China doesn’t want trade war but is ready to fight – China’s ambassador to Russia

SS: Let me ask you about Russia-China relations, especially about the economic aspect. You’ve said that our two countries are growing ever closer, that relations are getting stronger and that both economies are on the rise. President Putin and President Xi have met many times, and President Xi has even called Mr. Putin his best friend. However, over the first half of 2018, Chinese investment into Russia decreased by 24%. At the same time, China is investing quite a lot worldwide, which makes Russians wonder: why is China investing less and less into Russia? Is it actually withdrawing all of its capital from Russia? 

LH: As you know our leaders agreed that China and Russia would develop their cooperation in various areas, including economy and trade. It is very important to push forward our economic cooperation and investments. I can say that in recent years China has been investing more and more. I don’t have the exact data right now, but I can tell you that it’s a significant number. But sometimes the economy follows its own pace. You’ve just said that in the first half of 2018 investments have gone down a little bit. Most likely, there is another explanation for this trend. For example, a very important political event took place in China last year - the China’s National People’s Congress. But in the second half of the year investments went up. Our enthusiasm about our relations with Russia continues to grow, and grow significantly. I think that there are objective reasons for the slight drop in investments that we have seen. In the first half of 2018 we proposed our agenda. The ministers have their own very tight agenda and a busy schedule. They are however making plans for further development of our cooperation in different areas, including economy and investments.

SS: There is also the issue of sanctions, imposed on Russia by the West. Technically, China is not involved in these sanctions, but we’ve heard about cases when Chinese banks have been either unable or unwilling to perform transactions for their Russian clients and Russian companies – even those that are not on the sanctions list. So my question is: technically, China is not in favor of sanctions – but like it or not, it has to obey these rules?...

LH: Sanctions is a very unpleasant and nasty word. As you may know, China is strongly against sanctions being imposed on any country. Our attitude towards sanctions against Russia is clear and unambiguous. The Chinese leadership is unanimous in how they approach this situation. As for individuals, for example, bankers, I think that at the same sanctions are the reality. Every country needs to think of how it can better regulate its work, with sanctions in place, to achieve progress in enhancing economic cooperation anyway and making it ever more fruitful and beneficial. The Chinese regulators do not know all the specifics related to the operations of this or that particular bank, they can’t be sure what every single individual bank is like. But they still have to regulate the work of the banking sector, under real-life conditions that we have right now. And they need time for this. This is our approach to developing trade and economic relations with Russia. In any case the Sino-Russian relations are growing stronger. Any other approach would be impossible. 

SS: I would like to get back for a moment to the Belt and Road initiative. The report about the prospects of this project says that Belt and Road is an open and inclusive platform, and that it’s not some sort of an exclusive "China club”, which, in turn, begs the question: which European countries, specifically, is China planning to invite into the Belt and Road initiative?

LH: You’re right to say that One Belt One Road is not an exclusively Chinese initiative per se. It also affects China’s neighbours like Russia. And it also affects the regions that neighbour China, and it also goes beyond that - even to Africa, and it affects some European countries as well. During the six years since the launch of the Belt and Road Initiative, the cooperation has brought impressive results which have by far surpassed all expectations. The Belt and Road Initiative has become one of the most interesting public products with a very broad coverage around the world. Free trade brought tangible benefits to the nations located along the Belt and Road Initiative area, it made communication easier and it helped establish contacts between people along the route. Many new cultural projects and facilities emerged in the region affected by the One Belt One Road initiative, helping raise living standards of the local populations. Just recently, Italy has officially joined the Belt and Road Initiative, inviting more European states for cooperation. After the multiple documents signed by Italy and China were published, more and more European countries started to realise that the agreement actually complies with the European standards and their interest in this project has been growing ever since. China’s position hasn’t changed, and its approach to the Belt and Road Initiative has been consistent – the project is open for everyone. We welcome all countries, including European states, to join China in this endeavor and work together to make sure that the results of our joint efforts can bring more benefits to the population of participating countries.

SS: Your Excellency, let me ask you about the trade war between China and the United States. The two countries tried to agree on a set of conditions that would benefit both of them. It seemed as if they were close to signing an agreement, but as of now, not only is there no agreement, but the US has imposed even heavier tariffs on China. That’s the way it is today. So how are these new tariffs affecting China’s economy?

LH: As your know, in recent years, the Chinese economy has been moving along its own development path. We have a vast market of our own, an internal market as well. Domestic consumer demand for Chinese-made products is huge. Of course, China has been developing close cooperation with the outer world as well, ever since the policy of reform and opening up has been started. But it’s not just the outer world that we rely on. We have our own internal strength as well. Higher tariffs and duties affect China in a negative way, of course, but they are damaging for those who impose them as well. 

