https://archive.is/FKuhi (reuters)
https://archive.is/MIdNc (afp)
Chinese Vice Premier He Lifeng met for about eight hours with U.S. Treasury Secretary Scott Bessent and U.S. Trade Representative Jamieson Greer in Geneva in their first face-to-face meeting since the world's two largest economies heaped tariffs well above 100% on each other's goods.
U.S. President Donald Trump said on Friday that an 80% tariff on Chinese goods "seems right", suggesting for the first time a specific alternative to the 145% levies he has imposed on Chinese imports.
Neither side made any statements about the substance of the discussions nor signaled any progress towards reducing crushing tariffs as meetings at the residence of Switzerland's ambassador to the U.N. concluded at about 8 p.m. local time. (1800 GMT)
The discussions are expected to restart on Sunday in the Swiss city, according to an individual familiar with the talks, who was not authorized to speak publicly.
The 80% number is just something that Trump posted on his social media early on Friday morning, before any meeting ever happened.
UPDATE Trump posted on truthsocial, 1 hour ago. He describes the meeting with the phrases "total reset" and "great progress". I won't believe this until I hear the perspective from China's government.
Idk why China is even entertaining them. BDS America.
Because China has to. The moment I saw Trump having his little quarrel with Powell about not lowering the Fed key rate last week, I knew that China would bring itself to the negotiation table despite all the “no surrender to imperialists” rhetoric.
How come? Because the local governments are too heavily indebted, having borrowed massively since the past 15 years (2009 GFC) to build new cities, housing and infrastructure like high speed rails to circumvent the dwindling export revenues, betting that the land value would rise so much that they could easily pay off the debt and even with dividends to spare.
This was due to the highly decentralized nature of China’s economy, with the local governments contributing 50% of national tax revenues and 85% of the budget spending. Instead of the central government/state bank directly creating the money to finance all these developments, the neoliberal brained policymakers let the local governments borrow from the financial institutions.
Then, Covid happened in 2020. Three years of Zero Covid saved plenty of lives (it was a good decision), but it also decimated the local governments revenues and placed them under severe financial strains.
Evergrande’s implosion from 2021-2023 further exposed the deep corruption scandals between the local governments, financial institutions and property developers, ending with 2.4 trillion yuan evaporated from the people’s savings. And this is certainly only the tip on the iceberg given how many property developers have similarly engaged in such shady activities but have not been interrogated in the court yet (the government is actually afraid of a market panic it would set off if the rest of the property developers are charged, because too many people and corporations have invested in the property market since the past decade).
Then came the Ukraine war in 2022, when the US raised its interest rate to 5% in just a year, which further imposed financial stress to the local governments. Ironically, Russia tried to show China the way by forgiving $23 billion debt among African countries, which, if China had followed suit, would have paved the way towards dedollarization and ending the US monetary hegemony. Instead, China doubled down on protecting the dollar hegemony (can’t give up that $4.5T USD reserve that easily huh) and effectively putting an end to the whole BRICS dedollarization push.
So, here we are with Trump launching a global trade war, which is actually a financial war in disguise, and China really only have 3 options here:
There will be a lot of back and forth along the process, but it will ultimately lead to a renewed status quo between the US and China. Trump gets to boast about getting Powell to drop the key rate and reduced trade deficits. China/Xi gets to boast that the US has panicked and begged China into negotiations, lowered the tariffs and saved China’s deflationary economy.
But the key outcome is as follows:
In short, we are entering a new phase of American fascist imperialism - it wants to have its cake (lower trade deficits which have caused tension from the working class and petty bourgeoisie due to ongoing deindustrialization) and eat it too (preserving the dollar hegemony through finance capital entering China and IMF bailout of the Global South), and China needs to step up to take on this challenge, for which it has refused to do so.
So, how did we get here in the first place?
