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Once again, the world was waiting for the unexpected to happen and for carefully crafted international agreements and political agreements to come out of the window if President Trump does what he knows best.
The next saga to be played will be the Trump – Putin summit, often delayed but now decided in Helsinki on July 16th. This will come after the US president has attended a NATO summit and a low-key official visit to the United Kingdom.
No country will fear the surprises of the US-Russia summit. the accusation in Europe against the Russian misdeeds, whether real or imaginary, in espionage badbadination attempts for interference and encroachment on the small European countries of NATO . A sudden rapprochement between the unpredictable American Trump and the more patient Russian President will certainly be more than a headache for many in Europe.
However, while the prospect of a thaw in US-Russian relations, like the dramatic but short of substance The US-North Korean summit in Singapore could be good news to reduce global tensions between the US superpowers and provide a hope of settlement on many issues, a new phase of US-China relations becoming more apparent with long-term consequences on trade and security. The Chinese have been preparing for the current cooling of relations to freeze the preparations for a trade war against the United States.
To underline the seriousness, President Xi Jinping personally chaired a meeting of the highest decision-making body in China, the Standing Committee of the Chinese Communist Party, in Beijing on June 21st. This was the first time that Xi's main meeting of the decision-making body has focused on Sino-US relations since his accession to the leadership position. An equally unusual two-day meeting of the Central Conference followed this meeting on work on foreign affairs, which has traditionally been held since 1989 in December. There, Xi would have spent time talking about Sino-US relations again. At this meeting, President Xi called on all provinces and ministries to prepare for a large-scale trade war with the United States.
American rights on $ 34 billion of Chinese goods
Why all this preparation? The Chinese authorities had concluded that it was inevitable that the United States would impose tariffs on Chinese goods worth $ 34 billion on July 6 and that they would therefore take measures to respond by applying their own rates. To give more weight to the deliberations, the Chinese Politburo Standing Committee also approved the State Council's plans to take "extreme measures" to counter the expansion of new businesses by US companies in China, especially in the financial sector. The Chinese had always left all the doors open to a trade compromise, as the United States would launch a new round of talks, China would be ready to negotiate, but this campaign has now expired after the United States had made their decision.
In any trade war, the first line of weakness or defense is the national currency as evidenced by the near-collapse of the Iranian Riyal in the face of tougher US sanctions. The Chinese did not take any risks and Chinese top financial officials commented on Beijing's financial response to impending commercial threats. The much-anticipated 50 basis point reduction in the RRR (Reserve Requirement Ratio) is expected to release up to 500 billion yuan / RMB for commercial banks, and another 200 billion yuan to ease tensions on small and micro-banks. companies. And since borrowing costs are still high and trade uncertainty is likely to persist, the People's Bank of China does not rule out two or three cuts of 50 basis points each for the rest of the year. l & # 39; year.
While trade tensions abound, officials also expect the Chinese currency to depreciate against the dollar in the short term. The Chinese Central Bank will not intervene in the foreign exchange markets and will allow the markets to determine the RMB exchange rate, while ensuring that short-term currency devaluations will not result in exits. mbadive amounts of capital. The Chinese also have another weapon to deploy against the United States on the financial markets but they are holding back for the moment. The Chinese central bank while refraining from increasing its holdings of US Treasury bonds, but will seek to reduce them "appropriately", but did not intend to dump large amounts of cash suddenly. This remains an option if the trade war becomes nasty.
Much at stake
The Chinese certainly feel that there is a lot to do to stay firm this time around. To this end, the members of the Central National Security Council and the Central Finance and Economic Commission also participated in the June 21 session of the Politburo Standing Committee as non-voting participants
. The United States considers China's achievements in the fields of science, the military and defense, trade and other areas as detrimental to the strategic national interests of the United States. The implication was clear: either China is backing down on these strategic areas or is facing more trade sanctions from the United States. The Chinese have noted more worrying threats from the Trump administration such as the characterization of the Chinese initiative "A belt and a road" and cooperation with Africa as a provocation to the Existing world order led by the United States. Above all, while President Trump promotes a "America-first" and "Made in America" political priority, the United States has made it clear that he regards "Made in China 2025" as a direct threat to national interests of the United States.
These deliberations are bleak because they concluded that the United States has identified China as its greatest potential adversary, even its biggest potential enemy, and that the Trump-Putin summit is accelerating that change. The Chinese are known for their patience and their forward looking look for decades while other national leaders evaluate geopolitical changes in terms of weeks or days. The Chinese now probably believe that no matter who sits in the White House, China will face more challenges and threats from the United States for the next two decades or so, and Sino-US relations will be even more difficult than ever before. They are not currently. But for the moment, China's leadership sees Trump as an attempt to intimidate China in the hope that they will "go to bed", and the only counter-footing to what They believe is a titling reaction at every stage. It is up to Washington to continue, and China must prepare for the worst with the United States. President Xi said that China does not want a trade war with the United States, but that the United States seems to want a trade war with China, and if so, China must fight back with force.
first, but also who can do the most harm. The Chinese believe that in response, they must hurt America, and they reiterated that China would never offer concessions on anything considered a "fundamental interest" – Taiwan, South China Seas, Diaoyu Islands, One Belt and One Road. Initiative ", and" Made in China 2025 ".
A British diplomat is believed to have noted that President Trump's key character strength is that he" thinks outside the box ", but added that He supposed that there was a box in the first place, and the new rapprochement with Russia and the tension with relations with China will certainly push back the limit of what goes in and out of these mysterious boxes.
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Dr. Mohamed Ramady is an energy economist and geopolitical expert of the GCC and former professor at King Fahd University of Petroleum and Minerals, Dhahran, Saudi Arabia and co-author of "The OPEC in a post-Shales world – where to go?" On Saudi Aramco 2030: Post-IPO Challenges.
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Last updated: Saturday, 7 July 2018 KSA 08:06 – GMT 05:06
Disclaimer: The opinions expressed by the authors in this section are theirs and do not reflect the point of view of Al Arabiya English.
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