Why is China striking a defiant stance in trade war with US

Beijing: China struck a defiant stance on Saturday in response to President Donald Trump’s growing pressure on trade, blaming the United States for a breakdown in negotiations and saying it must withdraw its latest round of tariffs before a deal can be reached.

In a white paper released Saturday morning, Chinese officials showed little indication that they would back down, sending a signal that confrontation is the government’s formal approach to its trade dispute with Washington. The white paper came less than two days after the Chinese government threatened to put US companies and individuals on a blacklist if they stopped supplying their Chinese partners.

“China will never give in on major issues of principle,” the white paper said. “China isn’t willing to fight a trade war, but it isn’t afraid to fight and will fight if necessary. That attitude has not changed.”

How is this connected to FedEx?

The paper was released even as the official Xinhua news agency said Beijing will investigate whether FedEx Corp damaged the legal rights and interests of its clients, after Chinese telecoms giant Huawei said parcels intended for it were diverted.

Amid worsening tensions between China and the US, the Chinese commerce ministry said on Friday that it would draft a hit-list of “unreliable” foreign firms and individuals that harm the interests of Chinese companies. It gave no names. It issued the threat after Washington last month put Huawei on a blacklist that effectively blocks US firms from doing business with the Shenzhen-based telecoms equipment maker.

What have FedEx and Huawei said on this?

Huawei told Reuters that it was reviewing its relationship with FedEx which it alleged had diverted two parcels destined for Huawei addresses in Asia to the United States and had attempted to reroute two others. FedEx said the packages were “misrouted in error”. Xinhua, without elaborating, said FedEx recently did not deliver to the right addressees and addresses in China. The issue is a sensitive one because US intelligence officials have hacked Huawei equipment in the past, leading to concerns among Chinese officials that Chinese-made equipment could be intercepted. In a statement on its website, FedEx said it would “fully cooperate with any regulatory investigation into how we serve our customers.”

On Tuesday, FedEx China apologised on its Chinese social media account for the “mishandling” of Huawei packages and confirmed there was no “external pressure” to divert packages.

Why is the US wary of Huawei?

Washington believes Huawei, the world’s largest telecom network gear maker, is a potential espionage threat because of its close ties with the Chinese government.

Huawei has repeatedly denied it is controlled by the Chinese government, military or intelligence services. The issue has become a flashpoint in an escalating trade battle between the world’s two biggest economies.

What has China said about the trade tension?

The white paper was released at a news conference featuring Wang Shouwen, the Chinese vice minister of commerce and deputy China international trade representative. “When you give them an inch, the US wants a yard,” Wang said, adding that the US insisted on “unreasonably high demands” that crossed over into the area of “intervening with China’s sovereignty”. The Trump administration’s latest efforts to ramp up pressure on China “show very clearly who should take responsibility” for the current state of relations, he added.

So does that mean the tension will only deepen?

While the white paper did not list any specific new threats, it showed an “alarming” amount of defiance, said Diana Choyleva, chief economist at Enodo Economics. “It’s not necessarily an escalation as such, but a confirmation that China is now digging its heels in and preparing for a drawn-out conflict,” Choyleva said. “There won’t be any papering over the cracks as any potential trade deal would have been.” China uses white papers to detail and formalise its response to often contentious issues, indicating that the government holds a unified view on the matter.

Why is retaliating against US companies a risky strategy for China?

Many US companies are already reconsidering their dependence on Chinese manufacturing. Aggressive moves could only hasten that process, depriving China of a source of investment and jobs. “While it’s unlikely that foreign firms will start pulling out of China en masse, they are definitely rethinking the deployment of future capital and investments,” said Jude Blanchette, an expert on Chinese policymaking at Crumpton Group in Virginia. “It would make no sense for a large US firm to break ground on a new facility in China right now, given that there’s so much political and regulatory uncertainty swirling around.”

‘Huawei too close to Chinese government’

Acting US Defence Secretary Patrick Shanahan said on Saturday that technology firm Huawei was too close to the Chinese government, adding that Washington was concerned about cyber attacks and the theft of intellectual property. “Huawei is too close to the government,” Shanahan said at an Asian security summit in Singapore. The United States has accused Huawei of espionage, breaching trade sanctions against Iran and intellectual property theft. Huawei disputes all allegations against it.

— With inputs from agencies