonable accusation, slanderous accusation. Now he said that Beijing has been more helpful, I think that a couple of reasons, one, maybe he tried to continue to appreciate Beijing's support in his further negotiation with Pyongyang. And also he himself tried to maintain his very good friendship with President Xi, and at the same time, I think that it's also his conviction that without Beijing's support, it is impossible for Washington and Pyongyang to reach any agreement which will be sustainable.

SS: Trump has been saying that good things will happen to the North Korean economy if it chooses to denuclearize. So let’s assume for a second that a peace deal has finally been reached; could that allow Washington and Seoul drag Pyongyang off the Chinese orbit through investment? How much of a threat would that be for China’s national security?

CD: Well, I think that Beijing supports and also appreciates the dialogue between Washington and Pyongyang. And we believe that the dialogue on the denuclearization plus the long peace of this area is in the interest of all parties, and China, Pyongyang, United States, or even Russia, and some other countries concerned. So I think that in that regard, Beijing sincerely believes that as long as those negotiations could continue, and as long as Pyongyang could go through those kind of negotiation, and also on the track of denuclearization, and continue its economic reform and opening up, it will be good news for all parties. And I think that Beijing would do its utmost to continue to support Pyongyang's opening up and reform strategy, if they meet. At the same time, I think that Beijing would also try to work very closely with both Pyongyang and Washington to make those negotiations on a sustainable track, which means that we know those kind of negotiations would be very-very complex and long-term, and this up and down is almost inevitable. So even if there are some difficulties ahead of us, I think that Beijing would continue to support both sides to be patient, and try its utmost to bring these two parties to a table, as Beijing could.

SS: China is investing tens of billions of dollars in Africa, and Washington is obviously not very happy about it. U.S. national security adviser John Bolton says that China uses bribes and shady deals for its expansion, and huge loans to hold African countries captive to its demands. Is China seeking to establish itself as the string-puller in Africa?

CD: Well, I think that China's relationship with Africa has been maintained on a very sound foundation for many decades. And I think that both the African countries as a whole as well as China, we have appreciated such kind of very good economic and political relationship. I think that nowadays, this relationship is much more comprehensive, including even wider spectrums of the people-to-people dialogue, as well as many other cooperation on those sustainable economic development, climate change, as well as, I think that both sides also agree that they should, China would help Africa as a whole to invest more into those sustainable security capacity-building, so in that regard I think that this relationship is based upon equality, and based upon the non-intervention into domestic, internal affairs of each other’s. So I think that Washington's accusations, it's very ridiculous, because if they tried to, if Washington tried to check those, what is really mainstream thinking in the African continent, they would find that African people in general, they are very supportive to those ever-growing strengthening ties with Beijing.  

SS: Thank you very much for this interview, we were talking to Chen Dongxiao, senior adviser on economic diplomacy for China’s Foreign Ministry, discussing the rocky economic relations between the U.S. and China and their potential impact on the global economy. That’s it for this edition of SophieCo, I’ll see you next time.

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