Beijing signals openness to trade talks while preparing for the worst

  1   Beijing signals openness to trade talks while preparing for the worst

  Beijing wants US respect before trade talks?

April 16
Bloomberg News reported that Beijing is open to trade talks with the U.S. if the Trump administration takes several steps, citing a person familiar with the PRC government’s thinking. Those steps include:

• The most important precondition for Sino-U.S. trade talks is that those engagements are conducted with respect. PRC officials are unsure of the U.S. position because President Donald Trump speaks favorably about Xi Jinping but other officials in his administration, including Vice President JD Vance, are more hawkish.
• The U.S. must address PRC national security concerns, particularly over Taiwan. The person said China will not undertake any provocative actions on Taiwan, but will respond if provoked.
• The U.S. must designate a point person to oversee talks. The person said that the PRC has no preference for who it wants, but the point person must clearly be speaking and acting with Trump’s authority.
• PRC officials understand that Trump may want to lead the trade negotiations personally. However, while Beijing would be flattered should Trump take his time to get involved with the discussions, they believe that the best approach is for designated officials on both sides to oversee the talks. The person said that this would be the most effective way to ensure that the trade negotiations result in a meaningful summit between Trump and Xi.

  PRC appoints new trade negotiator

April 16
The PRC State Council announced a list of personnel reshuffles. Among the changes, the most notable was Li Chenggang taking over Wang Shouwen as the PRC’s trade representative and vice minister of commerce.

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Li Chenggang
Li, 58, began his career at the Ministry of Foreign Trade and Economic Cooperation (now Ministry of Commerce) from August 1989 to January 2004, where he would serve as a deputy director and later director of the anti-dumping investigation division of the ministry’s department of treaties and law. Li would go on to hold several key jobs in the commerce ministry, including serving as assistant minister and Party leadership group member (December 2016 to February 2021). He would later serve as the PRC’s ambassador to the World Trade Organization (February 2021 to March 2025). At a February meeting of the WTO in Geneva, Li criticized the U.S. for arbitrarily imposing tariffs on its trading partners, including China.

Li attended a Chinese private entrepreneur symposium on March 31 as a commerce ministry “leader,” according to a state media readout of the meeting. This was an official hint that Li could be moving to a new post.

Wang Shouwen
Wang, 59, also started his career at the Ministry of Foreign Trade and Economic Cooperation, where he served as deputy director of the translation division in the department of international liaison and director of the bidding and textile divisions in the department of foreign trade administration. At the commerce ministry, Wang would rise from deputy director-general to vice minister. After the U.S.-China trade war broke out in 2018, Wang would be appointed as deputy trade representative and later trade representative for the PRC.

Reuters reported that Wang was considered to be a tough negotiator and had clashed with U.S. officials in earlier meetings, citing a source in Beijing’s foreign business community. The source added, “He’s a bulldog, very intense.”

  CCP on ‘wartime footing’ in tariff war?

April 14
1. Reuters reported that the PRC has put civilian government officials in Beijing on a “wartime footing” and ordered a diplomatic charm offensive with the goal of getting other countries to push back against Trump’s tariffs, citing four people familiar with the matter.

Two of the people said that bureaucrats in the foreign affairs and commerce ministries have been ordered to cancel their vacation plans and keep cellphones turned on around the clock. Also, departments covering the U.S. have been beefed up, including with officials who worked on the PRC’s response to Trump in his first term.

2. Yuan Hongbing, an Australia-based Chinese dissident and jurist, told overseas Chinese media outlet Kanzhongguo that the CCP recently issued a classified document outlining the Politburo Standing Committee’s plan to deal with the Trump administration’s tariff war, citing sources inside the CCP system.

Yuan said that the 7,000-character document is titled, “Firmly Seizing the Initiative and Leadership in the Unprecedented Changes of the Century Through Decisive and Great Struggle” (通過決定性的偉大斗爭牢牢掌握百年未有之大變局的主動權和主導權). He added that the document was made available only to officials at the provincial-ministerial, prefecture-bureau, and county-division levels, and could only be read in secure reading rooms from April 7 to April 9. Those who accessed the document were strictly prohibited from recording, copying, or photographing the contents.

