Xi Jinping has been preparing for years at this moment.
In April 2020, long before President Trump launched a trade war that shook the world economy, China's top leaders held meetings with senior Communist officials, laying out his vision to change the tables of the US in conflict.
Tensions between his government and the first Trump administration were competing for previous tariffs and technology restrictions. Things got worse after the emergence of Covid, which stopped global trade and stopped the extent to which the US and other regions needed everything from surgical masks to painkillers, and eradicated world trade.
Faced with Washington's concerns about trade imbalances, China may have launched its economy with more foreign companies, as it had promised it would do decades ago. They may have bought more American planes, crude oil and soybeans, just as authorities promised Trump during trade talks. Many American manufacturers have gone out of business, and it is possible that they have stopped subsidies for factories and state-owned businesses that manufactured steel and solar panels at very low prices.
Instead, XI chose a proactive course of action.
Chinese leaders “must strengthen our international production chain's dependence on our country and form a powerful capacity to counter and deter China's artificial disruption of supply by foreign parties,” Xi Jinshu said in a 2020 speech to the Central Economic Commission.
Simply put, China needs to control the supply of what the world needs. It makes them think a lot about using tariffs on the enemy or trying to cut off China.
XI has increased exports and deepened China's position as a world-leading hub by instructing the state-controlled commercial banking system to lend another $2 trillion over the past four years, according to data from China's central bank. He also introduced a new economic war in the country's arsenal of export restrictions, anti-Monopoly laws and blacklists to return to American businesses.
So, when the current Trump administration slapped huge tariffs on Chinese goods, China was able to continue its attack. In addition to retaliating with its own taxes, it also imposed export restrictions on the wide range of important minerals and magnets that China has cornered the world. These minerals are essential for assembling everything from cars and drones to robots and missiles.
In the US, the looming threat of empty store shelves and rising consumer prices is putting pressure on the Trump administration. Prices for some key minerals have tripled since China announced the curb, according to Argus Media, a London product research firm.
“It's about inverting leverage so that the world depends on China and China doesn't depend on anyone. This is a reversal of what XI was very annoyed: China was very dependent on the West.
China still relies on the West on many advanced technologies, such as high-end semiconductors and aircraft engines. But willingness to weaponize supply chains may be one of the toughest examples of XI redefine China's relationship with the world and challenging US hegemony so that there is no Chinese leader before him.
Make the world choose your aspects
They are now in discussions that American officials say are aimed at removing tensions, but the two countries appear to be based on unbanned competition, particularly over key technologies that shape the future, such as artificial intelligence.
Their rivalry could cut the world off into competing territory of influence. The pressure to choose the side is increasing as the US pushes other countries to limit trade with China and warns Beijing to punish countries that do so.
“The Asian Studies of Georgetown University,” said Evan Medeiros, a professor of Asian Studies at Georgetown University, who was President Barack Obama's Asian Advisor.
“The whole world,” Medeiros continued, “We are trying to learn the answers to very important questions. How do we rely on trade with China, how much is it worth to us?”
Already, the Trump administration has shown that it cannot completely cut off trade ties with Beijing. China's smartphones, semiconductors and other electronic devices have been exempt from their tariffs. Trump also returned tariffs to the car manufacturer. China has also quietly stated that it could rule out some semiconductors, life-saving drugs and other healthcare products from the 125% tariff on American products.
Still, the tariff barrage is hit by the heart of China's growth engine. Exports are one of the only bright spots in an economy that has been severely weakened by property crisis and slacking consumer trust. A trade war could lead to millions of lost jobs in China, analysts estimate.
“Never kneel!”
Xi has long said that the US has been bent on thwarting the rise of China, and that the trade war appears to have validated his warnings.
Analysts say he appears to have a tendency to stretch Chinese muscles, and sees the trade war battle as a test of his authority as the most powerful Chinese leader since Mao Zedong. And his strategy reflects his perception that China is no longer weaker than the US.
When he came to power in 2012, Xi Jinping promised to pursue a “great renewal of the Chinese nation.” That ambition lies at the heart of the myth created around Xi. He is a transformative figure who restores China's glory, reversing the humiliation of foreign forces.
To achieve his goal, XI changed the rules to keep him in power indefinitely. He made national security a priority for all society. He believes that he will pour money into strategic industries like semiconductors and help China compete better with the US.
China has expanded its control of lithium-ion batteries used to power electric vehicles, cutting-edge robots for manufacturing, solar panels and wind turbines. Experts say China has also caught up with the artificial intelligence US, and is considered the next battle for the Industrial Revolution.
It also tightened the grip on China's vast propaganda equipment. This has increased in recent weeks to rally the masses for a prolonged “struggle.” The Ministry of Foreign Affairs posted a video on social media about the trade dispute, entitled “Never Kneel Down!”
“The trade war is the ultimate testimony of hostile forces in the West trying to contain, restrain and siege China,” Asdal said. “xi says, 'We have to be strong enough and strong enough to fight back.' ”
He could spin a tactical hideaway to beat Trump, even if XI had to retreat first.
“This concentration of power will prevent Chinese leaders from challenging drastic policy decisions and can reverse courses in the same way,” wrote Zongian Zoe Liu, a fellow member of the Council of Foreign Affairs, in a recent article in the Journal of Foreign Affairs.
Costs to China
It is not clear that XI's long-term strategy will make China stronger enough to overtake the US as the best superpower. The focus on critical technology and economic independence has worsened friction with China's trading partners, and has cost many Chinese families.
American leaders have said that if China expands its economic link west, it will gradually move towards political liberalization and a full embrace of the free market. However, China advanced on its own terms, blending the one-party authoritarian system with capitalism, enriching it without losing political control.
XI doubled that model, directing more capital to state-owned enterprises and banks, and letting the Communist Party say more about the direction of the economy. Entrepreneurs were once given space to grow, but under Xi, the authorities decide which industries will flourish and which will destroy. A more open economy driven by market demand rather than political missions could have expanded the rank and influence of Chinese companies and middle-class consumers.
But it may have challenged the party's control over society.
“This is not the economy that the statistical government wants. This is why impermeability has long been perceived as a problem at even the highest levels of government,” said Yasheng Huang, a Chinese economy expert at Sloan School of Management at the Massachusetts Institute of Technology. But “there were no equivalent reforms,” he added.
Experts have long argued that social welfare spending will make China's economy more balanced and reduce its vulnerability to the West. Chinese economists are urging the government to invest in hospitals and pensions to help rural migrants living in cities with hundreds of millions of people qualify for urban benefits. Such steps are considered important to encourage ordinary Chinese citizens to save less and spend more money, and contribute more to the country's growth.
Some experts even question whether XI should be very aggressive in challenging the US rather than following the famous dict formula of former top leader Deng Xiaoping.
“China is still ambitious without reaching the status of a superpower,” said Shen Dingli, a Shanghai-based scholar focusing on US-China bonds.
Shen cited Beijing's vast claims in the South China Sea. The erosion of Hong Kong's autonomy. And the flood of China's exports that makes it difficult for other countries to compete in trade. In summary, they alienate most of the world and contribute to Xi Jinping's calculations.
China once had a “favourable external environment” to develop as a nation, but that has “deteriorated,” Shen said. “It's very unfortunate.”
Minister Wakabayashi contributed to reports from Seoul, Berry Wang and Hong Kong's Joy Dong.
