Hedging Against the Unknown: PRC Media Coverage of the Sino-US Trade War

US President Donald Trump’s imposition of tariffs on foreign washing machines and solar products in January touched off a cycle of trade escalations between the United States and China, with immense domestic pressure on both sides to avoid appearing weak. A temporary ceasefire was declared in late May (Xinhua.net, May 25), but it did not last long. As of this writing, a trade war has begun in earnest, with both sides imposing significant tariffs on the other on July 5.

As tensions have escalated, Beijing has imposed strict controls on domestic media, limiting commentary to the most authoritative state-linked outlets, making them important sources for understanding Beijing’s strategic calculus. One prominent outlet, the Global Times (April 4) has also argued that it is necessary for PRC media to be actively involved in the trade dispute, to interpret China’s perspective for domestic and international audiences, and shape discourse favorably. A review of trade coverage the past half year can yield important insights, among them that the trade war took the PRC leadership by surprise, and that they have sought to hedge against a trade war’s downside effects by depicting national unity as key to victory in an uncertain situation.

Unexpected Conflict

Despite US President Donald Trump’s repeatedly endorsement of trade protectionism during his campaign, Beijing did not expect a large-scale trade war with Washington. Mainstream PRC media outlets refrained from harsh language in their coverage, for the most part, prior to the escalation of trade frictions in late March. Simply put, Beijing believed that bilateral trade, investment and commercial opportunities are ‘too big to fail’ (see, for example, Global Times, May 8).

Bai Ming, an expert with the PRC Ministry of Commerce, argued that China should explain to American businesses and the American people that trade with China is good for the United States, in the hopes that persuasion could head off a trade war (People’s Daily, April 23). Zhang Yansheng, chief economist at the China Center for International Economic Exchanges—a consultancy affiliated with the National Development and Reform Commission—wrote, “The trade imbalance is caused by the trade and economic structures of the two countries…The larger picture in Sino-American economic ties is cooperation instead of conflict, dialogue instead of trade war.” He also argued the China could shift its economic strategy by increasing imports, and that it might be possible to mitigate problems caused by imbalances in the trade relationship through increased purchases of American agricultural products, as well as oil and gas (Global Times, March 2; People’s Daily Overseas Edition, March 24; Global Times, March 30).

Exaggerated Advantages

The trade war has also surprised Beijing because of its confidence the United States would not start a conflict in which it would find itself at a disadvantage. This confidence stemmed from several aspects perceived to be favorable to China (People.cn, April 4; Xinhua, April 11).

First, China is the world’s largest manufacturing nation, the world’s largest trading nation, the largest holder of foreign reserves, and—for the moment—the second largest economy and consumer market behind the US. Since the global financial crisis, it has also been the largest driver of global economic growth (People’s Daily Overseas Edition, April 10; Global Times, March 25; People.com, April 4). Compared with Japan and Korea, both of whom were more willing to bend to American pressure on trade, China is more than capable of resisting. Despite a supposed domestic economic slowdown, Beijing took pains to emphasize that the PRC economy continued to grow at an impressive 6.8% in the first quarter of 2018. Growth in consumption accounted for 77.8% of the growth during the same period, possibly marking a fundamental shift in China’s growth mechanisms (People’s Daily Overseas Edition, April 23). A March 26 Global Times editorial observed that America’s supposed economic strengths had been exaggerated, and that the US was actually a “paper tiger” (Global Times, March 26).

Second, Beijing believed the US needs China more than China needs the US. In an April 12 article, People’s Daily Overseas Edition explained that American companies need China’s market, that China’s huge foreign currency reserves give it an advantage in a trade war, that America’s new trade barriers may offend other members of the WTO, and that external pressure will only accelerate the pace of China’s economic reform and growth. Strategic analyst Wang Xianghui, a PLA senior colonel and author of the popular book “Unrestricted Warfare”, argued that America cannot afford the catastrophic consequences it would invite if China decided to leave the dollar system and the America market. He added, “the costs [of doing so] for China’s development would be temporary, but it could put a complete end to the America-style globalization system and America’s global hegemony” (Global Times, April 10).

Third, domestic problems and international constraints would weaken the US in any such conflict. At home, the trade war caused immense market uncertainty, with major stock indices and tech stocks both seeing large, rapid declines (People’s Daily, March 24). U.S. farmers and liberalists would pressure the Trump administration to avoid a trade war of attrition with China (Global Times, April 9; People’s Daily, April 7). Nor is there much welcome for US trade protectionism among its European and Asian allies (People’s Daily Overseas Edition, March 26).

PRC media coverage has evinced a belief that China can claim the high moral ground as a defender of a liberal, open and multilateral economic order, in sharp contrast to Trump’s protectionism (People’s Daily, March 27). Chinese President Xi Jinping’s defense of globalization at the Global Economic Forum at Davos in 2017 was cited as proof of worldwide recognition of China’s leading position in the global order (Seeking Truth, May 15). Liu Xiaoming, the PRC ambassador to the United Kingdom, wrote in the Financial Times that, “Europe and China must stand together against protectionism,” indicating China’s confidence that it would find wide support in its trade war with America (Financial Times, March 28).

