Author: Yunshi (WeChat ID: yunshi911)
Recently, China and the United States have finally resumed contact – following the meeting between the Director of the Central Foreign Affairs Office and Sullivan in Vienna, on June 5th, Assistant Secretary of State for Asia Pacific Affairs Conda of the United States Department of State and Senior Director of China Affairs at the White House National Security Council, Bertrand, visited China and met with the Deputy Minister of Foreign Affairs in Beijing. The long-standing high-level contacts between China and the United States have finally begun to resume. And in the subsequent meeting, the Chinese official’s attributive was “candid, constructive, and productive” – this statement does give a rare positive impression in the current context of China US relations.
So, does this mean that the upcoming talks between China and the United States will be moderated?
My opinion is that negotiations have resumed, but relaxation is not necessarily necessary.
Firstly, strategic easing is impossible. As China and the United States have reached this point, it is basically impossible to return to the past strategically. Fundamentally speaking, the United States needs to use hegemony to bloodthirsty the world in order to maintain its own system and order from collapsing; And to the extent that China has developed to this day, if it wants to continue to move forward, it will inevitably conflict with the hegemony of the United States. Hegemony and anti hegemony have reached a historical stage where they have to collide, and both involve the fundamental interests of both countries, and a result must be separated.
So, there is no room for strategic easing between China and the United States.
Of course, even those who have a slight understanding of politics and economics can understand this. What everyone is concerned about is whether there will be a tactical easing – that is, a phased compromise, and then work together to cope with the global economic crisis, as in 2009.
In fact, I don’t think there is any sign of this yet – or rather, the two countries themselves have not made up their minds. So far, this round of China US meetings is only a negotiation for the sake of negotiation, and whether the final tactical easing will depend on the development of the situation.
How do you understand the above paragraph? We can explain it from two levels: tactical easing and negotiation:
On the surface, both China and the United States do have objective needs for tactical easing:
On the US side, after a year of interest rate hikes, interest rates have basically reached their peak, but inflation has not been effectively suppressed. The so-called global harvest only pits its own allies’ meat and vegetables, and the real target of harvest – developing countries led by China – has basically not eaten a few roots. At the same time, the economic crisis has become more and more intense, and the Silicon Valley Bank has exploded in the U.S. financial system. This series of events proves that although the United States is still prosperous on the surface, the systemic crisis is imminent.
More importantly, with the passage of the bill to suspend the US debt ceiling, the US will issue trillions of treasury bond in the second half of the year. In the current market environment, such a large scale of water pumping from the market is easy to detonate a bigger thunder than Silicon Valley Bank – once another bank of the four largest banks, such as Wells Fargo and Mombasa, explodes in this process, it will really be all over!
So, the United States is very eager for China to purchase bonds – after all, market liquidity is already very tight now. If the United States does not want the Federal Reserve to release water to buy bonds, causing the recovery cycle to fail, it can only seek the help of large overseas buyers – and China is not only the number one overseas buyer of US bonds, but also its international status and influence today, its choice is bound to trigger a chain reaction. As long as China takes the lead in purchasing, the market will have a great increase in confidence in US bonds and actively purchase them. Only in this way can US bonds be issued in full without causing financial system turmoil.
This is why the United States wants to ease its tactics with China.
And China also has reasons for tactical easing – the current economic situation, as you can see, is characterized by weak domestic demand, sluggish real estate, a significant increase in unemployment, urban investment bonds, and local government bonds at their peak. Even with the strong interest rate hikes by the Federal Reserve, China’s foreign trade has finally shown signs of decline – in May this year, China’s imports and exports reached 3.45 trillion yuan, an increase of 0.5%. Among them, exports reached 1.95 trillion yuan, a decrease of 0.8%; Import of 1.5 trillion yuan, an increase of 2.3%; The trade surplus was 452.33 billion yuan, narrowing by 9.7%. In US dollar terms, China’s imports and exports in May this year were 50.119 billion US dollars, a decrease of 6.2%. Among them, exports reached 283.5 billion US dollars, a decrease of 7.5%; Import of 217.69 billion US dollars, a decrease of 4.5%; The trade surplus was 65.81 billion US dollars, narrowing by 16.1%.
