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Tectonic Shift in China: Xi Under Fire as China Realizes It Underestimated U.S. Trade Resolve

LINTONG COUNTY, CHINA - JULY 7: (CHINA OUT) Ancient terracotta warriors stand in a pit at the Emperor Qin's Terracotta Warriors and Horses Museum on July 7, 2006 in Lintong County of Shaanxi Province, China. The Emperor Qin's Terracotta Warriors and Horses Museum is the largest on-site museum in China …
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Chinese President Xi Jinping is facing backlash from within the Communist Party over his hardline stance in the trade dispute with the United States, Reuters reported Thursday.

Reuters reports:

A growing trade war with the United States is causing rifts within China’s Communist Party, with some critics saying that an overly nationalistic Chinese stance may have hardened the U.S. position, according to four sources close to the government.

President Xi Jinping still has a firm grip on power, but an unusual surge of criticism about economic policy and how the government has handled the trade war has revealed rare cracks in the ruling Communist Party….

There is a growing feeling within the Chinese government that the outlook for China has “become grim”, according to a government policy advisor, following the deterioration in relations between China and the United States over trade. The advisor requested anonymity.
Those feelings are also shared by other influential voices.
“Many economists and intellectuals are upset about China’s trade war policies,” an academic at a Chinese policy think tank told Reuters, speaking on condition of anonymity due to the sensitivity of the issue. “The overarching view is that China’s current stance has been too hard-line and the leadership has clearly misjudged the situation.”

This is a huge shift in sentiment among the Chinese elite. Through last year and at the start of this year, many of China’s top thinkers were convinced that China could prevail in a trade fight with the U.S.

The earlier Chinese view is still shared by many in the U.S. who take the extraordinary position that market economies and democratic governments are weaker than command economies led by authoritarian governments. Senator Brian Schatz last month claimed that China held an advantage over the U.S., prompting mockery from U.S. Trade Representative Robert Lighthizer.
“I’m saying we have to take a short-term view because we are responsible to our voters periodically,” Schatz said.

“So does that mean that democracies always lose to authoritarian governments?” Lighthizer shot back.

Views such as Schatz’s were common during the Cold War, when many prominent economists and political scientists argued that the Soviet Union’s totalitarian society could prevail over the U.S. Earlier in the last century, some had made similar arguments based on the perceived strength of Nazi Germany compared to the U.S.

The rise of a persistent “resistance” to Trump’s presidency also fed China’s miscalculation, according to Reuters. Many in China thought the U.S. was so divided politically, and opposition to Trump so adamant, that the U.S. would fold under trade pressure.

Chinese officials also misread their meetings with Trump administration officials this May.

“China thought it had reached a deal with Washington in May to avoid a trade war, but was shocked when the Trump administration, in Beijing’s eyes, went back on that agreement,” Reuters reports.

Trump administration officials, such as Larry Kudlow, describe the meetings very differently. They say that China refused to agree to any concrete changes to its objectionable policies, which the U.S. says facilitate the theft of U.S. technology.

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