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China has unused weapons in escalating trade war: Don Pittis interviews FPI Senior Fellow Gregory Ch

Excerpt from a column published by CBC News on June 26, 2018. View it here.

China's strategic game

Whether or not Trump's tweet-led policy can be described as rational, Greg Chin, a China scholar at Toronto's York University, says it appears China is trying to be.

"A[s] far as I can read it, the Chinese haven't really gone for the jugular yet," says Chin, who is currently working on a book about the internationalization of the Chinese currency.

While Trump always quotes trade in physical goods, he fails to mention the huge value of goods and services sold to the Chinese by U.S. companies operating in China. As the trade war heats up, Chinese consumers could show their displeasure by cutting back on those purchases, doing significant damage to U.S.-listed companies.

There are many other things China could do, but so far Beijing has shown restraint, and Chin is convinced that, unlike many other countries, including the U.S. and Canada, China has a long-term plan worked out.

"The Chinese have actually had a lot of time to think about this," he says. They listened to "the noises" Trump was making during his campaign.

"And knowing China, they've been strategizing for a while. How do we deal with this guy and how do we roll this stuff out? And how do we not over-react when he's over-reacting?"

China holds a large chunk of the U.S. government's long-term debt, more than $1 trillion US.

It has an enormous and growing domestic economy. By some measures it is already bigger than the U.S. As former Goldman Sachs banker Jim O'Neill recently stated, China creates an Italy every two years.

It has depended on the U.S. for a lot of that growth. But now U.S. protectionism is adding pressure to look for new suppliers and new markets.

"The United States can do things that bring pain to China, the Chinese economy, Chinese companies," says Chin. "But at the same time I think the United States could overplay its hand."

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