With the breakthrough in industrial upgrading and the accumulation and development of the the Belt and Road, in the past year’s US interest rate increase cycle, our foreign trade bucked the trend to record highs, becoming a key pillar to support China’s economy in the downturn of both investment and consumption. And now, with the continuous fermentation of the economic crisis and the tightening of the US dollar, this upward trend has finally come to an end. If the United States continues to sustain the interest rate hike cycle, the decline in China’s foreign trade will further expand. At this point, if China and the United States ease their tactics and achieve cooperation to jointly resist the economic crisis, then external tightening will ease, and the stimulus policies that have been stored internally can be safely implemented, and the economic difficulties can be reversed.
Since both China and the United States have a need for tactical easing, will negotiations, compromises, and cooperation be the next step?
This is not necessarily true. Although both China and the United States have a need for tactical easing, there are also obstacles to tactical easing. The so-called obstacles, on the surface, are due to the large price difference between China and the United States, but fundamentally, the struggle between hegemony and anti hegemony between China and the United States has reached a critical point.
This round of economic crisis and the US dollar interest rate hike cycle, we define it as a major change that has not occurred in a century. And the fact is also true. The reason why it has been raised so high is because the success or failure of this round of interest rate hikes and crisis response will have a critical impact on the strength of the United States and even its hegemony.
If the United States survives this time, it will still be the global hegemon and can continue to pull wool, while emerging countries will still live under the shadow of American hegemony – even China, as the number one emerging power, as the general backstage of the anti hegemonic alliance, and as the largest strategic competitor of the United States, will be targeted more forcefully by the returning United States, and become the leader in the big change, Other countries that have started to ride the fence between China and the United States will return to the wing of the United States – which means that China will face an extremely unfavorable overall situation in future strategic games.
And if the United States doesn’t make it through this time and falls ahead of China. That is the epic decline in national strength, the crazy collapse of US dollar credit, and the significant loosening of US hegemony. Next, China will rely on its previous large reserve of stimulus policies to save itself while driving a global economic rebound. In this process, it will use its huge consumer market to attract a large number of overseas countries into its own economic system, and countries will also accelerate their stance on China. Thanks to both internal and external blessing, China will truly compete with the United States in terms of Hard power and political and economic influence, and take the opportunity to consolidate the general trend of rising while falling. The game between China and the United States will also shift from the current historical stage of US attack and defense to the next historical stage of US attack and defense failure, and the national fortune in the next decade will be bright.
This is why both China and the United States are clearly suffering from death, but they both gritted their teeth and did not want to compromise first – this time, there has not been a major change in a hundred years, which is too important for both countries, so both sides want the other to compromise more, sacrifice less, and hope that they can occupy a favorable Ecological niche in this war relaxation. In order to achieve this goal, the United States would rather engage in a frenzy of reducing its balance sheet while providing targeted water supply to thunderous banks. It would rather issue bonds at a super high interest rate of 5 points – although this may seem like drinking poison to quench thirst, as long as it can be carried on, the United States is willing to drink even the poisoned wine when it comes to China. And the same is true in China – clearly holding a lot of cards in their hands, but fighting against the decline of real estate, high unemployment rate, increased risks of local and urban investment bonds, and not amplifying the bidding to rescue the market – in the end, both sides are so abusive that they don’t want to lose in the Sino US game, and don’t want the other party to take advantage.
Since both sides have this mentality, how can the tactics be relaxed? There is only one possibility of easing the situation, which is that there will be a mountain and a water shortage that cannot be sustained. If we continue to support it, it will explode, and we will have to accept the advice and give in.
But now, it’s clearly not yet the time. Although both parties are feeling uncomfortable and may have suffered internal injuries, at least on the face of it, both parties are still holding on – and on the surface, it seems like they can still hold on.
How can tactical easing be achieved in this situation?
