Wednesday, March 28, 2018

The sleeping Lion has woken up to shake the world



Just hours after Donald Trump’s announcement, China struck back to impose levy 15 per cent tariffs on 120 types of products including fruit, wine and steel pipes, worth US$977 million, 25 per cent tariffs on another 8 categories of products worth US$2 billion including pork and recycled aluminum. It’s allegedly, moreover, that China is ready to respond further in case the U.S measures were really implemented.

The American dared to take such drastic action against China because of their track record of winning. China, as usual will lose and fulfill the demand to make demanded concessions and give priority to the U.S’s interest.

History does, in fact, repeat itself. Look at all those horrible battles that took place in China, especially the Eight-Nation Alliance invaded China. The eight nations were the United State, Japan, Russia, Britain, France, Germany, Italy and Austria-Hungary.  When the international legations in Beijing were besieged by Boxer rebels supported by the Qing government, the coalition dispatched their armed forces, in the name of humanitarian intervention to defend their citizens in China, and a number of Chinese Christians who had taken shelter in the legations.

The war ended with a coalition victory, followed by the signing of the Boxer Protocol on September 7, 1901, undertaking to execute 10 officials said to be linked to the outbreak. The compensation has to compensate war reparations for a total of 450 million Chinese ounces of silver to the eight countries. The said amount is to be paid in 39 years besides seizure of valuable things.

Over the years, the U.S and China had had 3 major trade confrontations over textile in the 1980s, intellectual property in the 1990s and exchange rates in 2005. It was a height that we had never even dared to think about before, almost every time China was at inferior position and forced to make a lot of compromises compare to U.S which just made a token compromise.

Some economy analysist say, currently the actions taken by China is a temporary measure in the form of protest but it’s totally restricted. End of the day, China has to surrender and once again make concessions such as reforming the state owned enterprises at least contributed to the current imbalances.

However, some pro U.S observers even said, China would be cautious as the trade between U.S and China is much more important to the Chinese economy rather than for the U.S. On the other hand, varies studies suggested that it is the other way around due to the America’s economic might is fading.

According to Investopedia, U.S has been at the top list of the national economies globally since 1871. However, as the Chinese economy experienced astonishing growth in the past decades and began an unprecedented economic catch-up in 1978, surpasses Japan as world’s second largest economy since 2010. Nevertheless, it’s said that China is gaining on the U.S and catapulted to become the world’s second biggest economy. Surprisingly but not unexpected, some economists even claimed that China has already overtaken the U.S to become the world’s largest economy.

Historically, industrial revolution increased the efficiency and reduced the cost of production which caused Britain, the U.S and other European nations to produce goods far more than their populations. Moreover, the continuing industrial innovations in manufacturing, technological breakthrough and financial efficiency not only helped the U.S achieved high production but chart a course for U.S to become the world’s largest economy in 1900 and continuing to maintain U.S economy, political and then military dominance in the strategic economy environment that never stops evolving.

Although innovation never stops in the U.S and the Great Britain, never the less they are going through a process of de-industrialization. On the other hand, China not only industrialized on a spectacular scale but never stop innovating. The successful innovation and new technology is no longer progressing, instead its pace is accelerating faster than ever before. Under the circumstances, it brings China “huge soft power” and the ability to influence world economy.
                                                                               
With the equal access to advance industrial technologies, in addition to a much larger population, it had resulted China the dominant economic power, so as the political and military dominance in the world for the 21st century.


According to reports, currently the trade between two countries actually supports not less than 2.6 million jobs in the U.S across a large wide range of industries, including the jobs that created by the Chinese company in the U.S. As time goes on, the Chinese middle-class consumers will exceed the entire population of the U.S by 2026. The U.S companies can exploit the significant opportunities to tap into the new and lucrative customer base that can further boost the employment and economic growth. Even economic data show that nations have trading closely with China outperform other nations with less integrated trade ties.

In 2015 alone, China had purchased $165 billion in term of goods and services from the U.S, representing 7.3 % of U.S exports and about 1 % of total U.S economic output. 

Although some U.S manufacturing jobs have been lost due to trade deficit, but U.S firms manage to sell high-value products to China, including semiconductors, cars, trucks, construction equipment which support a very large number of jobs. In addition, U.S firms also export business and financial services, totaling $6.7 billion in 2014 and $7.1 billion in 2015. By 2030 the exports to China is estimated to reach more than $520 billion.

As China has become an integral part of the global manufacturing supply chain, its exports are comprised of imported components for final assembly. If the value of the imported components subtracted from China’s export, so much so the U.S trade deficit with China is reduced by half to about 1% of GDP, which is about the same amount as the U.S trade deficit with the European Union.

China has grown to become the 3rd largest destination for U.S goods and services in 2000. U.S exports to China directly and indirectly supported 1.8 million new jobs and $165 billion in GDP in 2015. The total economic benefits generated from investment by both countries respectably amounted to 2.6 million U.S jobs and about $216 billion of GDP.

Goods manufacturing by China also lower the prices in the U.S markets, dampening inflation and putting more money in American wallets. U.S consumer prices are 1% to 1.5% lower due to cheaper Chinese imports. The typical household earned about $56,500 in 2015; goods imported from China therefore saved the families up to $850 that year. Besides, if China stops buying Boeing, 180,000 American jobs could be lost.

Ironically, the U.S has enjoyed a dominance role in the global economy especially trading with China for such a long time, but the scenario might begin to change with the rise of emerging China.
                                                                                               
Some political analysts said, White House slapped US$60 billion worth of Chinese products is a “Thucydides trap” and is a catastrophic strategy to keep China down.

More than two centuries ago, Napoleon Bonaparte said: “China is a sleeping lion. Let her sleep, for when she wakes she will shake the world.”

On the other hand, China’s President Xi Jinping say, today, the lion has woken up. But it is peaceful, pleasant and civilized.

A central question that some political analysts ask is: Have you ever seen a peaceful, civilized and not aggressive lion?

In the art of War, Sun Tzu say, if you know yourself but not the enemy, for every victory gained you will also suffer a defeat and puff oneself up one’s own cost.

The question remains: Does keeping China down is the answer to the fading American Dream?

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