China Research

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Konsten att förstå Kina

Sammanfattning / Brief summary in Swedish

Ekonomiska bedömningar avseende Kina kräver god förståelse för kinesernas psykologi och politiska värderingar. Det stora problemet med Kina-analyser och kommentarer som görs i vår del av världen är att det mestadels sker utifrån en västerländsk synvinkel och värderingsansats. Detta fenomen leder ofta till felaktiga slutsatser.

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It can be observed that more and more analysts comment these days on China. Of course, a lot is written and said about developments in China. Thus, some new knowledge about China can be acquired quite easily. One special problem, however, is not recognized sufficiently in many cases: the frequently existing inadequacy of applying Western logic when attempts are made to explain the Chinese and their (future) actions and reactions.

For this reason, the headline of this blog is set as “the art of understanding China”. Interpreting many Chinese conundrums is indeed an art. However, a substantial number of conundrums are not regarded as such phenomena by most Westerners.

President Trump frequently accuses the Chinese of unfair behavior in international business. This criticism is not unmotivated and has in recent years also been taken up frequently and concretely by the European Union Chamber of Commerce in China. It is therefore urgent that the EU in the foreseeable future can achieve a workable common China strategy – however, in a more gentle way than the U.S. has been and still is applying.

What the Chinese dislike

Achieving an acceptable EU strategy also for the Chinese assumes, however, that the EU looks at China in a kind of diplomatic way and not from a “Europe first position”. President Trump’s “America first position” vis-à-vis China certainly was received by the Chinese as extremely unfriendly. It should not be neglected that the Chinese still are very proud of their long-term history and also the (economic) achievements in the past four decades.

In general terms, attitudes that point at humiliation and arrogance by foreigners are always strongly disliked by the Chinese. History also tells us that the Chinese used to become very upset when American officials regularly argued for a stronger currency (RMB, yuan). An important conclusion: It is not so much what you say it but the way you say it (even if there are issues you never should mention for the Chinese).

Below, I link to a summary of Chinese and Western values and logics. There may be certain moves going on into a new direction, for example in China from repetition to innovation or from unity to individualism. But the link still provides China analysts with nicely applicable guidelines for understanding Chinese logics and behavior. Without doubt, the search for such insight promises to be beneficial                          https://www.chinahighlights.com/travelguide/article-chinese-and-western-thought.htm .

Hubert Fromlet
Affiliate Professor at the School of Business and Economics, Linnaeus University
Editorial board

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Tillspetsningen i USA/Kina-konflikten allt annat än oväntat

Sammanfattning / Summary in Swedish

Handelskonflikten mellan USA och Kina präglades av en rejäl tillspetsning under de senaste veckorna. Utvecklingen fick dessutom en ytterligare påspädning genom en något hastig försvagning av den kinesiska valutan yuan – en försvagning som USA:s politiska ledning kallade ”valutamanipulation”.

För egen del vill jag inte gå lika långt med mitt ordval. Hade yuanens växelkurs varit fritt flytande – och inte som i verkligheten flytande med uppenbara dagliga gränser – hade den istället högst sannolikt blivit ännu svagare under det gångna året. Överhuvudtaget ter det sig omöjligt att se president Trumps tre ekonomiska målsättningar och önskemål fungera på samma gång: ännu lägre räntor, god tillväxt och likväl en svagare dollar.

De senaste två veckorna har med all önskad tydlighet visat att USA/Kina-konflikten ej kan analyseras utan psykologiska, politiska och sociala infallsvinklar – https://blogg.lnu.se/china-research/?cat=13398 från den 3 juni.

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Readers of this blog may remember my previous skepticism about positive trade negotiations between the U.S. and China any time soon – unlike many other analysts did ahead of G20 summits and similar events. My doubts about a deal were – and still are – mainly based on the deep psychological divergence between the American president and the Chinese political leadership https://blogg.lnu.se/china-research/?cat=13398 from June 3. President Trump thinks that he has prerogative to interpret global developments in line with what he defines as “America first”; whereas the Chinese look at their history and development with obvious pride and dislike therefore all kind of humiliation from the other side of the Pacific.

One can be pretty sure that the Chinese have felt strongly humiliated in recent quarters. Since the American president does not like the Chinese (politicians), space for fruitful negotiations was very limited already from the beginning of the trade tensions more than one year ago – and has become even more limited in the past few weeks. This development was no surprise and does not bode well for decreasing tensions between the two global superpowers any time soon.

Is China really a currency manipulator?

In the beginning of August 2019, American Secretary of Finance Steven Mnuchin very angrily called China a “currency manipulator”. This was a kind of spontaneous comment since U.S. law also requires that three assumptions for such an unpleasant classification have to be met, certainly after careful analysis (see the illuminating information by the United States Government Accountability Office, GAO, https://www.gao.gov/new.items/d05351.pdf, find different access). However, this was obviously not the case in the beginning of August – but still in the Treasury’s evaluation from May 2019. Then, the conclusion from the analysis was that no important trading partner of the United States more recently had violated the three – by law – defined fairness indicators for exports to the United States (see the source below). However, China, Japan, Korea, Germany, Italy, Ireland, Singapore, Malaysia and Vietnam had failed more recently in two developments of the three trade- and currency-related indicators. For this reason, the above-mentioned countries are currently set on the Treasury’s so-called Monitoring List. Sweden still is not there – but probably not far away. https://home.treasury.gov/system/files/206/2019-05-28-May-2019-FX-Report.pdf (find different access).

Making a more general comment, each and every country is, in principle, free of choosing its exchange rate policy, China certainly as well. However, being listed by the United States as a currency manipulator may have serious consequences for China directly and for the global economy more indirectly. But it should be repeated that real market forces most probably would have given a weaker development of the yuan vis-à-vis the USD in recent quarters – because of China’s weakening growth and lagging reform activities.

In other words: In my view, China currently does not meet all the necessary criteria for being a currency manipulator – right in line with the conclusions of the Treasury only three months ago. However, when asking China for global currency responsibility, the same request could be sent to President Trump regarding American responsibility for global trade – preferably with China to follow with good energy to create more transparency and willingness to reform, giving this way benefit to both the Chinese and the global economy, the American certainly included.

Hubert Fromlet
Affiliate Professor at the School of Business and Economics, Linnaeus University
Editorial board

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