President Trump’s decision to link U.S. tariff negotiations to China’s handling of the ongoing Hong Kong protests seems like a smart move. It amply demonstrates the importance of Hong Kong in the eyes of America and other Western democracies. It would also seem to give Chinese leader Xi Jinping even less room to maneuver, and may add leverage to the U.S. negotiating position.
Furthermore, Trump’s offer to meet with the Chinese leader face-to-face to resolve the Hong Kong crisis peacefully focuses the world’s attention on Xi, rather than Trump, as the source of potential violence and intolerance. But these advantages may not have the impact that Trump hopes they will. There are a couple of possible reasons for this.
Waiting for 2020?
For one, it appears as if China may have decided to wait out Trump and his trade war policies. If true, the hope would be that Trump is be replaced in the 2020 presidential election by a more pliable American president.
But if that’s the case, there are some vulnerabilities to that strategy. The most obvious one is that Trumps may win re-election. Another is that two more years of tariffs will have inflicted more damage on China’s already limping economy, including an increase in the exodus of manufacturers and capital.
Europe is the Key to China’s Growth
That’s why Europe, not Trump’s tariffs, may be China’s bigger concern. Xi understands that focusing on European trade is the key to lessening the impacts of U.S. tariffs. About one billion euros in trade takes place every day between China and Europe, and China’s investment into the European Union (EU) almost doubled from 17.3 billion euros in 2017 to 29.1 billion in 2018. That trade flow is vitally important for both sides.
Trade also gives Beijing the opportunity to expand its relations with the EU. Not only are the Europeans a much more willing trading partner than the United States, but China and the EU both share recent experiences and viewpoints in their difficulties of working with Trump. Beijing sees increasing trade as a geopolitical opportunity to pull the EU further away from American influence.
Hong Kong Policy Poses Risk to Xi Jinping
Xi may not admit it, but his Hong Kong policy risks reversing the trading relations China worked so long and hard to establish with the EU. And economically, with U.S. trade relations continuing to deteriorate, China can ill-afford to lose trading deals with the Europeans as well.
But remaining in the Europeans’ good graces won’t be as easy for China as it has been in the past. The Huawei spyware scandal, for instance, remains a sore point with much of Western Europe and highlights the EU’s concern about Chinese takeovers of critical sectors. In response, the European Commission recently laid out a 10-point plan to address the trade imbalance and unfair and destructive trading practices by China. Notably, that was before the events in Hong Kong began.
China’s European Press Campaign
These objectives help explain Chinese ambassadors’ concerted efforts to persuade Europeans to side with Beijing and against the protesters in Hong Kong. What those efforts lack in subtlety, they make up for in intensity. China’s anti-protester campaign includes writing op-ed pieces condemning the Hong Kong protesters, as well as public criticisms against those European governments that do not.
But will that be enough to pull Europe out of its traditional Atlantic posture?
Europe Remains Suspicious of China
Like the United States, the EU is very sensitive to the threat that China and its technology theft and consistent cyberattacks pose to their long-term well-being. Perhaps just as important, the liberal democracies of Western Europe are closely watching China’s behavior toward the Hong Kong students, who are protesting against totalitarian China to preserve what’s left of their own liberal democracy.
Still, Europe has yet to choose sides in the U.S.-China trade war. Furthermore, some of the southern and eastern European nations are the beneficiaries of billions in Chinese investments and would welcome more. But it’s Germany and France—the leaders of the EU—that will determine its direction. And though British statements advising China to avoid violence in Hong Kong are met with Chinese rebukes, it would be wise for the Chinese Communist Party (CCP) to keep in mind that Hong Kong, with its highly efficient legal and financial systems, is a West European (British) creation—not communist China’s—and plays a huge role in China’s financial relations with the world.
CCP Divided on Xi’s Lack of a Plan
But there may be another, internal political reason for China’s overt efforts to bring Europe to their side. According to the Nikkei Asian Review, Xi’s position within the Party is not as secure as some would believe it to be. Some Party members are at odds with Xi’s devaluation of the yuan, disagree with his refusal to name a successor, his growing personality cult and his management of the economy.
Furthermore, there’s a growing concern within the CCP regarding Xi’s year-long delay in delivering the next five-year economic plan. The CCP has always planned China’s economy with a long-term horizon, but Xi’s foot-dragging is making Party members nervous. Some members view the lack of a formalized economic plan as the bigger obstacle to China’s continued economic growth than the U.S. tariffs. These factors magnify the importance of maintaining and growing trade relations with Europe support, both in trade and geopolitically against the United States.
Xi faces a delicate and perhaps uphill battle to bring Europe over to China’s side. He realizes that if he treats Hong Kong like Tiananmen Square, he could lose support for his “One Belt, One Road” (OBOR, also known as Belt and Road) initiative, jeopardize trade with Europe and other trade advantages China currently enjoys. Crushing the Hong Kong protesters won’t just degrade communist China’s already tarnished reputation, it will blacken Xi’s as well, and sink his signature international development plans.
Xi must surely be weighing these potentialities; otherwise, tanks from the People’s Liberation Army would have rolled into Hong Kong weeks ago.