The Chinese system could be an advantage in a US trade war, but both countries could face ‘real harm’, according to experts
China’s political system – where state power and social control are dominated by the ruling Communist Party – could give Beijing an edge in a new trade war with the United States compared with other countries, experts and insiders have said.
But they warned that Chinese companies and local governments may lack the creativity to respond to a tariff war, as they rely on directives from the powerful central government.
US President Donald Trump stunned the world last week by announcing hefty new tariffs on imports from dozens of countries, including many of America’s closest allies. Chinese goods were hit with 34 per cent tariffs, and Beijing soon pledged reciprocal duties.
Zhu Feng, dean of the School of International Studies at Nanjing University, said China’s state-led administrative system had more room for “macroscopic prevention, adjustment and shifting to deal with the huge impact of the trade war on its economy and industry”.
If the trade war led to a sharp drop in China’s exports to the US, it would “have a catastrophic impact on the economy and damage people’s livelihoods and social stability”, Zhu said.
But China’s system would help the authorities address the challenges, Zhu added.
A political scientist based in eastern China, who asked not to be named, said the country’s advantage was that “the state level has more power and more means to control society, and it can even give direct orders to enterprises”.
William Hurst, Chong Hua Professor of Chinese Development at the University of Cambridge, said the “tariffs will cause real harm but this will not have a determinative impact on the Chinese economy”.
He said China was facing serious challenges to social and economic stability that were mostly domestic and had little to do with the US, referring to the country’s slowing economic growth.
Despite several measures introduced by Beijing to improve the economy, prospects for employment and income growth remain fragile, while a protracted property market slump and feeble investor confidence have significantly impacted household spending, undermining hopes for reviving the economy through consumption.
Experts agreed that a trade war between the world’s two largest economies would most likely worsen China’s domestic economic situation.
Shi Yinhong, a professor at the School of International Studies at Renmin University in Beijing, said China’s internal unity was “not very solid” because of the economic downturn and high unemployment.
“People’s livelihoods are the most real things, and weak employment and incomes are big problems,” said the political scientist in eastern China.
But it would be unlikely that China would see mass protests over issues such as rising prices, as in the US, he added.
The view was not shared by David M. Lampton, former president of the National Committee on US-China Relations and professor emeritus at Johns Hopkins University.
“This would almost certainly threaten domestic political stability in both countries given that legitimacy in our two systems rests substantially on economic performance,” Lampton said.
“Within days of last week’s promised hike in US tariffs, there were demonstrations across every state in the union. How certain can Beijing be that the same laws of political and economic physics do not apply to itself?” he added.
Analysts also warned that, under the impacts of a tariff war, the Chinese system could cause society to lose “vitality”.
Zhu, of Nanjing University, said the Chinese system was poor at “mobilising social vitality” to enable enterprises to be competitive and resilient.
“Under China’s system of concentrated power and corresponding ideological tradition, there is little room for initiative, creativity and exploration in society except at the top leadership level,” said Shi, from Renmin University.
“China does not have US-style elections. This has given Chinese leaders a longer planning horizon and a greater degree of freedom in handling domestic policy,” said Deng Yuwen, former deputy editor of Study Times, the official newspaper of the Central Party School.
“But they still need to respond to the demands of the Chinese people, including jobs, security and growth to reaffirm their legitimacy,” he added.
An official source with knowledge of China’s overall response preparations said an entire task force had been mobilised in Beijing that included not only key economic agencies, such as the ministries of finance and commerce, the People’s Bank of China and economic planner the National Development and Reform Commission, but also the propaganda and security departments, and social agencies to forge a “comprehensive response plan”.
“This is going to be a protracted war,” the source said.
“China’s formidable apparatus for maintaining political and social stability amid economic hardship is another source of confidence. By contrast, China’s leaders believe that over the long term, Trump is ill-equipped to withstand the political pressure that his tariff policies will generate,” said Gabriel Wildau, managing director of US-based consultancy Teneo.
Additional reporting by Sylvie Zhuang
