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China Caves to President Trump in U.S. Trade War

China caved to President Trump’s Trade War demands as state-media published plans that foreign investors will no longer be subject to compulsory technology transfers.

As China’s Vice Premier Liu He was holding a televised meeting with President Trump in the Oval Office to announce big increases for U.S. agricultural exports to China, its Xinhua News Agency announced that China’s President Xi Jinping hopes to meet with Trump just before a March 5 vote by China’s National People’s Congress to ratify elimination of rules for foreign investment mandatory foreign technology transfers.

With the clock running down on Trump’s threat to increase a 10 percent tariff on $200 billion of Chinese exports to a 25 percent tariff on March 1, China is agreeing to meaningful structural trade reforms that the U.S. has been demanding for over a decade.

The move will open a wide swath of China’s internal markets that have been closed to U.S. service industry firms. The breadth of China’s “reform” regime supposedly includes elimination of non-tariff trade barriers such as eliminating state-sponsored cyber-intrusions and converting U.S. intellectual property rights, according to the Epoch Times.

With the draft legislation supposedly setting a goal of guaranteeing equal treatment of foreign companies already reviewed by the National People’s Congress Standing Committee in December, Xinhua stated: “Once adopted, the unified law will replace three existing laws on Chinese-foreign equity joint ventures, non-equity joint ventures (or contractual joint ventures) and wholly foreign-owned enterprises.”

Multinational corporations that massively outsource U.S. production jobs to China have acknowledged that China has run a balance of payments as a percentage of GDP surplus with the United States every year since 1993. But China’s trade surplus peaked at 8.7 percent in 2007 and fell to just 1.7 percent in 2017. That analysis ignores supply chain “value-added” inputs of Chinese parts and subassemblies in products that are “officially” labeled as exports from other Asian nations.

China assumed President Trump and his populist allies would politically be crushed in a Trade War, because 87 percent of the computer and electronics products hit by Trump’s tariffs are produced by Silicon Valley and other non-Chinese-owned factories, according to research by Syracuse University’s Mary Lovely and Yang Liang.

Analysis by the nonpartisan OpenSecrets website reveals that 2018 midterm elections fund-raising led by Silicon Valley and Wall Street Democrats, swamped Main Street and Ag-country Republicans by $385.4 million. Although Democrats successfully regained control of the U.S. House of Representatives, Trump’s energetic barnstorming campaign increased the Republican’s majority in the U.S. Senate.

America in early 2019 has enjoyed its strongest domestic job growth since the 1970’s and a parade of U.S. public companies reported record profits. But the Epoch Times tabulated that between January 29th and 30th, 230 public Chinese companies declared fourth quarter losses of at least 100 million yuan ($14.92 million).

The Chinese must accept that they catastrophically underestimated President Trump’s Trade War resolve to go all-in against China and its multinational corporate fellow-travelers. As a long-term player, China must now cut a deal with a relentless adversary, and hopes America elects a more pliable president in the future.

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