Chinese Ambassador to Cyprus: No one stands to win in a trade war

Chinese Ambassador to Cyprus Huang Xingyuan said that the trade war between China and the United States cannot solve the deep-seated problems of the US economy, no one stands to win from the trade war, and China will integrate into the world economy in a more open and inclusive manner.

China-Cyprus relations 

Speaking on China-Cyprus relations and cooperation between the two sides in the future, Huang Xingyuan said that China's Belt and Road Initiative is a result of the development of China's economic opening up. Cyprus has become an important hub of the Belt and Road Initiative because of its unique geographical location. The two sides have reached a consensus on mutual benefits and deepening cooperation. The President of Cyprus sent greetings to the Chinese people in the Lunar New Year of Pig, and was the first foreign leader to arrive in Beijing for the Second Belt and Road Summit. China and Cyprus have signed cooperation agreements in sectors including culture, education and communication. In particular, the agreement between China and Cyprus will greatly improve the information technology infrastructure of Cyprus and promote the development of the digital economy in Cyprus. At the same time, the native produce of Cyprus, such as Halloumi, wine and olive oil have entered the Chinese market, enriching the Chinese people's tables.

Huang Xingyuan said that since the financial crisis in Cyprus in 2013, thousands of Chinese families have invested in Cyprus and a Chinese community has emerged on the Island. Chinese investment activities have stabilized the Cypriot real estate market and played a role in the economic recovery of Cyprus. As more Chinese travel to and settle in Cyprus, relations between the two countries are entering a new level.

Trade war and the world economy

Huang Xingyuan also talked about the impact of trade war on the world economy from a historical perspective. He said that there was no winner in the trade war, which was supported by historical lessons. The Great Depression that swept the world in the 1920s and 1930s was triggered to some extent by a trade war between Europe and the United States. The Great Depression also contributed to the Second World War, plaguing people all over the world with disasters and sufferings.

Huang Xingyuan said that the real reason behind the US-Japan trade war between the 1960s and the 1990s was that the balance of economic strengths between the two countries had shifted. By the 1990s, Japan’s GDP amounted to 67% to 69% of the United States’ GDP, which made the latter nervous. There is similar to the current Sino-US trade war. With China’s strength approaching that of the US’s, the Americans would not examine their own problems such as unreasonable economic structure and low savings rate. Instead Washington has repeatedly chosen trade war as a simple solution to its own problems. We did expect that the trade war would come sooner or later. What we did not expect was how rough in manner the US could be. They are using all sorts of means, including detention of executives, robbery of goods, smearing and lying in broad day light. They even use administrative power and state power to cut off Chinese companies in the high-tech sectors, by stopping supplying parts to and suppressing and restricting Chinese high-tech companies. These unconventional means have went far beyond our imaginations and have raised concerns about a possible recession in the world economy.

China’s mentality towards Sino-US trade relations is that we do not intentionally pursue a trade surplus with the United States. China is a low-key and reserved nation. We recognize that an open US market is beneficial to China. However, China will respond actively if the Americans insist on a trade war. Chinese enterprises and China's national strength will grow stronger amid America’s embargo and our fight against it.

China is willing to conduct trade negotiations with the United States with an open and inclusive attitude. This is not only to stabilize Sino-US economic and trade relations, but also to stabilize people's confidence and expectations and stabilize the recovery and growth of the world economy.

Not afraid of trade war 

We are not afraid of either trade war or negotiation because we have our own bottom line and confidence. The trade war is a tipping point in the development of the US’s China policy. It is the result of the US's long-term strategy of contact and containment against China. We should be prepared for the possibility that containment and suppression will be the mainstream in American’s China Policy in a fairly long time frame.

China has become the world's second largest economy. Our advantages demonstrated in the development speed, economic volume, leadership of the China Communist Party, and the development model of the political system, especially China's leading position in the 5G field, have caused panic in the United States. It is impossible for China to give up its own development just to avoid panic in American, and it is impossible for Americans to give up its containment policy because of some gestures made by China. Therefore, the contest between China and the United States will be long-term.

He believes that during the trade war, the best reaction for China is to maintains its strength, endurance and take it easy, just mind its own businesses. Some counter-measures from Huawei in response to the US suppression are commendable.

