Economic Expert Assesses China’s Trade War Signals During ‘Two Sessions’ Political Meetings

March 11, 2019 Updated: March 11, 2019

Under the shadow of the Sino-U.S. trade war, the Chinese Communist Party has convened its annual “Two Sessions” meeting in Beijing.

Over the course of two weeks, the regime’s rubber-stamp legislature approves legislation and sets agendas pre-determined by the Party leadership. For the Party, the overall state of the Chinese economy—and the impact of the trade war—are the main subjects of concern.

The Epoch Times interviewed Cheng Xiaonong, a scholar of Chinese politics and economy in New Jersey who is also a visiting scholar at Princeton University, for his take on what signals the Chinese regime has given thus far at the Two Sessions, and how the trade talks will fare in the future.

The Epoch Times: On March 4, at a press conference for the National People’s Congress [NPC, the name of the regime’s rubber-stamp legislature], NPC spokesman Zhang Yesui responded to a question about the trade war, saying that the interests of China and the United States are deeply intertwined, and a confrontational relationship is not in the interest of either party. What do you think his words imply?

Cheng Xiaonong: I think that through the trade war, China has come to understand two things: one, that these types of tricks are not in a normal country’s path of development: bribing American scientists and technicians, plundering the technical staff of American companies, or attracting Taiwanese talent to work in China, etc.—using these types of methods to steal American technology. Or, they steal American professors, ethnic Chinese professors, through transferring the fruits of research from the United States to China.

The Chinese should understand that the game of theft and trickery is an evil path and that they ought to return to the righteous path. What is the righteous path? It is enterprises’ independent research and development of technology. Speaking of this, a normal human should also have this bottom line, not to steal. In actuality, the pressure from the United States is helping China to create an institutional environment that respects intellectual property rights and strengthens enterprises’ independent research and development.

To China, taking the righteous path would be a win. In the present Sino-U.S. trade war, the hand of the United States is to force China to take a righteous path. The United States is not trying to topple China. It hopes that China can develop its own economy, but it cannot rely on stealing and robbing.

The other point is, in the future China must develop peacefully, and should not rely on military strength to develop. Military struggle cannot bring about development. It can only lead to war. In the era of nuclear war and nuclear weapons, the ultimate result of provoking and pursuing war is extinction; then there is no development to speak of. Since we speak of peaceful development, China should not, and cannot think all day about how to deal with the United States, how to surpass the United States, and eventually how to suppress the United States. These ideas are actually all narrow-minded.

Chinese leader Xi Jinping, Chinese Premier Li Keqiang and Li Zhanshu, chairman of the Standing Committee of the National People’s Congress (NPC), sing the national anthem during the opening session of the NPC at the Great Hall of the People in Beijing on March 5, 2019. (Jason Lee/Reuters)

ET: The National People’s Congress is about to review the new draft of the Foreign Investment Law. This is the third review since the initial deliberation by the Standing Committee of the NPC in December last year. After three months of trial, the speed of legislation is said to be the fastest in Chinese history. If the NPC passes this legislation, will it help stop the trade war?

Cheng: The revision of the Foreign Investment Law is actually the core issue in Sino-U.S. negotiations. Because the original foreign investment law allowed China to force foreign companies to transfer technology, and also allowed Chinese capital to occupy a majority of shares so that foreign companies could not operate alone [required to create a joint-venture with Chinese company]. It had a range of discriminatory provisions.

These provisions are actually all for the purpose of facilitating the theft of foreign technology. The so-called not allowing foreign companies to occupy the majority of shares is also for the purpose of holding the status of major shareholder so as to pressure foreign companies to hand over technology.

The Standing Committee of the NPC formulated that one meeting be held every two months. However, in order to review and amend this foreign investment law, the NPC has held three meetings in two months and will continue to have meetings. In form, public appraisal for the deliberation was to end Feb. 24, and in the end enter the revisionary stage. The reason behind having more than four meetings in three months is that the United States has a deadline of March 1.

It has not yet formally passed. When passed, though the Chinese will be considered to have made some structural adjustments, Chinese companies will still need to be supervised. Because in China there are many cases of not complying with the law. Therefore, after the Foreign Investment Law has been revised, although in law the vile provisions have been removed, can it really be enacted? What if it can’t? These problems are precisely what the United States is currently negotiating with China. If it isn’t doable, if your actions don’t match your words, then we [the United States] will continue to impose tariffs.

ET: The United States has asked China to carry out structural reforms. Will this promote reform of China’s political system?

Cheng: I think this is an accompanying conjecture. It is a subjective wish, the hope that economic changes will bring about political changes. I want to say that one of the theories in the West is that when the economy develops, politics will move toward democracy. These types of theories have now proven to be wrong.

The economy develops and politics recedes; there are a lot of these situations. In Latin America, we are seeing the latest example in Venezuela. It was once “economically developed,” and then in the end came a dictatorship. Therefore, economic development does not necessarily lead to political progress.

The aim of U.S. negotiations is not to change Beijing’s political structure. Some people understand structural transformation as a political structural change. In fact, the structural reforms proposed by the United States are economic, such as allowing foreign companies to compete freely in China, China’s revoking of various restrictions on foreign companies, various unfair systems, etc.

ET: What do you think is the most critical issue in the Sino-U.S. trade war?

Cheng: Intellectual property rights. Right now many people focus on the tariffs. In fact, tariffs are only a method of the United States. That is to say, on the issue of intellectual property rights infringement, the United States is now requiring that China establish a new legal rules system on top of relevant legal system rules. This is to ensure that China will stop infringing upon intellectual property rights in the future, and stealing technology and human talents in the United States.

If China refuses to make any changes and insists on being a thief, then the United States has the means of sanctions, which is what these tariffs are. If you insist on being a thief, I will knock you out with these tariffs.

In fact, China should understand that the protection of intellectual property rights discussed by the United States is not only necessary for the United States, but also an internal necessity for China.

From the beginning, intellectual property rights infringement in China had no national borders; Chinese companies first stole from domestic counterparts. So why do Chinese companies not have technological research and development, and many companies are unwilling to independently develop new products? The reason is because it was stolen once it was developed, and successful researchers were picked up by domestic competitors. The methods China uses in stealing technology from the United States is actually a method commonly used in China.

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