I. THE LAW AND THE PROTESTS
1. ‘The Value of Global China’: McKinsey

<tr><td class="bg-holder"><img src="https://assets.website-files.com/5c864c33af62620dca1373ac/5d3b822773102c2878bd87d1_The%20Value%20of%20Global%20China-McKinsey.jpg" alt="CHINADebate" width="100%" /></td></tr><tr><td class="nl-post"><p class="caption">McKinsey</p><p class="excerpt">&lsquo;At a time when the risks of international engagement are more obvious than ever, China faces important questions about whether &ndash; and to what extent &ndash; it should continue to pursue opening up its economy to the rest of the world. At stake may be some $22-37 trillion in economic value &ndash; or 15-26% of world GDP &ndash; by 2040.&rsquo;</p><p><strong>The excerpts</strong> below are from <a href="https://www.project-syndicate.org/commentary/china-global-integration-trade-investment-liberalization-by-jonathan-woetzel-and-jeongmin-seong-2019-07" target="_blank"><strong>&lsquo;The Value of Global China.&rsquo;</strong></a></p><ul><li><strong>That essay is based </strong>on and is barely a taste of <a href="https://www.mckinsey.com/~/media/McKinsey/Featured%20Insights/China/China%20and%20the%20world%20Inside%20the%20dynamics%20of%20a%20changing%20relationship/MGI-China-and-the-world-Full-report.ashx" target="_blank"><strong>&lsquo;China and the world: Inside the dynamics of a changing relationship,&rsquo;</strong></a> 168-page report from the McKinsey Global Institute and a team led by <a href="https://www.mckinsey.com/our-people/jonathan-woetzel" target="_blank"><strong>Jonathan Woetzel</strong></a>.</li><li><strong>The report,</strong> long on charts and graphics, is a surprisingly quick-ish read.</li><li><strong>Or you can ease </strong>into it through the 2-page <a href="https://www.mckinsey.com/~/media/McKinsey/Featured%20Insights/China/China%20and%20the%20world%20Inside%20the%20dynamics%20of%20a%20changing%20relationship/MGI-China-and-the-world-In-brief.ashx" target="_blank"><strong>&lsquo;Briefing Note' </strong></a> and the 32-page <a href="https://www.mckinsey.com/~/media/McKinsey/Featured%20Insights/China/China%20and%20the%20world%20Inside%20the%20dynamics%20of%20a%20changing%20relationship/MGI-China-and-the-world-Executive-Summary.ashx" target="_blank"><strong>&lsquo;Executive Summary.&rsquo;</strong></a></li><li><strong>Absolutely terrific</strong>&ndash; one of the few must-reads so far this year.</li></ul><p><strong>And don&rsquo;t miss </strong>what seems to be almost a companion piece, <a href="https://www.mckinsey.com/featured-insights/innovation-and-growth/globalization-in-transition-the-future-of-trade-and-value-chains" target="_blank"><strong>&lsquo;Globalization in transition: The future of trade and value chains.&rsquo;</strong></a></p><hr /><p class="h5p">'The Value of Global China'</p><p><strong>&lsquo;Over nearly 40 years</strong> of economic reform, China has reaped extraordinary rewards from opening up to the world,&rsquo; write <a href="https://www.mckinsey.com/our-people/jonathan-woetzel" target="_blank"><strong>Jonathan Woetzel</strong></a> and <a href="https://www.mckinsey.com/our-people/jeongmin-seong" target="_blank"><strong>Jeongmin Seong</strong></a>.</p><ul><li><strong>&lsquo;And the potential</strong> of such engagement is far from depleted, our <a href="https://www.mckinsey.com/featured-insights/china/china-and-the-world-inside-the-dynamics-of-a-changing-relationship" target="_blank">new research</a> shows.&rsquo;</li><li><strong>&lsquo;For example,</strong> while China commands 11% of global merchandise trade, it accounts for only 6% of global trade in services.&rsquo;</li><li><strong>&lsquo;Moreover,</strong> while China&rsquo;s banking, securities, and bond markets all rank among the world&rsquo;s top three in size, foreign entities account for less than 6% of their value.&rsquo;</li><li><strong>&lsquo;And though China</strong> has 110 Global Fortune 500 companies, less than one-fifth of their revenue is <a href="https://us.spindices.com/indexology/djia-and-sp-500/sp-500-global-sales" target="_blank">earned overseas</a>, compared to 44% for S&amp;P 500 firms.&rsquo;</li></ul><p><strong>&lsquo;Even before today&rsquo;s trade tensions,</strong> the relationship between China and the world had been changing.