Now, let’s have a brief overview of China’s current economy. I have warned for more than 1.5 year (actually, since the end of Zero Covid in 2023) that China’s deflationary spiral is not something that you can stimulus/subsidy out of. That’s because nobody wants to address the elephant in the room that is the root cause of low consumption among Chinese citizens today - a massive wealth inequality. Lifting millions of people out of poverty sounds great (and so did many industrial capitalist countries like Japan and South Korea) but at the same time a growing inequality combined with geopolitical uncertainty have driven people to save (25% savings rate among average Chinese households, which is 6 times higher than an average American family) instead of spending.
Growth in recent years has mostly come from investments rather than increase in disposable income of the working people, and while you can paper over all these inequality problems while exports were running high (selling goods to foreign countries), investments were still generating its returns (rising property market value), we have finally come to the point where the net deficit spending country aka the US empire has decided it’s time for a recession to kill off the export economies, while the property market bubble bursting signals the coming end of the massive infrastructure building era.
Consumption becomes the only way out, except that building a huge consumer base (with such an advantage of a 1.4 trillion people to begin with!) should have started 15 years ago (in the wake of the 2009 GFC), not today. China has recently unveiled its plan to boost consumption, which can quite literally be summarized as “look, our household debt level isn’t quite as high as those in the Western countries and Japan yet, why not loosen the credit requirement so our citizens can borrow more to spend their way out?” Completely neoliberal brained, and ironically following the footsteps of Japan which served as a precautionary tale to what China should NOT be doing.
(went too long, here’s the rest of the comment)
What should China have done instead?
To understand how to get out of this mess, we need to understand what made the post-war Marshall Plan so successful in the first place.
As WWII was coming to an end, and with the war economy under FDR solving the unemployment issue caused by the Great Depression, and instead greatly increased the wages and living standards of the working class in America, the country now faces a new world that is rapidly demilitarizing. To keep American industries running and to prevent a massive layoffs that would have plunged the US into a recession once more, the Marshall Plan was enacted.
Now, did the US lowers the wages of its own people to maintain its export competitiveness? No, the US literally gave Germany a whole lot of dollars, which enabled the Germans to purchase American goods made by American factories and workers, and in turn raised the income of the American working class. This was what led to the postwar boom of the US economy in the 1950s. Eventually, the reindustrialization of postwar Germany and Japan would surpass that of America’s, and to maintain its imperialist streak, the empire chose to end the Bretton Woods arrangement and hyperleaped into finance capitalism, but that’s a story for another day.
The important point here is that China has to launch a Marshall Plan if they are serious about challenging US dominance. There is no point selling cheap Chinese EVs to African countries in exchange for their raw materials, for that will not help those countries industrialize and will only perpetuate their status as colonies to yet another superpower.
What China needs to do is to first, use its massive dollar reserves to pay back Africa’s and the Global South’s debt, then give those countries yuan - the Chinese currency - in order to support purchase of Chinese goods. This will in turn raise the income of the Chinese working class, increase their purchasing power, and will enable the Chinese workers to import goods and services from the Global South countries, raising their income too and fund the development of those countries.
Most important of all, this will also lower the massive trade surplus in China (yes, China will lose its net exporter status, but does China really want to compete with other poorer economies to manufacture low value added goods like shoes and clothings?), paving the way towards a bancor-like mechanism to return the world economy to a more balanced trade, and towards ending US monetary imperialism once and for all.
But there is no indication at all that China is willing to do this. The dollar hegemony has greatly benefited the Chinese economy over the past 30 years, and so we end up in this comical situation instead, where Trump is actively trying to end this mutually beneficial arrangement while China runs with “protectionism bad! free trade good!” defense.
But sooner or later, everyone will have to accept that neoliberalism has run its course. But, will it be the US new fascist technofeudalism that takes its place, or a socialist model upheld by the Global South?
Made a new account just in time to catch and upbear another banger xiaohongshu post. Massive bummer to hear about your laptop, glad you stopped by Hexbear again though!