For the Beijing government, the Hong Kong crisis is gaining momentum, and it is drawing global attention with its strong images of young protesters defying black-clad policemen. The August 5 general strike was at least partly a failure but at night protesters attacked a Police station starting a fire. Many believe the police might intervene soon to restore some kind of peace with unfathomable consequences.
This is overshadowing the US-China trade talks, which only a few days ago kept the world in suspense with their massive implications. The trade talks have not been successful, and it is unclear whether and when there will be any progress. The RMB collapsed beyond 7 against 1 US dollar. Apparently, China wants to use devaluation of its currency to make up for the new tariffs. The Dow Jones reacted by plummeting 750 points, the biggest drop in 2019.
In fact, as Edward Alden argued, the US might have made a mistake in its choice of strategy in dealing with China on trade.
In fact, there are three sets of problems between the US and China, plus the Internet-technology issue hanging over all three:
- Trade: market access, state support to industries, dumping, debt, financial market transparency, IPR theft
- Human rights and political transparency: religious freedom; rights of minorities, including Muslims and Christians; plus political opacity, freedom for human-rights advocates, lack of democracy
- Military-strategic: border issues with neighbors, military buildup.
- Cyberspace: new security challenges, technological buildup, 5G and future 6G, new business and security dimensions
These problems are specific to the US and China. But China does not only have these sorts of problems with the US. Moreover, these problems are interconnected. Until sometime in June 2018, China underestimated the importance of trade talks. Yet as soon at Chinese leaders realized their importance, Beijing also began to comprehend that trade was not an isolated concern, as it was with trade discussions with Germany or Japan, but it had far-ranging consequences for the other areas listed above.
Moreover, there are graver consequences for global trade and the economy, thus impacting China as well. If China stonewalls an agreement, much of the present economic and commercial order will tumble down and crash, as de facto China’s commercial decoupling with the US would upset all global trade (which is centered on US rules) because of China’s size. That is, China would pit itself against most of the world, or at least much of the global GDP. Because of the size of the challenge, this would be very bad for China, when “China versus the US” would already be very bad for Beijing.
Neither can China hope to gain much more time to move one way or another on trade and other issues. The Hong Kong demonstrations have a dynamic of their own, and the narrative, which is beyond the control of any government, could soon compel the world to pick sides between the local police and the demonstrators, thus hijacking whatever the US government (which is different from the US in general) wants to achieve with China, and vice versa for the Chinese government. Something has to give fast, some minimal agreement on trade would be best as at least it would douse some water on the fire.
It is all bad for everybody – for the US but especially for China, which has a smaller economy and is politically more isolated than the US. Perhaps Beijing should start thinking outside of her traditional box and set her mind on facing all these issues in a creative fashion and in coordination with the world. Here there are two institutions that are in a more neutral position vis-à-vis both sides: the UN or the Holy See. The UN’s clout, unfortunately, has been waning over the past thirty years. In the meantime, Holy See is gaining more credibility all over the world. It is a religious institution, but it is also highly authoritative. It could lend a hand in finding some solutions for all the present issues.