China is better able to withstand a trade war than in the past

While President Trump threatens to raise tariffs on Chinese imports, he has an important point: the United States remains China's largest export market, with $ 500 billion of merchandise just last year.

But China is less dependent on the US market than it was ten years ago and, in some ways, is more likely to resist a trade war than the United States.

"The question is less about whether we can hurt them than to bear the pain, the better it is … And there is reason to believe that in the short term, the Chinese are better placed to handle that "Robert Ross, professor of political science at Boston College and expert on US-China relations.

China has become an economic superpower by becoming a major exporter, rapidly developing a large and highly efficient production base that has allowed it to sell cheap products around the world.

"We built China," boasted President Trump during a recent appearance in South Carolina.

But China has stopped diversifying its economy, which makes it less vulnerable to US pressure than it once was.

"The economy of China is much less dependent on trade and trade with the United States than previously," says Linda Lim, professor of business strategy and international trade at the University of Michigan.

"Trade accounts for about 20% of the Chinese economy," she says. "Ten years ago, it was 40%."

At the same time, US companies like Boeing, General Motors and Apple are now making a lot of money on the vast consumer market in China, giving Beijing an edge over the US economy which was lacking.

Chinese bureaucrats could make life very difficult for these companies if they wanted to, Ross said.

"All these various industries can develop problems in China," he says. "There may be health risks at a McDonald's, Starbucks could all of a sudden be the subject of investigation for profit problems and tax problems."

Of course, the United States can also hurt Chinese companies.

But the top-down nature of its economy gives Beijing weapons that are lacking in Washington. Unlike Trump, Chinese leader Xi Jinping does not need to worry about mid-session or congressional oversight when he acts.

Many Chinese companies can count on government subsidies to help them when things get tough and do not experience the same pressure from shareholders to make a profit every quarter, says Lim.

"If you do not need to earn money, it's a huge competitive advantage, so that they can absorb the cost" of a trade war , she says.

This is not to say that China is desperate for a trade war or can afford to be indifferent to its consequences, says David Dollar, who was the Treasury's financial emissary United States in China during the Obama administration.

"I would say it's a serious short-term problem for the Chinese and not such a big problem in the medium and long term," Dollar said.

$ 500 billion of China's exports to the United States equivalent to about 4% of its gross domestic product, and losing half of this product would be a blow. But China can gradually replace it by exporting to other countries, which it has been doing for years.

In fact, a trade war would only accelerate a process already under way in China to become more economically self-sufficient, Lim said.

"China wants to become more technologically independent and less dependent on foreign imports of high-tech products in particular, semiconductors and others, which it receives from the United States and elsewhere," she says.

"So, it's perverse, you reinforce their determination to be less dependent on you," Lim says.

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