So, since there is currently no room for tactical easing, why do we still need to meet and negotiate? Both sides continue to work hard, wait for whoever can’t work hard first, then negotiate again – after all, only then can tactical easing be achieved.
My understanding of this is that during the current period, negotiation is not a means, but rather an end in itself.
For the United States, it also understands that it is difficult to negotiate results at the moment. But now its situation is really uncomfortable, especially with the imminent issuance of bonds. If China does not take on the bidding or even dismantle the platform, the issuance of bonds is likely to cause chaos. In this situation, even if the United States does not want to surrender its chips and acknowledge it first, it must adopt a posture of easing tactics with China. Even if it cannot be negotiated in the end, as long as this stance exists, the market’s concerns about bond issuance leading to financial turmoil will be much reduced. Moreover, the negotiation process itself is also beneficial for both parties to reduce differences, enhance understanding, and rebuild mutual trust. Set up this contact platform first, walk and watch later. If the bond issuance goes smoothly, it’s just fine. If the bond issuance really goes wrong, causing one’s financial system to collapse and having to compromise with China, then there is a foundation. By achieving tactical easing, the efficiency of cooperation in rescuing crises will greatly improve. After all, after experiencing a financial tsunami, everyone knows that once a crash occurs, the time window for rescuing the market is very small, We must seize the time.
For China, first and foremost, we cannot rule out the same considerations as the United States – that is, in case we cannot continue to make progress first, we must quickly compromise and seize the time to use tactics to alleviate self rescue. However, considering that China has only been on defense so far and has not taken the initiative to launch targeted explosions against the United States – such as selling US bonds and accelerating the strong push towards de dollarization (currently, de dollarization operations are more like pushing the boat along the river). So from this sign, it seems that China should have more room to spare, believing that it can hold on longer than the United States. Moreover, with the overall pattern of the United States being strong, weak, and attacking while defending, the biggest possibility for the United States is not to accept China’s compromise, but to suffer a painful defeat when China is too weak to resist.
So this is not the main reason.
The most crucial reason, I believe, is also a means for China to stabilize the United States. After all, the current pattern is still characterized by the United States being strong, weak, and attacking while defending. So even if China’s tolerance is stronger than that of the United States, it is still worried that the United States will not be able to keep up with it – after all, if the United States really thinks it can’t handle it, there is another option – it is to tear down its face and fight in East Asia.
Although China is not afraid of going to war with the United States and is prepared for a major war with its current strength, given that time is on our side, it is definitely better not to fight.
Since we need to stabilize the United States and prevent it from jumping over the wall in a desperate manner, it is understandable to have the negotiation table re erected – although China does not expect any results to be reached now, the resumption of the negotiation mechanism still gives the United States at least a hope of not going blind (after all, it is not a last resort, and the United States does not actually want to fight). When he couldn’t hold on anymore, swaying and struggling between self explosion and arch fire, China could also use this channel to release some goodwill in a timely manner, and even offer some moderate concessions, to deter his intention to jump the bridge in critical times, in order to prevent him from being dragged down by domestic hawks or the malicious puppies of Japan and South Korea.
This is the real reason for the resumption of the Sino US meeting. The reopening of negotiation and meeting channels is not necessarily for tactical easing, but rather for establishing a bottom line communication mechanism. Both sides may not necessarily hope to reach a result through negotiation now, but only through this means, to enhance understanding, draw cards from each other, and rebuild some basic mutual trust as much as possible, in order to prepare for the next extreme situation.
Now that we have clarified this point, we understand that the resumption of the current meeting or even the resumption of negotiations does not mean that China and the United States are about to ease off. At least at this stage, negotiations are not necessarily aimed at solving problems. Negotiations are only for the purpose of negotiation, and their purpose is to lay the groundwork for future problem-solving. Friends who believe that negotiations have arrived and that the tactical easing between China and the United States will not be far away may have thought too much. The real decision on tactical easing depends on who can’t hold on first and who can endure longer. And this result may only be verified through time.