How China Plays the Long Game Against Trump

President Xi Jinping believes the world is undergoing unprecedented changes. Donald Trump's actions, particularly his challenges to the existing world order, are seen by China as an opportunity. While the US is perceived as a force for instability, China aims to present itself as a stable global actor. Trump's trade wars have prompted China to diversify its economy away from an over-reliance on the US market, resulting in record trade surpluses despite decreased exports to the US.

The US-China relationship is crucial and defined by the contrasting leadership styles of Trump and Xi. Trump is seen as brash and impulsive, while Xi is methodical and plays the long game. Chinese policymakers view Trump as transactional but also unpredictable, leading to the popular Chinese internet nickname 'TACO' (Trump Always Chickens Out). Another nickname, 'Chuan Jian Guo' (Trump, the Nation Builder), reflects the belief that Trump's actions inadvertently help China become a superpower.

China has been observing and preparing for Trump's challenges. After being caught off guard by the first trade war, China learned to retaliate, imposing tariffs of its own. Despite declining exports to the US, China diversified its trade to India, Southeast Asia, and the EU, showcasing resilience. China also uses strategic export controls on rare earth minerals, which are vital for various industries from electronics to military hardware, to inflict pain on US manufacturing and global supply chains due to its dominance in mining and refining.

Despite its trade victories against Trump, China faces significant internal economic problems. Its GDP growth target is the lowest since 1991, reflecting issues like excessive debt among local governments, businesses, and real estate developers, leading to overcapacity and deflation. This has resulted in falling fixed-asset investment and a reliance on exports to sustain the economy, leading to job insecurity and the export of deflation to other countries.

While China seeks to exert economic influence, it is reluctant to get entangled in military conflicts, even for allies like Venezuela and Iran. Although these countries are important economic lifelines for them, they are not strategically vital enough for China to commit military intervention. The Strait of Hormuz presents a significant vulnerability for China's oil imports, highlighting the risks of widespread conflict. China currently focuses on fighting the trade war, where it holds more advantages, acknowledging that it is not yet the equal of the US militarily.