&rsquo;</p><ul><li><strong>&lsquo;China&rsquo;s relative exposure</strong> to the rest of the world &ndash; in terms of trade, technology, and capital &ndash; peaked in 2007, and has been declining ever since, producing an overall decline from 2000 to 2017.&rsquo;</li><li><strong>&lsquo;This partly reflects</strong> the economy&rsquo;s growing emphasis on domestic consumption &ndash; a trend that accelerated after the global financial crisis sharply reduced foreign demand for China&rsquo;s exports.&rsquo;</li><li><strong>&lsquo;Over the same period,</strong> however, the rest of the world&rsquo;s exposure to China increased, highlighting the country&rsquo;s growing importance as a market, supplier, and provider of capital.&rsquo;</li></ul><img src="https://assets.website-files.com/5c864c33af62620dca1373ac/5d3b83efb1eba455371695f9_China%20world%20exposure%20index.png" alt="CHINADebate" width="100%" /><p><strong>&lsquo;This divergence arguably</strong> reflects the unbalanced dynamic that is fueling trade tensions with the United States. The sheer scale of China&rsquo;s impact may also be a factor.&rsquo;</p><ul><li><strong>&lsquo;Closer economic ties</strong> with the world have fueled China&rsquo;s growth, as the country learned best practices from global players and provided cost-competitive products.&rsquo;</li><li><strong>&lsquo;But there have been losses,</strong> too, notably in the form of manufacturing jobsin both China and advanced economies.&rsquo;</li></ul><p><strong>&lsquo;In any case,</strong> China and the world face important questions about the trajectory of their mutual engagement.&rsquo;</p><ul><li><strong>&lsquo;At stake,</strong> according to our simulation, may be some $22-37 trillion in economic value &ndash; or 15-26% of world GDP &ndash; by 2040.&rsquo;</li></ul><p><strong>&lsquo;While less predictions than possibilities,</strong> our simulation provides insight into the implications of the choices for China and the world in five key areas.&rsquo;</p><h5>&lsquo;1. Growth as an import destination&rsquo;:</h5><ul><li><strong>&lsquo;China may either</strong> pull back from international trade, and the world may fail to reform the multilateral trading system, causing total global trade flows to decline.&rsquo;</li><li><strong>&lsquo;Conversely,</strong> China could push forward, establishing itself as a major destination for exports from emerging and advanced economies.&rsquo;</li><li><strong>&lsquo;The total value at stake,</strong> according to our simulation, is $3-6 trillion between now and 2040.&rsquo;</li></ul><h5>&lsquo;2. Liberalization of services&rsquo;:</h5><ul><li><strong>&lsquo;China may maintain current restrictions</strong> on its services sector, which create a productivity gap <em>vis-&agrave;-vis</em>the developed economies, or it could roll back these restrictions, attracting more foreign players and thus boosting the sector&rsquo;s growth and global competitiveness.&rsquo;</li><li><strong>&lsquo;Here,</strong> $3-5 trillion could be at stake.&rsquo;</li></ul><h5>&lsquo;3. Globalization of financial markets':</h5><ul><li><strong>&lsquo;China and the world</strong> can integrate their financial markets, thereby broadening investor choice and improving capital allocation, or they can maintain the <em>status quo</em>, risking more volatility and low productivity growth.&rsquo;</li><li><strong>&lsquo;We estimate</strong> that $5-8 trillion of value could be at stake.&rsquo;</li></ul><h5>&lsquo;4. Collaboration on global public goods&rsquo;:</h5><ul><li><strong>&lsquo;Global challenges,</strong> such as climate change, and provision of adequate public goods, such as infrastructure, depend on China and the world collaborating.&rsquo;</li><li><strong>&lsquo;Greater or less collaboration</strong> could put about $3-6 trillion of value at stake, and potentially much more, as climate change&rsquo;s impact is likely to be much greater after 2040.&rsquo;</li></ul><h5>&lsquo;5. Flows of technology and innovation&rsquo;:</h5><ul><li><strong>&lsquo;Increased technology</strong> (and knowledge) flows between China and the rest of the world would support the development of globally competitive, productivity-enhancing solutions; decreased flows would undermine global productivity.