Beijing sees Trump’s hand and won’t fold: Pepe Escobar

Beijing sees Trump’s hand and won’t fold: Pepe Escobar for The Saker

With Sinophobic hysteria reaching new heights in US, China’s counter play is a massive new economic plan

Stranger things have happened.

Everyone was expecting US President Donald Trump to go nuclear by de facto sanctioning China to death over Hong Kong. In an environment where Twitter and the President of the United States are now engaged in open warfare, the rule is that there are no rules anymore.

So in the end, what was announced against China amounted to an anti-climax.

The US government, as it stands, is terminating its relationship with the World Health Organization (WHO). The geopolitical repercussions are immense and that will take time to sink in. In the short term, something must be blamed for the US’ appalling Covid-19 record, so it might as well be a UN institution.

Hong Kong’s preferential trade status will also be terminated, but in a hazy future in still undetermined terms.

Phase 1 of the US-China trade deal still stands – at least for now. Yet there’s no guarantee that Beijing itself won’t start to doubt it.

The bottom line: “Investors” were duly appeased, for now. Team Trump seems not to be exactly versed in the niceties of Hong Kong’s Basic Law, as the president stressed the “plain violation of Beijing’s treaty obligations with the United Kingdom.” The national security law was blasted as “the latest” Chinese aggression against its own special administrative region.

Now compare all this with the Two Sessions in Beijing ending the day before, with an intriguing, quite Keynesian performance by Prime Minister Li Keqiang. This was compelling as much for what Li did not say as for what he chose to put on the public record.

Let’s review some of the highlights. Li stressed that the NPC’s resolution putting forth a national security law for Hong Kong is meant to protect “one country, two systems,” and not as an “aggression.”

Instead of demonizing the WHO, Beijing is committed to a serious scientific investigation of the origins of Sars-Cov-2. “No cover-up” will be allowed, Li said, adding that a clear, scientific understanding should contribute to global public health. Beijing also supports an independent review into the WHO’s handling of Covid-19.

Geopolitically, China rejects a “Cold War mentality” and hopes China and the US will be able to cooperate. Li stressed the relationship could be either mutually beneficial or mutually harmful. Decoupling was described as a very bad idea, for bilateral relations and for the world at large. China, after all, will start to import more and that should also profit US companies.

Domestically, the absolute focus – 70% of the available new funding – will be on employment, support for small and medium enterprises and measures to encourage consumption rather than investment in infrastructure building. In summation, in Li’s own words: “The central government will live on a tight budget.”

If not completely Sisyphean in the long term, it will at least be a “daunting task” in Li’s terminology considering the previously stated end-of-2020 deadline would be to reach President Xi Jinping’s goal of eliminating poverty across China.

Li said absolutely nothing about three key themes: the alarming Himalayan border stand-off between China and India; the prospects for Belt and Road Initiative (BRI) projects; and China’s complex geopolitical and geo-economic relationship with the European Union (EU).

The non-mention of the last theme is especially noticeable after Chancellor Merkel’s quite encouraging assessment earlier this week and EU foreign affairs chief Josep Borrell’s remark to a group of German ambassadors that “the end of an American-led system and the arrival of an Asian century” is now “happening in front of our eyes.”

Confirming steady rumors emanating from Frankfurt, Berlin, Brussels and Paris, China and East Asia are taking precedence as the EU’s top trading partner. This is something that will be extensively discussed at the upcoming EU-China summit next autumn in Germany. The EU is going Eurasia. Team Trump won’t be amused.

Dancing with wolves, remixed

Predictably, the Beijing leadership needs to focus on domestic consumption and reaching the next level on technological production so as not to fall into the notorious “middle-income trap.” Fine-tuning the balance between domestic stability and a very strong and wide global reach is another task that brings Sisyphos to mind.

Xi, Li and the Politburo very well know that Covid-19 hugely affected migrants, farmers and small-scale family entrepreneurs. The risk of social unrest is very high. Unemployment protection is far from Scandinavian levels. So back to business, fast, has to be the top priority.

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