A Feast for Nationalist Propagandists

Possibly due to the perception that China could defeat the US in any trade war, much of the coverage in domestic media has taken a hard-edged nationalistic tone, using harsh words to mobilize domestic support and signal China’s unshakable resolve.

Some Chinese analysts argued that the US wants Beijing to sign a new Plaza Accord. The Accord, which Japan ratified in the 1980s under pressure from Washington, is believed by many in China to have caused Japan’s subsequent economic stagnation and recession. An April 7 Global Times editorial wrote, “Utilizing the [same kind of] national will demonstrated in the Korean War, China can defeat the Trump administration in a trade war…China suffered from its decisions to intervene [in the Korean War] temporarily, but…defeated Washington’s strategic pride and won America’s respect.” The editorial added, “Let America realize the special ability of the Chinese [people] to unite against foreign economic hegemony…Let the two regimes confront in a tit-for-tat trade war, and find out whether US or China can resist the pressure, and further develop.” A People’s Daily editorial published on the same day said, “Since America provoked the trade war, China does not have to restrain itself. It must make American pay for its misbehavior, and teach a lesson to those who show little respect for the rules of trade, and are unrealistically expecting others to give in.”

The nationalistic propaganda came to an abrupt end after the two sides reached what appeared to be an agreement on May 19. PRC official media said the agreement was a win-win, that both sides should value it, and that they should continue to cooperate in a spirit of dialogue and negotiation (People’s Daily, May 21). When President Trump announced he would proceed with tariffs on Chinese products on May 29, several days before US Secretary of Commerce Wilbur Ross was to visit the PRC for trade talks, Beijing framed Trump’s sudden policy shifts as an attempt to generate bargaining leverage, and accused America of damaging its own credibility, (People’s Daily, May 31). Trump’s announcement, however, was largely downplayed in mass media. On June 15, after President Trump announced plans to add tariffs on Chinese goods, Beijing responded with short statements from its Commerce and Foreign Affairs ministries, and the announcement of new measures to attract foreign investment by the States Council (June 15). The low-key reaction may indicate a willingness to de-escalate a trade war if possible.

Uncertain Strategic Impacts

The entire debate has also been framed by uncertainty on the potential implications of a trade war for China’s grand strategy. It is widely believed inside the PRC that the Trump administration is targeting China’s “Made in China 2025” initiative (Study Times, May 18). On April 7, People.cn wrote that the US was afraid that China could build a cutting-edge technology industry, and was hoping to delay “Made in China 2025” to maintain its hegemony in world trade and technology. Another piece claimed the trade war was only a cover for US attempts to down China’s technological innovation and development, and to ultimately contain its rise (People.cn, April 8). How should the trade war shape China’s strategy? Views differ on this question.

Wang Xianghui has argued that China’s prior development was based on engagement with the American-led global system. He has compared the two countries to two hedgehogs in a cold winter, trying to stay close enough to stay warm without hurting one another. Now, though, he argues that it is time for China to begin distancing itself from the US, lower its expectations, pay more attention to its domestic market, and cooperate with other countries to reduce China’s dependency on the US market (Global Times, April 10).

Some observers have called for a revised PRC foreign policy in the face of mounting US concern and resistance. Wu Xinbo, Director of the American Studies Center at Fudan University, believes the US has abandoned its previous strategy of engagement vis a vis China, and has adopted a more pragmatic approach characterized by tense competition in economics, technology and security. He believes the US will cooperate closely with regional allies to balance, deter and even contain China. He has suggested China should avoid a US-Soviet style cold war with America, and be willing to surrender short-term interests for the sake of long-term development where appropriate (Global Times, April 24). Ruan Zongze, vice director at China Institute of International Studies, believes China should stick to Deng Xiaoping’s guiding principle of “hide your strength and bide your time”, and avoid confronting the US directly.

Conclusion

Just as in the United States, there is no clear consensus in China about the nature or direction of US-China trade frictions. The shape of future developments will depend on which view prevails. If Beijing concludes that the US is containing China, it may be less willing to cooperate with the US on regional issues, and may move to enhance relations with other major powers and expand its presence in the developing world. Strategic distrust and misunderstandings between US and China may complicate the situation, making a tit-for-tat conflict more likely. At the same time, Beijing might opt to keep a low profile, avoiding direct confrontation with the US to buy more time for development. Neither approach, however, can guarantee a lasting accord between the two countries.

Duan Xiaolin received his Ph.D in Public Policy from National University of Singapore, and now works as an Assistant Professor in International Relations at King Fahd University of Petroleum and Minerals.