Yuan claimed that the document contained the following points:

• The U.S. tariff war is not an isolated economic issue, but rather, the first campaign in a comprehensive political, economic, military, and cultural war initiated by President Trump.
• The Party, government, and the military are called upon to heed Xi Jinping’s strategic call for a “decisive great struggle” to defeat the hegemonic position of the U.S. in economy, military, and international politics since the end of World War II.
• The United Front Work Department and Ministry of Foreign Affairs are required to coordinate closely and adopt a dual approach, prioritizing international united front work as a top task in the coming period.
• The key to international united front efforts is to fully exploit widespread global dissatisfaction with Trump’s tariff war, focusing on forming a strong international economic united front with economically advanced countries like Germany, France, the UK, Canada, Japan, South Korea, and Australia, as well as China’s neighboring countries, to firmly oppose Trump and uphold the globalized economic order centered on the WTO. If Trump persists in escalating the tariff war, the international economic united front should be leveraged to unite wavering nations like India and Vietnam, capitalizing on Trump’s self-isolation of the U.S. to exclude it from the globalization process of the international economic united front, thereby ending the era of U.S. economic hegemony.
• Regarding economic warfare, the CCP authorities should further refine mechanisms for achieving self-sustaining economic circulation within China’s vast domestic economy. In response to Trump’s declaration of a U.S. state of emergency, all levels of government should be fully prepared to partially or fully reinstate a supply system to address potential hardships.
• Regarding geopolitics, the CCP’s International Liaison Department and Ministry of Foreign Affairs should strengthen strategic cooperation with Russia, Iran, and North Korea as the cornerstone of countering Trump’s challenges. On this basis, the PRC should deepen ties with neighboring countries and those in the Global South, promptly identifying and exploiting anger and dissatisfaction in Europe and Canada over Trump’s tariff war to divide and weaken, or at least undermine, NATO, dismantling the political-military strategic pillar of the U.S. since the Second World War. By leveraging conflicts of economic interest, the PRC will weaken U.S. political relations with Japan, South Korea, Australia, and New Zealand, gradually causing the U.S. to not only become “isolated” (自閉症) in the economic sphere but also lose its status as the global policeman and relinquish its 80-year-long, post-WWII international hegemony.
• Regarding the military struggle, the entire Party and military should deeply understand and resolutely implement Xi’s strategic vision of engaging in a military showdown with the U.S. in the Taiwan Strait.
• Regarding a potential conflict in the Taiwan Strait, the CCP authorities should envision a new type of conventional warfare under modern high-tech conditions, characterized by systematic, informatized battlefield control across all domains, and backed by a robust and reliable nuclear deterrent. Should such a conflict break out, the military should destroy U.S. military bases in Japan, South Korea, the Philippines, and Guam in the event of U.S. military intervention over Taiwan, forcing the U.S. to retreat east of Hawaii and effectively reduce America to being a regional power.
• In concluding, the document proclaims that only by bravely facing the challenges of turbulent waves can great victories be achieved. After defeating the comprehensive war initiated by Trump, with the tariff war as its precursor, the ideal of a “community with a shared future for mankind” advocated by the CCP will become the direction for human development in the 21st century.

Yuan Hongbing claims that Beijing intended to use the document to stabilize the “extreme internal chaos and panic within the Party” that Trump’s tariffs have caused, citing CCP insiders. Beijing’s plan, however, backfired and instead sparked widespread and intense anxiety among officials. Yuan added that the Beijing officialdom is “now enveloped in an unprecedented atmosphere of despair.”

Yuan claimed that Xi’s “aggressive response and determination” in responding to Trump’s tariffs stems primarily from CCP think tanks having convinced him that yielding in the tariff war would lead the U.S. to unite other nations in revisiting the COVID-19 pandemic and hold the CCP accountable for crimes against humanity and economic damages. Yuan also claimed that the greatest obstacle to the CCP launching a war in the Taiwan Strait comes not from external forces but from within the military, given the prevalence of disloyal “two-faced” senior officials who lack absolute allegiance to Xi.

Yuan added that many mid- and high-ranking military officers are eagerly awaiting and even hoping for Xi to invade Taiwan because they would have a historic opportunity to stage a coup and completely overthrow the tyrannical “communist emperor” Xi Jinping, citing “second-generation reds” who are familiar with thinking inside the People’s Liberation Army.

  Our take

1. The information in the Bloomberg article about Beijing being amenable to trade negotiations with the U.S. predicated upon certain preconditions is in line with regular CCP operations. Assuming the information accurately reflects the CCP authorities’ thinking, it is a sign that despite Beijing’s tariff countermeasures, the Xi leadership is in fact keen to ease trade tensions with the U.S. and mitigate the very severe economic and political risks that Trump’s tariffs would inflict over the long term.

Bloomberg’s information partially affirms our earlier observation (see here and here) that Beijing has been signaling that it is open to talks with the U.S. even as it issues tough rhetoric. The information that Beijing wants the U.S. to respect it as the foremost condition for trade talks also aligns with our observation that the CCP is concerned about saving “face” so that its “quan wei” (authority and prestige) can be preserved. To a lesser degree, Beijing’s requests that the U.S. designate a point person who must “clearly be speaking and acting with Trump’s authority” and that lower level officials should preferably conduct negotiations before Xi and Trump sign off on it are about saving “face”; the CCP does not want any diplomatic mishaps where Xi Jinping is directly involved in trade talks with Trump and is later made to look the fool should those talks end negatively for China.

