◎ If the CCP has identified that Trump will do anything to get his trade deal, they will definitely call his bluff and turn the trade deal into his greatest weakness.
In our special report, “2019: A Waterloo Year for China and the United States,” we laid out how each side would try to seize the advantage over the other to avoid defeat this year. Developments in the week of Aug. 12 indicate that the Chinese Communist Party is now at an advantage.
Unless United States President Donald Trump adopts a new China strategy, we believe that Trump, America, and Hong Kong will face substantial risks in the coming months.
The backdrop:
Aug. 13:
- U.S. Secretary of State Mike Pompeo and CCP Foreign Affairs Work Commission director Yang Jiechi met in New York and “had an extended exchange of views on U.S.-China relations,” according to a U.S. State Department statement.
- Bloomberg News reported that Pompeo may decide to run in the 2020 U.S. Senate race in Kansas. Pompeo has until June 2020 to join the Senate race. Other news outlets also reported on Pompeo’s possible Senate run throughout the week, noting that he has left mixed signals about his intentions and that Majority Leader Mitch McConnell has encouraged him on several occasions to run for the Kansas seat.
- President Trump tweeted: “Many are blaming me, and the United States, for the problems going on in Hong Kong. I can’t imagine why?” In a separate tweet, Trump wrote: “Our Intelligence has informed us that the Chinese Government is moving troops to the Border with Hong Kong. Everyone should be calm and safe!”
Aug. 14:
- In a tweet about China and the U.S. Federal Reserve, Trump wrote that “China is not our problem, though Hong Kong is not helping.”
- Later in the evening, Trump tweeted: “I know President Xi of China very well. He is a great leader who very much has the respect of his people. He is also a good man in a “tough business.” I have ZERO doubt that if President Xi wants to quickly and humanely solve the Hong Kong problem, he can do it. Personal meeting?” In a separate tweet, he wrote: “Of course China wants to make a deal. Let them work humanely with Hong Kong first!”
- According to a POLITICO report, Trump and Xi Jinping had a phone conversation in mid-June where Trump “surprised his aides when he told Xi that he would not condemn the Chinese government over a crackdown in Hong Kong. He understood it was an internal issue in which the U.S. would not interfere, he said.” Aspects of the POLITICO piece were first reported by The Financial Times on July 10.
Aug. 15:
- Trump retweeted his “personal meeting” tweet from the previous day with the comment: “If President Xi would meet directly and personally with the protesters, there would be a happy and enlightened ending to the Hong Kong problem. I have no doubt!”
- When asked about Trump’s Aug. 14 tweet, PRC Foreign Ministry spokesperson Hua Chunying said: “Hong Kong affairs are entirely China’s internal affairs. As we noted, President Trump also said previously that ‘Hong Kong is a part of China. They’ll have to deal with that themselves. They don’t need advice.’ We hope the U.S. side will keep its word.”
Our take:
1. Until late on Aug. 14, President Trump’s stance on Hong Kong hewed remarkably close to the CCP line, that is, the situation in Hong Kong is an “internal matter” of the PRC and that the U.S. would not interfere. While Trump appeared to change tune with his encouraging Xi Jinping to meet with Hong Kong protesters and work “humanely” with Hong Kong, his “censuring” of the PRC are still weak when compared with the statements on Hong Kong by Speaker Nancy Pelosi, Majority Leader Mitch McConnell, and several other Republican and Democratic U.S. lawmakers. Given this context, we believe that the reporting by POLITICO and The Financial Times on the phone call between Trump and Xi in June is reliable (see “The backdrop”).
Trump’s stance on Hong Kong shows his hand on his China strategy. In “Art of the Deal” fashion, Trump is “aiming high” with plans to “settle for less” with the PRC. Put another way, Trump’s priority and bottomline is signing a relatively tough trade deal with China. While the Trump administration has “aimed high” by playing the human rights card and warning the world about the risks of using 5G developed by the PRC, Trump has indicated with his attitude towards Hong Kong that he will “settle for less” by not going “all in” in confronting the CCP threat when he gets a Sino-U.S. trade agreement.
