July 17, 2019

Trade war reflects US fear of China’s state-led economic model, says member of Beijing’s political elite

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By Frank Tang From South Morning Post

Kong Dan is the former chairman of the state-owned Citic Group and Everbright Bank. Photo: Handout

  • Kong Dan, the former chairman of the state-owned Citic Group and Everbright Bank, urges to stick to its development path over adopting a western model
  • Speech at Moganshan Research Institute comes at a time when and Chinese negotiators are said to be near an agreement to end their 10-month trade war

The trade war launched by the United States reflects a fear of China’s state-led economic model, according to a member of Beijing’s political elite, reflecting confidence among the ruling class over the country’s political economy system that must be maintained and cherished.

Kong Dan, the former chairman of the state-owned Citic Group and Everbright Bank, believes China’s principal advantage is its “government plus market” that has been proved successful over the last four decades.

And instead of weakening the state-led system, China has to cherish its model and make good use of its “institutional advantages” in the next five to 10 years to deal with technology and resource supply challenges amplified by an increasingly hostile US, Kong said.

“The root cause of China-US trade friction is their fear of our path and our system,” said honorary chairman Kong during a speech earlier this month at the spring session of the Moganshan Research Institute think tank that was only released this week.

Kong, whose father was a senior intelligence officer during China’s communist revolution, retired in 2010 and holds no official public positions, but is seen as an influential Chinese “princeling”, or offspring of one of the original Communist founders of the People’s Republic of China, with ties to its powerful families and institutions.

The speech by Kong, who also chairs the Citic Foundation for Reform and Development Studies, comes as US and Chinese negotiators are said to be near an agreement to end their 10-month trade war. The US imposed tariffs on Chinese imports from July in an attempt to force Beijing to open up its market and drop its state-sponsored development strategy.

Kong’s comments reflect a train of thought in Beijing that the country should stick to its existing development path rather than adopt a western model, although China is open to make technical changes on how the government manages the economy.

Kong believes the US is trying to “choke” China’s development by containing its technology development, citing US sanctions on Chinese telecommunications equipment maker ZTE.

The root cause of China-US trade friction is their fear of our path and our system.Kong Dan

China, though, still lags behind the US in many technology fields of manufacturing, new material, chips, health care and military, said Kong, adding that Washington’s restriction on technology transfers to China could pose a serious danger to development.

“The act of putting a hand around the throat can lead to death, and we should not underestimate the danger. It will cause more harm than discomfort,” Kong said.

Another threat for China’s development over the next five to 10 years is about resources, said Kong, who said that China may need to rely on an external supply of iron ore and natural gas to fuel its development, a supply which is not guaranteed.

“The challenges of technology and resources are hard to address in the short term,” he said. “So we must rely on our institutional advantages and make full use of them through reforms.”

Kong said China should promote its “whole-of-country” approach, in which all resources are mobilised to serve strategic goals, to build on the Mao Zedong era and the last four decades of reform and opening up.

While Kong said China should comply with market rules and international norms during this process, he said the essence is about “concentrating resources on big things.”

Ironically, China’s “whole-of-country” approach is inviting growing suspicions from Washington after US Federal Bureau of Investigation Director Christopher Wray said in February that China is seeking to become a global superpower through unconventional means in a “whole-of-society threat on their end”.

“And I think it’s going to take a whole-of-society response by us,” Wray said.

For more on this story go to: https://www.scmp.com/economy/global-economy/article/3007309/trade-war-reflects-us-fear-chinas-state-led-economic-model?utm_source=mailchimp&utm_medium=email&utm_content=190423&utm_campaign=GME-O-enlz-TradeWar&MCUID=8d9bd0120f&MCCampaignID=868c953799&MCAccountID=7b1e9e7f8075914aba9cff17f

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