&rsquo;</li><li><strong>&lsquo;The world can</strong> also decide how to facilitate more or fewer flows of technologies that are increasingly subject to security reviews.&rsquo;</li><li><strong>&lsquo;According to our simulation,</strong> $8-12 trillion could be at stake, depending on the extent to which technology flows unleash innovation and productivity growth.&rsquo;</li></ul><hr /><p><strong>&lsquo;It is important to note that</strong> these choices are not just China&rsquo;s; the world also has decisions to make.&rsquo;</p><ul><li><strong>&lsquo;For example,</strong> by working together to reform the global trading system in ways that strengthen dispute resolution and boost inclusiveness, countries could ensure that the benefits from increased Chinese (and other) trade are shared broadly.&rsquo;</li><li><strong>&lsquo;Furthermore,</strong> if China moves to globalize its financial sector further, the rest of the world must be open to Chinese investment.&rsquo;</li><li><strong>&lsquo;And, of course,</strong> all countries should play a role in delivering global public goods; on climate change, in particular, they must commit to reaching specific milestones in line with their capabilities and their contributions to the problem. &lsquo;</li><li><strong>&lsquo;Finally,</strong> countries should ensure that their trade and investment policies are conducive to continued transfer of technology and knowhow.&rsquo;</li></ul></td></tr>

2. China's Maritime Militias in the ‘Gray Zone’

<tr><td class="bg-holder"><img src="https://assets.website-files.com/5c864c33af62620dca1373ac/5d3b8536cb7dfd240bee7f27_China%27s%20Maritime%20Militias%20in%20the%20South%20China%20Sea.jpg" alt="CHINADebate" width="100%" /></td></tr><tr><td class="nl-post"><p class="caption">CSIS</p><p class="excerpt">&ldquo;War without Gun Smoke&rdquo; (一场没有硝烟的战争): &lsquo;Paranaval forces, and the &ldquo;gray zone&rdquo; in which they typically operate, are on the frontlines of China&rsquo;s seaward expansion.&rsquo;</p><p><strong>I was astonished </strong>years ago when China claimed rights to essentially the entire South China Sea, and when it began to build islands there to enforce its claim &ndash; and the U.S. and the rest of the world let it happen.</p><ul><li><strong>That astonishment </strong>is now mixed with some admiration at how cleverly China is protecting its spoils &ndash; a paranaval militia.</li><li><strong>Here is </strong>a short video followed by details of how this works.</li></ul><table class="intable"><tbody><tr><td class="intable-border"><p><a href="https://www.youtube.com/watch?v=y2Rk1wRCfnc" target="_blank"><strong>&lsquo;China's Maritime Militias in the South China Sea&rsquo;</strong></a> is 2m20s video by the Center for Strategic and International Studies (CSIS).</p><p><strong>&lsquo;China is asserting claims</strong> to all the waters and airspace of the South China Sea,&rsquo; says narrator <strong>Gregory Poling</strong> of the CSIS.</p><ul><li><strong>&lsquo;And they're doing it</strong> not primarily with military or law enforcement vessels.&rsquo;</li><li><strong>&lsquo;They're doing it</strong> with an armed militia that camouflages itself by operating on fishing boats.&rsquo;</li><li><strong>&lsquo;The maritime militia is</strong> really the tip of the spear for China's power projection in the South China Sea.&rsquo;</li></ul><p><strong>&lsquo;The South China Sea</strong> is the most contested piece of geography on the planet.&rsquo;</p><ul><li><strong>&lsquo;The</strong><strong>largest recent deployment</strong> we've seen of this militia has taken place over the last seven months around Thitu Island, which is occupied by about a hundred Filipino civilians and a small military contingent.&rsquo;</li></ul><p><strong>&lsquo;China has had dozens</strong> of these militia boats surrounding the island every day.&rsquo;</p><ul><li><strong>&lsquo;On a shot</strong> from December 20th what you see is 95 Chinese boats &ndash; the heaviest day that we monitored.&rsquo;</li><li><strong>&lsquo;Every one</strong> of them is large.&rsquo;</li><li><strong>&lsquo;None of them</strong> broadcasting the signals that they should be to avoid collisions.