The intensified U.S. economic offensive against China is weighing heavily on China's leadership. Instead of offering concessions, Beijing is hardening its position and stoking nationalism. Though the strategy will help Beijing build public support in the short term, it could backfire in the longer term.
With Washington's targeting of Huawei raising tensions to new heights, the U.S.-China trade conflict shows no signs of abating. Now, the Chinese government has hardened its position on trade and is seeking to fan the flames of nationalist sentiment.
Five days after Washington increased tariffs on $200 billion of Chinese goods, state broadcaster CCTV on May 13 used its most popular news program to issue a strongly worded statement exuding confidence in China's ability to stand up to the United States. The tone stood in marked contrast to Beijing's relatively muted attitude in the preceding months as trade talks dragged on.
The statement coincided with Beijing's announcement of retaliatory tariffs and a high-level Politburo meeting, suggesting a degree of consensus among China's top leadership. In the following days, a series of commentaries and editorials from the state media and affiliated social media accounts continued to whip up nationalist sentiment in the face of U.S. pressure.
Why It Matters
The shift toward a nationalist tone coincides with Beijing's hardened trade negotiating position, which includes its rejection of U.S. demands for changes to Chinese law. Now, China is sticking to its line that any deal must involve the removal of all tariffs, respect China's dignity and steer clear of expecting the country to purchase an unreasonable amount of U.S. goods. If Washington does not rethink its demands and the sides fail to reach a deal within the United States' four-week deadline, China is implying that it is willing to accept an escalation of the trade war. These developments, accordingly, mean Chinese-U.S. trade tensions are less likely to diminish any time soon.
If Beijing sees little prospect of a U.S. de-escalation, it could impose restrictions on U.S. businesses and individuals in China and even refuse to sell strategic commodities like rare-earth elements to Americans.
Beyond select regulatory obstacles, Beijing has yet to erect major official obstacles against U.S. businesses and individuals. This stands in contrast to Beijing's tougher approach to Canada, whose citizens and exports it has targeted. If Beijing sees little prospect of a U.S. de-escalation, it might impose restrictions on U.S. businesses and individuals in China and even refuse to sell strategic commodities like rare-earth elements to Americans. Increased nationalism could also lead to public boycotts, protests or even attacks on U.S. assets and individuals beyond the state's control.
An intensified conflict over trade and nationalism that results in harm to U.S. interests will make China less appealing to foreign investors, something Beijing can ill afford at a time when its economy is already slowing. Moreover, previous protests have shown that promoting nationalism can boomerang on the Chinese state and lead to unwanted social disruptions.
Given widespread and powerful resentment over China's "Century of Humiliation," nationalism can always be a powerful instrument to forge national cohesion during challenging times, allowing the Communist Party to muster popular support. Chinese President Xi Jinping has harnessed this force to manage the country's socio-economic transition. But despite increasing tensions with the United States since early 2018, Beijing had until now refrained from deliberate appeals to nationalism in the trade war, leaving more space for de-escalation and continued trade negotiations.