Trade War: What Trade War?
We’re all buying into the myth of a trade war with China, or China is isolated from the global community but it just isn’t true, no matter what the headlines say, the truth is very different.
First of all, to see how serious this problem might be, we need to separate the few countries that reportedly have problems with China from the many countries which don’t.
Much of what we know as the “international community” do have problems with China. They believe China is a threat to them and they believe they need to de-risk but, despite tensions, robust trade continues.
Actual membership of this international community remains nebulous but, according to some academics, it consists of as few as 10 countries led by the USA, including some EU countries, Australia, the UK, Canada and perhaps, but to a lesser extent, Japan and South Korea. These countries, all aligned with the USA, seem to have a problem with China.
There appear to be no Middle Eastern, no Eurasian, no African and no Latin Americans in this international community. No Muslim country claims membership either. As far as Asia is concerned, there may be more but the two aforementioned are bristling with US bases, and both Japan and South Korea have large portions of their communities who do not want this situation to continue.
Countries not forming part of this “International Community” do not seem to have a problem with China. There are 195 countries in the world and 147 of them have signed up to the Belt and Road Initiative. Furthermore, dozens of them have indicated a desire to join BRICS. They don’t see any threat from China, they see opportunities.
The USA has sanctioned and banned some products to, or from, China, and the “international community” has followed suit. China, on the other hand, has not. That’s correct, China has not banned the export or importation of any products. It has referred some to the World Trade Organisation, it has placed restrictions on some but it hasn’t banned anything other than Australian lobsters and wood, reasoning that they were contaminated. Both problems are now addressed and both should resume trading soon.
A few people will challenge this because it’s been reported China has banned Gallium and Geranium but they haven’t. They’ve restricted them to sale under licence, and that’s very different. Unlike the USA, which did ban the sales of certain chips and the machinery to make them, China has not prohibited the sale of these two minerals. If the USA, or anyone else, wants to buy them to make products for peaceful purposes, they can do so under licence with end user certificates. If they want them to make bombs, military hardware or other implements that might be used to kill, then they can’t.
That’s what de-risking ought to mean.
On the topic of threats, while we could argue that a three-week incursion into Vietnam in 1979 was an exception, China has never invaded, occupied or colonised any country anywhere in its history whereas, the International Community broadly consists of invading, occupying and colonising countries.
If we look closely at the countries claiming China is a threat to their national security, their freedoms or their democracy, we’d expect to find declining trade figures and, if we just read media reports, that’s what we do see. However, if we look beyond the headlines and see the real trade figures, the opposite is true, it seems we’re being conned!
Many countries feel some perceived threat from China but Australia holds a special place in the trade war narrative and, despite this, China is, by a huge margin, Australia’s largest trading partner.
China did prevent the importation of some coal and it’s now a matter of public record, having been tabled in parliament, that the Australian coal industry was lying about the quality of their exports; China picked them up on it and stopped them. It’s also worth noting that days after China temporarily stopped importing Australian coal, USA increased their coal sales to China by 900%. It’s also true that when China placed tariffs on Australian wine, and restricted the import of Australian lobsters, the slack was immediately taken up on each product by Australia’s closest ally, the USA. For the record, full Australian coal exports to China restarted in February 2023.
Australian media tells us that China is buying up all the farmland; but it isn’t true. Closer examination indicates the purchases went from 1.7% to 2.4% and that included Hong Kong’s ownership of the foreign owned land, even that has now declined to virtually none. Note that 2.4% was China’s share of foreign owned land, not of Australia. The Netherlands, USA and UK all own a lot more.
Then the narrative switched to Chinese are buying up all the houses; but they aren’t. Foreign investors, from all overseas countries combined were buying a total of 3.7% of the new homes and 2.2% of existing homes in Australia. Again, we’re being conned and, what’s worse, we’re being conned by sensationalism, perhaps even racism, but certainly not reality. Nevertheless, the Australian government has now written new laws preventing foreign ownership of homes.
In 2023, trade between China and EU hit record highs in the first quarter; China and Australia are also at record highs with March 2023 being the best month ever. There have been some product changes in recent years, for example, China no longer buys much Australian wine while US wine sales to China increased by 120%. As for lobsters, the US state of Maine would like to thank Australia for their contribution to an industry that was decimated by Trump’s restrictions but recovered and surged to record highs through Australia’s woes. Australians are being conned; China isn’t their enemy.
The BBC, in February 2023, reported that despite there being a 5-year trade war between the USA and China, the 2022 trade figures between the two countries were at another record high. Furthermore, Direct Foreign Investment into China saw its largest single quarter in the first quarter of 2023, and is tracking at a 12% growth on 2022’s record year. This is a most interesting trade war, one in which all the numbers indicate growth!
We’re witnessing one of the biggest myths in history. British, Australian, European and American media will all have us believe China is a threat and de-risking or de-coupling is needed. The reality is that, despite political claims and media amplifications of them, business people know; China may hold challenges but is their greatest opportunity for growth and investments.
China is not a threat. It never has been, the real threat is people telling us that China is a threat and we should ask them: why they are doing that and what is it that really frightens them? The facts, if we take time to view them, tell us clearly, it isn’t China!