Three reasons for a trade war with China will make China stronger

Us tariffs on China are (in the short term) not a good thing. But in the long run, Mr Trump's pressure will make China stronger. It will help China speed up its economic restructuring, place greater emphasis on innovation and boost national pride.


Technological progress was crucial to the building of empires and the rise of great powers. The fourth industrial revolution will shift international competition from Labour, territory and soft power to new technologies such as robotics, artificial intelligence and wireless services.


Until recently, us policymakers thought the us was a technological superpower. China is seen as a copycat and will only clone American technology or buy American innovators to absorb intellectual property and technology. But in the next generation of ultra-fast Internet technology, 5G, the us is lagging behind. No American company makes wireless networking gear like huawei.


Huawei's 5G power and impact can be seen as China's Sputnik moment. Just as the Soviet union was the first to launch a satellite, China is now ahead of the rest of the world in 5G development. China has long recognized the dangers of relying on the United States technologically and economically. Huawei is the product of the Chinese government's industrial policy strategy.


China aims to make 80 per cent of artificial intelligence at home, to minimise dependence on foreign countries for the technology's complex components, and to become a leading centre for ai technology by 2030. China's strategy has worked -- 48 per cent of global ai financing in 2017, for example, was Chinese. So banning huawei and imposing tariffs on Chinese goods won't slow China down -- it will spur the country's new innovation system and boost independent research.


Another consequence of the U.S. trade war with China has been to accelerate the rebalancing of the Chinese economy away from external demand and investment toward domestic demand. This process, which began with the global financial crisis in 2008, has become increasingly necessary as China's middle class expands. Since then, the government has led large-scale infrastructure investment, taken measures to increase incomes, reduce income taxes and improve the social security system to help expand domestic consumption. In 2018, when trump first announced the tariffs, final consumer spending contributed 76.2% to China's GDP growth. Since then, Beijing has adopted new policies, including tax cuts, improved child and pension plans and other incentives. So the trade war has (in effect) helped China redistribute wealth and rebalance its economy.


The trade war has also united the Chinese people around the government. The Chinese see us treatment of Chinese companies as bullying and compare it to the unequal trade imposed on China by western powers in the 19th century. Chinese society is seething at the mention of the topic, adding to domestic support for the government.


The Chinese word for crisis consists of two meanings: danger and opportunity. The country's ability to capitalize on the current challenge from the United States will make it stronger in the years ahead.

US.VS.CHN