SS: We all know that, should this conflict escalate to an all-out trade war, it would be disastrous for the entire world. Your economies are so intertwined that the consequences would ripple out across the globe, affecting, at the very least, the Americans themselves. The first thing that comes to mind is inflation – the rate of inflation is going to rise in the US. Does this mean that China, too, has leverage over the United States?

LH: As you surely know, economic globalisation has been underway in recent years, and this process is especially active right now. No country is able to develop its economy in isolation, without cooperation with other countries. If one country starts a war against another one, it always inflicts big losses upon itself. It is always like that. China has always supported equality, fair and mutually beneficial cooperation with other countries. We believe it should be a two-way street though. China has its advantages, and its partners have their own advantages. And there should be complementarity between them. China does not want to fight, we are opposed to fighting, but at the same time we are not afraid of fighting. China is bold and resolute and is able to defend its legitimate rights and interests. China is still holding the door open for the US-China trade negotiations. If the United States wishes to proceed with them, it needs to be more sincere. There are principles of cooperation and there are certain red lines for China. China will never back down on matters of principle, on pivotal issues. China is hopeful that both sides will be open for compromise in order to achieve a win-win trade agreement based on mutual respect, equality, integrity and in line with the promises that have been made. If the existing system of cooperation is irrevocably damaged, it will be a huge loss for them, too. That’s what I think.

SS: I would also like to talk about the INF Treaty. Not long ago, Donald Trump has announced his intention to withdraw from the treaty banning intermediate-range nuclear missiles. He proposes a new treaty as a replacement  which would also include China – in addition to Russia and the United States. I’ve recently interviewed an official representative of China's National Defense Ministry, who told me that China is not even considering joining such a treaty, because its nuclear arsenal is incomparable to those of Russia and the United States. Still, if China were offered to outline its own conditions for an agreement to replace the INF treaty, what would those conditions be?

LH: Well, I can say that this treaty was signed a very, very long time ago by two countries: the USSR and the United States of America. This means that these two countries must observe this treaty. As for China, as far as I understand, we are not a party to this treaty. This is a bilateral treaty, not a multilateral one. China is strongly in favor of preserving it. Many countries around the world strongly opposed the unilateral withdrawal by the United States from the treaty. But as far as China is concerned, we have nothing to do with the treaty. We, however, feel it is paramount for the parties to maintain the INF treaty as part of the system which was established a long time ago.

SS: Let me ask you a question about Huawei. So, the US is planning to blacklist the Chinese company. Is China going to retaliate in any way? Could it, for example, kick Apple out of the country? 

LH: Regarding Huawei, I’ve already said that the government of China is going to take all the necessary measures to protect our companies’ legitimate rights and interests. As for foreign companies in China, as long as they operate legally, i.e. in full compliance with the Chinese laws, they have nothing to worry about. But I would like to stress that trade and economic relations between countries must be based on the principles of equality, mutual benefit and mutual respect.

SS: China has recently claimed to be a 'near-Arctic state', even though it has no border with the Arctic. What exactly does China mean when it calls itself a 'near-Arctic state'? Following the same logic, wouldn’t all countries of the world be 'near-Arctic states'?

LH: China is an important actor in the Arctic and has long been involved in Arctic affairs. In 1925, China joined the Svalbard Treaty and officially started participating in Arctic affairs. Since then, China has been constantly ramping up its research activity, accumulating experience, increasing its involvement and facilitating cooperation with other countries. China has been developing an integrated scientific system for monitoring oceanic, atmospheric, biological and geological processes in the Arctic. Being an important member of the international community, China is actively participating in creating international rules and regulations regarding the Arctic. China has launched the Belt and Road Initiative to build the so-called Ice Silk Road together with others, to create new opportunities for cooperation in enhancing transportation and communication and to promote sustainable social and economic development of the Arctic region. China and Russia share common interests in the Arctic, and our advantages complement each other. Our cooperation in the Arctic is becoming a new landmark in developing collaboration between our two nations. We have been working together to develop the Yamal LNG project and these joint efforts proved to be very efficient. They can serve as a role model of win-win cooperation between China and Russia. Our two countries have many other joint research projects. We hope that relations between our countries will grow even deeper and we will continue our strategic cooperation and partnership in the Arctic. 

SS: Like you said, China has been interested in the Arctic for a long time. Since 2015, China has invested 90 billion dollars in the Arctic region. Both Russia and China are developing new sea routes, new shipping routes in the Arctic. At the same time, the US is worried that China’s growing involvement in the Arctic may result in Chinese military bases popping up in the region. Are these concerns justified?

LH: No, these allegations are totally baseless. These concerns are not justified. We are willing to participate in the development of the Arctic region and to ramp up our economic engagement with other countries. But our involvement is limited to economy and trade and to cooperation with certain countries in trade. The concerns voiced by our American partners are completely unjustified.

SS: Thank you so much, Your Excellency. I wish you good luck!

LH: Thank you very much!