&rsquo;</li><li><strong>&lsquo;None of them</strong> with nets or other gear in the water - none of them fishing.&rsquo;</li><li><strong>&lsquo;They just sit there</strong> for long periods of time monitoring and intimidating the Filipinos.&rsquo;</li></ul><p><strong>&lsquo;It seems clear</strong> that China's goal in the South China Sea is to establish effective dominance of all the waters and airspace within what they call the &ldquo;Nine-Dash Line.&rdquo;&rsquo;</p><ul><li><strong>&lsquo;They don't want</strong> to do that by fighting a military conflict with the United States or anybody else.&rsquo;</li><li><strong>&lsquo;What they want</strong> to do is use civilian actors - these paramilitary forces - to effectively control the space, make it impossible for their neighbors to operate, and therefore win without ever having to fight.&rsquo;</li></ul></td></tr></tbody></table><table class="intable"><tbody><tr><td class="intable-border"><p><strong>Here is more </strong>about the China&rsquo;s paranaval militia, taken from several interviews by<strong> Andrew S. Erickson and Ryan D. Martinson </strong>of the Naval War College&rsquo;s China Maritime Studies Institute and the editors of <em>China&rsquo;s Maritime Gray Zone Operations</em>.</p><p><strong>&lsquo;Chinese policymakers</strong> are very clear about the fact that their long-term goal is to exercise &ldquo;administrative control&rdquo; over all of the 3 million square kilometers of Chinese-claimed maritime space.&rsquo;</p><ul><li><strong>&lsquo;This includes</strong> all of the Bohai Gulf, large sections of the Yellow Sea and East China Sea, and all of the area within the nine-dash line in the South China Sea.&rsquo;</li></ul><p><strong>&lsquo;To this end,</strong> China employs maritime &ldquo;Gray Zone&rdquo; strategies have three primary characteristics.&rsquo;</p><ol><li><strong>&lsquo;They seek</strong> to alter the status quo.&rsquo;</li><li><strong>&lsquo;They do</strong> so gradually.&rsquo;</li><li><strong>&lsquo;And they employ</strong>&ldquo;unconventional&rdquo; elements of state power.&rsquo;</li></ol><p><strong>&lsquo;Today, a large proportion</strong> of Chinese-claimed maritime space is controlled or contested by other countries.&rsquo;</p><ul><li><strong>&lsquo;This is the status quo</strong> that Beijing seeks to alter.&rsquo;</li><li><strong>&lsquo;Its campaign</strong> to assert control over these areas has progressed over a number of years.&rsquo;</li><li><strong>&lsquo;Clearly, then,</strong> Chinese leaders are in no rush to achieve their objectives.&rsquo;</li><li><strong>&lsquo;And while China&rsquo;s Navy</strong> plays a very important role in this strategy, it is not the chief protagonist.&rsquo;</li></ul><p><strong>&lsquo;The Chinese Coast Guard (CCG) and the People&rsquo;s Armed Forces Maritime Militia (PAFMM)</strong> perform the vast majority of Chinese maritime gray zone operations.&rsquo;</p><ul><li><strong>&lsquo;Chinese strategists</strong> and spokespeople frame their actions as righteous efforts to protect China&rsquo;s &ldquo;maritime rights and interests.&rdquo;&rsquo;</li><li><strong>&lsquo;The CCG</strong> uses law enforcement as a pretext for activities to assert Beijing&rsquo;s prerogatives in disputed maritime space.&rsquo;</li><li><strong>&lsquo;PAFMM </strong>personnel are often disguised as civilian mariners, especially fishermen.&rsquo;</li></ul><p><strong>&lsquo;The PAFMM</strong> is a state-organized, developed, and controlled force operating under a direct military chain of command.&rsquo;</p><ul><li><strong>&lsquo;This component</strong> of China&rsquo;s armed forces is locally supported, but answers to China&rsquo;s centralized military bureaucracy, headed by Commander-in-Chief Xi Jinping himself.&rsquo;</li><li><strong>&lsquo;While most retain day jobs</strong>&ndash; they do fish, at least some of the time - militiamen are organized into military units and receive military training, sometimes from China&rsquo;s Navy.&rsquo;</li><li><strong>&lsquo;In recent years,</strong> there has been a push to professionalize the PAFMM.&rsquo;</li><ul><li><strong>&lsquo;The Sansha City Maritime Militia, </strong>headquartered on Woody Island in the Paracels, is the model for a professional militia force.