'No Victors': Xi Jinping Issues Caution to U.S. Regarding Trade Conflict
Xi made these comments on Tuesday during a gathering with the leaders of various global financial organizations, such as the World Bank and IMF, following Chinese authorities announcing an antitrust investigation into American tech giant Nvidia the day prior.
This inquiry is widely perceived as a significant intensification in an ongoing struggle for dominance in AI technology, which both Washington and Beijing consider vital for national security, even before former President Trump's return to office.
"Trade wars, technology wars, and tariff wars go against the historical trend and economic principles, and there will be no winners," Xi stated based on reports by CCTV.
"Constructing 'small courtyards with high walls' and 'decoupling and breaking chains' will harm others without benefiting oneself. China has always believed that when China prospers, the world benefits, and when the world is at peace, China achieves more success," he added.
At a previous meeting, US National Security Advisor Jake Sullivan utilized the "small yard and high fence" phrase to explain a strategy that largely permitted normal trade with China while implementing constraints on certain items, particularly high-tech products such as semiconductors, believed to have military applications.
Last week, the Biden administration issued a third round of export restrictions in three years, limiting Beijing's access to various types of semiconductor manufacturing equipment and advanced memory chips, as well as taking action against more than 100 Chinese companies.
Recently, former President Trump declared that China would face an additional 10% in tariffs on its goods beyond any existing tariffs if it failed to halt drug smuggling into the US.
During an interview broadcast on NBC over the weekend, the incoming president stated that he and Xi had been in contact with one another a few days prior. At a regular press briefing on Monday, a representative from China's Foreign Ministry did not provide a direct affirmation or denial of this conversation.
Declining exports
China, currently experiencing a downturn in domestic demand due to multiple economic challenges, has become heavily reliant on exports, particularly to major partners such as the US. Data released on Tuesday indicated that exports deteriorated sharply, while imports unexpectedly decreased last month.
Exports increased by only 6.7% in November. This was significantly less than the 8.5% projection made by a group of economists surveyed by Reuters and notably lower than the 12.7% uptick observed in October.
"We do not believe this signals the end of China's recent export growth streak," Zichun Huang of Capital Economics wrote in a research note. "Although US tariffs may reduce export volumes by around 3% over the next year, the threat of tariffs may actually boost exports as US firms hasten orders in anticipation of future developments."
The necessity of preparing for "external shocks" was mentioned in Monday's summary of a meeting by the Communist Party's powerful Politburo, which made headlines by revealing their intention to implement a "moderately loose" monetary policy for the upcoming year. Economists interpreted this to suggest that monetary policy, which involves controlling interest rates, was being eased for the first time since 2010.
"It is likely that China will work to improve trade relations through methods like reducing export tax rebates and providing clearer rules, including in regards to government procurement," Citi economists wrote on Monday.
"Despite the ongoing tensions in the business sector, particularly in the field of AI technology and high-tech products, Xi emphasized that China's prosperity is beneficial to the world as a whole."
"With China heavily relying on exports for its economic growth, the recent decline in export volumes could be a consequence of the current economic challenges, but potential tariff threats may also incentivize accelerated orders from US companies."
