China’s top leaders huddled on their annual summer retreat on August 3, US President Donald Trump loomed large over their deliberations. Just two days earlier, Trump administration officials had said they were considering taxing Chinese exports worth $200bn at 25 percent — compared to a previously announced tariff of 10 percent. The world’s two largest economies had formally started trade hostilities in July, when they slapped punitive duties on $34bn of each other’s exports. Chinese officials hoped their unwanted trade war with the US would pause there, at least for the summer. “Everyone has been surprised by Trump,” said one Chinese economist who is close to Beijing policymakers.
“Most Chinese officials assumed that Trump was just trying to push the boundary but would eventually back off.” Mr Trump has instead pressed ahead with his efforts to turn up the heat on Chinese President Xi Jinping. Next week, the US will impose already announced tariffs on another $16bn in Chinese exports, which will be matched by Beijing. In the face of this unprecedented economic and geopolitical challenge, Mr Xi’s administration has sought to stabilise China’s domestic economy, currency and stock markets, while also appealing to people’s patriotism.
In its most recent meeting on July 31, the Chinese Communist party’s politburo — comprising its 25 most senior officials — called for “stable employment, stable finance, stable foreign trade, stable foreign investment, stable investment and stable expectation”. Days later at Beidaihe, a seaside resort near the Chinese capital, politburo member Chen Xi urged a group of the country’s leading scientists to “keep a patriotic heart” and help China “independently control core technologies”.