From Trump’s perspective, it makes sense to get the PRC to commit to a trade deal and not apply too much pressure on China. First, Trump could believe that a tough trade deal would force the CCP to make the structural changes that would lead to genuine economic and even political liberalization of China. Second, the Trump administration likely does not have good solutions to resolve the whole range of issues that would arise from a full-blown Sino-U.S. conflict. The above two reasons justify the “sacrifice” of Hong Kong in the interim for the “greater good” of signing a Sino-U.S. trade agreement. And if this is indeed Trump’s line of thinking, then it is also not unthinkable that U.S. Secretary of State Mike Pompeo, who has drawn the ire of the CCP for his “hawkish” moves and statements on China, could later step down and join the 2020 Senate run.
2. The CCP would be emboldened by Trump’s Aug. 14 and Aug. 15 tweets about Hong Kong and believe that they have a great chance of surviving the Trump presidency.
First, the idea of a CCP leader personally meeting with protesters to resolve matters is laughable—unless the leader wants to suffer the fate of Zhao Ziyang. The CCP will read Trump’s exhortation as a sign of weakness and naivety, and will not seriously contemplate the prospect.
Second, the CCP will believe that Trump does not actually understand the Party, its characteristics, and its weaknesses. Earlier, the CCP would be frightened by the Trump administration’s tough stance on key issues like human rights, and would come to believe that President Trump is ultimately aiming for regime change in China. However, Trump has recently shown that he can compromise on Hong Kong, a serious human rights issue, to get the trade deal. This signals to the CCP that Trump does not seek the end of the PRC. And if Trump’s priorities are less lofty, then the CCP stands a good chance of manipulating Trump and surviving his presidency.
What’s next:
1. In May, we wrote: “We believe that the Chinese Communist Party is exploiting Trump’s attachment to an ‘epic deal’ to buy itself time to ensure regime survival and further its agenda of world domination. Unless the Trump administration takes action to counter the CCP’s delaying tactics, the United States is at risk of losing its advantage in the ‘new cold war’ with the Chinese regime.” This analysis continues to hold.
2. Treachery and deception are second nature to the CCP. Thus, the CCP can say, promise, and sign anything to undermine its enemy and further its agenda.
If the CCP has identified that Trump will do anything to get his trade deal, they will definitely call his bluff and turn the trade deal into his greatest weakness. For instance, it is completely within the CCP’s machinations to drag out the trade negotiations until the end of the year before suddenly agreeing to most of the Trump administration’s terms when Trump again threatens to raise tariffs. The United States and the PRC would then take about a month or two to finalize the trade deal in early 2020 before it is ready for President Trump and Xi Jinping to sign. The CCP could then drag its feet on implementing its trade agreement commitments, provoking an angry response from Trump. At this stage, the CCP could blame America for acting unreasonably and unilaterally annul the trade agreement. And if the Hong Kong situation has not been resolved by this point, the CCP would order in the military to end the protests and “stabilize” the city. PRC military intervention in Hong Kong would result in a financial “Pearl Harbor” for America and the world, and the CCP would be able to advance its plan to replace the U.S. as the global hegemon.
Trump could react to the CCP’s “about-face” by ordering higher tariffs and take even more drastic measures, but the damage would have been done—Trump would be without a trade deal and would be lightyears away from resolving the Sino-U.S. conflict with only a few short months, if not weeks, away from the 2020 U.S. presidential elections. Instead of being the next Ronald Reagan, Trump would very likely end up being the next George H. W. Bush.
3. Trump’s weak stance on Hong Kong would only encourage the CCP to keep pushing the boundaries of suppression in the city. The CCP may not mobilize military troops in Hong Kong or send them in from Shenzhen, but will definitely send in undercover security forces or paramilitary troops to blend in with the Hong Kong police force and use heavy-handed methods to quell the protests. The CCP would likely be aiming to drive the protesters out of the streets before Oct. 1, the 70th anniversary of the founding of the PRC. The Hong Kong people must brace themselves for greater violence from the police and the triads, and even serious cases of bloodshed.
After the CCP subdues the Hong Kong people, it will definitely turn its attention to influencing the 2020 Taiwan presidential election and turn Taiwan’s democracy against itself. If the CCP succeeds in getting a “Manchurian candidate” elected as president, it will work towards the signing of a peace treaty between the PRC and the ROC, and lay the foundation for eventual reunification. Once Taiwan becomes a PRC “internal matter,” America will lose a strategic partner in the Indo-Pacific and the CCP would move to “rollback” U.S. influence in the region. All in all, the CCP would gain additional footholds and increased leverage to challenge the U.S. for global hegemony. This outcome can be avoided if the U.S. stands firm on Hong Kong.