He said that the speech by Ren Zhengfei, the leader of Huawei, reflected his strategic vision and broad mind, in sharp contrast with the stinginess and rudeness of Americans. Both Huawei and the US are climbing a hill. Huawei hopes to embrace its competitor at the hilltop. To their surprise, the US wants to raise stones to crush its competitors. But this will not deter us from climbing the hill.

Huang Xingyuan said that Huawei attached great importance to respecting and embracing its opponents, while preparing backups at the same time. Huawei safeguards interests and rights with legal weapons and wins sympathy and respect from the whole world.

He said that the Sino-US trade conflicts and the US crackdown on Huawei remind us that we must have a clear mind on the difficulty of reaching the summit, and we need to be fully prepared to ensure we could go far and steady.

Huang Xingyuan worked in the Chinese Embassy in Japan for 12 years and had a direct feeling of the Japanese-American trade war.

Speaking of the impact of the US-Japan trade conflict on Japan and what lessons China can learn from it, Huang Xingyuan said that the Japanese-American trade war began in the 1960s and covered wide range of products from textiles, steel to electrical appliances and automobiles, pretty much everything that Japan had an advantage over US. The result was Japan’s full submission and two lost decades. It is necessary for us to study the US-Japan trade war as a historical lesson, which would help us to better cope with our current situation.

According to Ambassador Huang, Japan and US have special relations. Japan is heavily dependent on the United States from military security to trade and economy. To a certain extent, Japan only believed in the United States. They learned from the US and envied the US. Their exports were also aimed at the US market. The key point was Japan was also seriously fearing the United States. This was not only because of the two atomic bombs of Hiroshima and Nagasaki, but also because Japanese post-war political and economic systems, even its constitution, were formulated with the help of the US. Americans know best where Japan's weaknesses and pains are.

In this trade war, Japan was always in a passive position. With the European countries following US’s directions, the United States forced Japan into signing the "Plaza Agreement," making Japan restrict its exports voluntarily, open its markets and lower tariffs, and allow Japanese companies to invest more in the United States.

The United States did not let Japan off easily. Some people say the last straw on Japanese economy was the sharp appreciation of Yen. In my opinion that the fundamental cause of the greater loss of Japan in this trade war was Japan itself. First is that the export-oriented economic structure itself is not sustainable; the second is the excessively rapid global layout under the expansion mentality; the third is the excessive dependence on monetary policy, which led to financial market turmoil and the real estate bubble; fourth is the limited achievements in industrial upgrading and domestic demand expanding. Japan was completely defeated, but the United States did not win either. US’s trade deficit persisted even today.

America’s hegemony

Huang Xingyuan said that the fundamental reason why US has provoked this trade war is its fear that China will break America’s hegemony, including in leading technology, setting rules and agenda. That’s why the Trump administration has hit so hard and wage a war in trade and technology against China even with itself also suffering losses.

The lesson we can learn from the Japan-US trade war is that compromises and concessions with no bottom lines will not ensure the opponent’s kindness. We should step up supply-side reforms to make our products more competitive. Thirdly, we should carefully make use of monetary policy tools to maintain the basic stability of the financial market and foreign exchange rate, preventing dramatic changes in RMB exchange rate, especially we should guard against the turmoil caused by the bursting of the real estate bubble.

We should also keep in mind that today's China is different from Japan. The scale of Sino-US trade has exceeded 500 billion US dollars, more than 10 times the scale of Japan-US trade. Back then, Japanese companies exported only for export, and Chinese products have been highly internationalized. There are also many American companies involved in Chinese manufacturing. Both China and the United States are in the same supply chain. Containing China will also hurt US interests, especially the interests of some American high-tech companies.

Huang Xingyuan said that it must be acknowledged that there is still a certain gap between China and the United States in science and technology sector. In order to get rid of the overall disadvantaged position in the field of science and technology, China should vigorously develop basic education and introduce talents. This is the fundamental response. Only by integrating the broader and deeper into the world economy, can the Chinese economy enhance its ability to withstand risks and make its due contribution to world economic growth.

Huang Xingyuan said, the result of protectionism is inefficiency and backwardness. After the subprime mortgage crisis in 2008, in order to reducing the market share of Japanese cars in the United States for the sake of American car manufacturers, the US government used its national powers, media and rating agencies to suppress the Japanese auto giant Toyota in a systematic way. However, the US auto industry has not improved as a result. China's rapid economic growth was a result of our opening up policy in the past 40 years, and China is determined to integrate deeply into the world economy with a more open attitude.