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China seeks to avoid a cold war

President Xi Jinping of China set out his vision of the future in a wide-ranging speech to the online Davos assembly. Here’s how he sees the US relationship developing.

On Monday, President Xi Jinping of China set out his vision of the future in a wide-ranging speech to the online Davos assembly. Here’s how does he see the US relationship developing.

by
Charles Stanley

in Features

27.01.2021

Monday’s speech was an important statement from a government which does not make many interventions in the global debate. It was an appeal to the developing world, stressing China's commitment to their futures and reminding them of the Belt and Road vision. It was both an offer of a more collaborative future for the world – and a warning to the USA.

China offers the world the "path of peaceful co-existence, mutual benefit and win-win co-operation". It wishes to step up "world macroeconomic policy co-ordination to achieve strong, sustainable balanced and inclusive growth". President XI is concerned that the north-south divide remains and inequality is too great. He proposes a new world deal to close the gap. He envisages a "coming together against global challenges to jointly create a better future for humanity."

Countries, he says, should stay committed to international law and rules and not seek supremacy. They should stay committed to consultation and co-operation instead of conflict and confrontation. "We should respect and accommodate differences, avoiding meddling in other countries internal affairs". The developed world needs to "stop (the) unilateral practice of keeping advantages in development all to oneself". He wishes to see efforts to address climate change increased to promote more sustainable development. There need to be rules for global digital governance.

US will still act tough

President Biden will doubtless use more diplomatic language in response than President Trump often used – and will see where the USA and China can find agreement – but the Biden Administration has already opened some fundamental disagreements with China.

China thinks its treatment of the Muslim population in the West is both reasonable and a matter for Chinese law. The US has called it genocide. Similarly, China does not appreciate the US removing special trade privileges from Hong Kong and continuing to criticise the government of that region. China does not like President Biden confirming US military protection for Taiwan and has been testing Taiwanese and US defences in the area with a series of military flights. There are no signs that President Biden will relax the strictures over intellectual property, nor volunteer a return to sharing technology or reaching a common system for digital communications and social media.

China appeals to the wider world by stating it wishes to help countries over Covid-19 and states that 150 different countries have now received some pandemic assistance. It wishes to strengthen its role in bodies such as the World Health Organisation. It has improved its offer on cutting its large output of carbon dioxide. President Xi now expresses the hope that China will see peak levels of CO2 output before 2030 – and will cut the amount of carbon per unit of GDP by 65% from 2005 levels by 2030 instead of the 60-65% previously promised. China has announced more wind and solar investment but will still only produce 25% of its primary energy from non-fossil fuels by 2030.

Xi’s offer

President Xi suggests China will open its markets more and will collaborate more. He does not want President Biden to pursue his idea of a strong western alliance against the features of Chinese policy he most dislikes and will hope he can work away at detaching the EU from the US if Washington persists with its challenges to the Chinese approach. The draft Investment Agreement between the EU and China will limit the EU’s willingness to join US criticisms of Chinese policy.

The Chinese Central Bank at its latest Monetary Policy Committee pledged to keep things stable. It wishes to see a stable currency and will aim to keep money growth in line with nominal GDP growth. It will provide more support for technology and small business. It has been successful with the government in allowing full recovery of lost output from the Covid-19 lockdown already and can look forward to a year of good growth in 2021. It was keen to reassure that it will "follow the guidance of the Xi Jinping “Thought on Socialism with Chinese characteristics for the New era". It will be pleased that there is now an updated statement of that from the President himself. His ambitions now encompass tackling world inequalities and extending Chinese influence to many more parts of the developing world.

The world's second-largest economy does wish to see a better global recovery from Covid-19 and is concerned about damaged supply chains and interruptions to world trade. It would like a diplomatic truce with the West but will not accept western criticisms of what they regard as internal matters. It is ready to rally support in the developing world if President Biden builds an alliance to pressurise them on trade, intellectual property and human rights.

The Chinese market is backed by good economic prospects and is still well below previous extended highs. It is likely to stay at a discount all the time US investors and their government are critical of China. The tougher restrictions on technology transfer and use may well lead to a strengthening of the Chinese technology sector as it seeks self-reliance and develops a different, rival system to that of the US.

Nothing on this website should be construed as personal advice based on your circumstances. No news or research item is a personal recommendation to deal.

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