&rsquo;</li><li><strong>&lsquo;It is outfitted</strong> with seven dozen large new ships that resemble fishing trawlers but are actually purpose-built for gray zone operations.&rsquo;</li><li><strong>&lsquo;Lacking fishing responsibilities,</strong> personnel train for manifold peacetime and wartime contingencies, including with light arms, and deploy regularly to disputed South China Sea areas, even during fishing moratoriums.&rsquo;</li></ul></ul><p><strong>&lsquo;Meanwhile, the PLA Navy</strong> also plays a role in disputed waters, serving what Chinese strategists call a &ldquo;backstop&rdquo; function.&rsquo;</p><ul><li><strong>&lsquo;It discourages foreign countries</strong> from pushing back too forcefully and stands ready over the horizon to come to the aid of China&rsquo;s gray zone forces should the situation escalate.&rsquo;</li></ul><p><strong>&lsquo;Using paranaval forces</strong> like the coast guard and the militia allows China to find an optimal balance between &ldquo;rights protection&rdquo; and &ldquo;stability maintenance.&rdquo;&rsquo;</p><ul><li><strong>&lsquo;Paranaval forces</strong> are much less provocative than gray-hulled warships.&rsquo;</li><li><strong>&lsquo;The Chinese coast guard</strong> operates on the pretext of routine law enforcement, and militia often pretend to be fishermen.&rsquo;</li><li><strong>&lsquo;Yet both forces</strong> can be used to pursue traditional military objectives of controlling space.&rsquo;</li></ul></td></tr></tbody></table></td></tr>

3. ‘The Failures of the “Failure of Engagement” with China’

<tr><td class="bg-holder"><img src="http://www.paulsoninstitute.org/wp-content/uploads/2016/04/Iain-Johnston-1-725x443.jpg" alt="CHINADebate" width="100%" /></td></tr><tr><td class="nl-post"><p class="caption">The Washington Quarterly ▪ Summer 2019</p><p class="excerpt">&lsquo;What do they believe the world would look like if the United States had rejected engagement early on? Would China be more or less socially and economically liberal?&rsquo;</p><p><strong>&lsquo;One core element</strong> in the current narrative in Washington about China is that the previous U.S. engagement strategy, pursued mainly from the Clinton administration on, has failed,&rsquo; writes Harvard&rsquo;s Alastair Iain Johnston in <a href="https://cpb-us-e1.wpmucdn.com/blogs.gwu.edu/dist/1/2181/files/2019/06/Johnston.pdf" target="_blank"><strong>&lsquo;The Failures of the &ldquo;Failure of Engagement&rdquo; with China.&rsquo;</strong></a></p><p><strong>&lsquo;The &ldquo;engagement failed&rdquo; idea </strong>rests on two empirical claims and one (mostly unspoken) counterfactual claim.&rsquo;</p><ul><li><strong>&lsquo;The first empirical claim</strong> is that engagement was designed to create a Chinese commitment to the U.S.-dominated liberal order, but basically failed to change China&rsquo;s preferences toward the international norms and institutions that constituted this order.&rsquo;</li><li><strong>&lsquo;The second empirical claim</strong> is that engagement was designed to liberalize, even democratize, China&rsquo;s political system, and as such has failed.&rsquo;</li><li><strong>&lsquo;The counterfactual claim</strong> is that, had the United States never adopted the engagement strategy in the first place, the United States would be better off today because it would have been better prepared to compete with or contain China earlier.&rsquo;</li></ul><p><strong>&lsquo;According to the current narrative,</strong> a primary criterion for the success or failure of U.S. engagement was whether an authoritarian China would evolve into a much more politically liberal and/or democratic China.&rsquo;</p><ul><li><strong>&lsquo;Since a politically liberal,</strong> even democratic, China has not emerged, engagement has been a failure.&rsquo;</li><li><strong>&lsquo;Vice President Mike Pence</strong> underscored this conclusion in an October 2018 speech on China: &ldquo;Previous administrations made this choice [economic engagement of China] in the hope that freedom in China would expand in all of its forms&ndash;not just economically, but politically, with a newfound respect for classical liberal principles, private property, personal liberty, religious freedom&mdash;the entire family of human rights. But that hope has gone unfulfilled.