2. Beijing’s appointment of a new trade representative suggests that it is laying the groundwork to facilitate future Sino-U.S. trade negotiations. Both Li Chenggang and Wang Shouwen spent the bulk of their respective careers in the PRC commerce apparatus and are considered “technocrats.” Li’s previous appointments, however, indicate that he could be more suited for engaging in tricky trade talks with the U.S. than Wang, who is considered to be more “hardline.”

The removal of the “very intense” Wang as PRC trade representative could be a subtle move on Beijing’s part to start de-escalating tensions with Washington. Beijing could be signaling that it was too uncompromising with earlier trade meetings and is now looking for a “fresh start” by changing its lead trade negotiator. That being said, Wang’s “tough” approach likely reflects to a large degree his attempt to be “politically correct” and reflect what the Xi leadership wanted at the time on trade and foreign policy issues. Until very recently, officials who are closely aligned with the Party leadership tended to exhibit “wolf warrior” behavior to varying degrees.

The Li Chenggang – Wang Shouwen personnel swap is likely not entirely due to the U.S. tariff escalation. This is because Li had already appeared publicly as a commerce ministry “leader” at the Chinese private entrepreneur symposium on March 31, or two days before Trump announced his tariffs. Because the personnel swap was set to go ahead regardless of the tariffs, Wang will unlikely be held accountable for the escalation in the Sino-U.S. trade conflict.

3. Yuan Hongbing’s “CCP insider” information cannot be independently verified, but cannot be entirely ruled out at present. If Beijing does indeed have a classified document on how to approach the trade war and it was disseminated as low as to the county level, then more details are likely to emerge from other sources in the future. Otherwise, the authenticity of Yuan’s “Party insider” information will increasingly be called into question.

The accuracy of Yuan’s “Party insider” information is somewhat suspect given the current political situation in the CCP regime. For one, Xi Jinping has been constantly tightening surveillance over officials and stepping up the “self-revolution” purges. Therefore, it is doubtful that officials would dare to engage in “improper discussions” of Party Central’s policies (妄議中央) or more brazenly express dissatisfaction with Xi in their circles (even the CCP elites) for fear that they would be reported on by others. Also, because Xi’s stance on Taiwan is no different from those of earlier CCP leaders and he appears unlikely to order an invasion in the near term given the ongoing “rectification” of the PLA, Yuan’s “Party insider” claim that military officials are hoping that Xi can attack Taiwan so that they may overthrow him reads like the hopeful projections of “anti-Xi” elements rather than a sign that Xi is gearing up for a “military showdown” in the Taiwan Strait.

Regardless of the veracity of Yuan’s information, the Xi leadership has been steadily preparing for worsening Sino-U.S. tensions and potential conflicts since Xi Jinping took office. Some examples include:

• Xi revived the supply and marketing cooperative system in his first term, likely to support the potential implementation of a partial rationing system should the need arise in future.
• Since late 2023, the CCP has been promoting public community canteens on a large scale.
• During the COVID-19 pandemic, the CCP implemented stringent “zero-COVID” measures to restrict population movement. Such measures could potentially be reinstated if necessary to maintain stability.
• The CCP has promoted the “Fengqiao Experience,” a type of social control where the masses are tapped to monitor each other. For instance, so-called “grid managers” are hired at the grassroots level to oversee grid-based “management” of people.
• The CCP has encouraged recent graduates to enlist in the military. The move is likely intended to confine potential social instabilities within the military and boost the “cannon fodder” numbers in the event of a hot war.
• The CCP has required officials to surrender their passports, restricted Chinese citizens from applying for passports and traveling abroad, and has implemented other policies that suggest it could make China “semi-closed” under extreme circumstances.
• The CCP has established a digital yuan, which could be used to support a rationing system in the future if required.
• Since the outbreak of the Sino-U.S. trade war in 2018, the Xi leadership has promoted concepts such as “bottom-line thinking,” “the East is rising and the West is in decline,” “unprecedented changes in the world not seen in a century,” and “the great rejuvenation of the Chinese nation.” Also, Party members are instilled with the notion that the Sino-U.S. struggle is a contest of “national strength, systems, and ideologies,” with U.S. hegemony ultimately giving way to a CCP-led “multipolar” order.

4. The CCP authorities are undoubtedly aware that prolonged trade tensions with the U.S. will lead to de facto economic decoupling between China and the United States. Such a decoupling would accelerate and worsen China’s economic risks, some of which could potentially transform into political risks.

However, Beijing also likely recognizes that its “internal contradictions” are acute, particularly with the “self-revolution” campaign and sweeping anti-corruption investigations in the military. Where possible, the CCP authorities would prefer to negotiate with the U.S. first and find ways to de-escalate external tensions so that the Xi leadership can complete its internal purges and Xi Jinping can be done with power consolidation.