&rdquo;&rsquo;</li></ul><p><strong>&lsquo;But today&rsquo;s dominant narrative</strong> about the failure of engagement&mdash;embodied in the 2017 National Security Strategy and in a great deal of punditry of late&mdash;is ahistorical and simplistic. It mischaracterizes and sometimes omits the causal arguments used by key figures in the engagement strategy.&rsquo;</p><ul><li><strong>&lsquo;For the most part,</strong> the U.S. government&rsquo;s engagement strategy did not posit that systemic political liberalization or democratization was inexorable or inevitable.&rsquo;</li><li><strong>&lsquo;Substantive political liberalization </strong>and/or democratization in China would be a hard and unpredictable slog that combined both the liberalization of mass attitudes in China, external pressure on the PRC regime, as well as considerable change in the preferences for self-preservation of the Communist Party.&rsquo;</li><li><strong>&lsquo;Nor was political change</strong> in China the core goal of engagement.&rsquo;</li></ul><p><strong>&lsquo;China&rsquo;s economic development and integration,</strong> aided to a large degree by U.S. engagement policy, appears to have worked in liberalizing societal attitudes, as engagers predicted.&rsquo;</p><ul><li><strong>&lsquo;Whether the regime</strong> would respond positively to these attitudes and preferences was less certain and depended on the interests of the Communist Party and, to some degree, on external pressure on human rights.&rsquo;</li><li><strong>&lsquo;Either way,</strong> according to the engagement argument, a positive outcome in democratizing the Chinese government was neither inevitable, nor even the principal goal of engagement.&rsquo;</li></ul><p><strong>&lsquo;Finally,</strong> putting aside the conceptual and empirical problems with the &ldquo;engagement failed&rdquo; argument, its proponents need to think more carefully about the counterfactual logic of their claim.&rsquo;</p><ul><li><strong>&lsquo;What do they believe</strong> the world would look like if the United States had rejected engagement early on? Would China be more or less socially and economically liberal? Would China be more or less supportive of the nuclear nonproliferation regime? Would China be more or less supportive of containing greenhouse gases?&rsquo;</li><li><strong>&lsquo;The &ldquo;engagement failed&rdquo; advocates</strong> implicitly and sometimes explicitly make the following counterfactual argument: if the United States had not engaged China, it would have had at least a two decade jump in balancing or containing the PRC.&rsquo;<ul><li><strong>&lsquo;The United States</strong> would have mobilized the capabilities and resources to deal with China earlier, making U.S. interests in the Asia-Pacific and elsewhere more secure than they are today.&rsquo;</li></ul></li><li><strong>&lsquo;But &ldquo;engagement failed&rdquo; advocates</strong> would also logically have to make a strong case against other, equally plausible, but less optimistic counterfactual histories.&rsquo;</li></ul><p><strong>&lsquo;One such alternative</strong> might be that without engagement, the United States would have faced a hostile, nuclear-armed China alienated from a range of international institutions and norms, kept out of global markets, and with limited societal/cultural exchanges.&rsquo;</p><ul><li><strong>&lsquo;In other words,</strong> a China still ruled by a ruthless Leninist Party but one that had massively mobilized and militarized to vigorously oppose U.S. interests.&rsquo;</li><li><strong>&lsquo;Then there would be the</strong> overall socioeconomic benefits forgone due to earlier confrontation with China&mdash;the material benefits from trade and the future benefits from cooperation on the threat from climate change.&rsquo;</li></ul><p><strong>&lsquo;In short, this</strong> counterfactual reality would feature a much more dystopian U.S.- China relationship than exists today.&rsquo;</p></td></tr>

II. POTENTIAL BACKLASH FROM THE U.S.
4. Hardline trade minister joins China’s negotiating team

<tr><td class="bg-holder"><img src="https://assets.bwbx.io/images/users/iqjWHBFdfxIU/ig5oaDDTs0tI/v0/1000x-1.jpg" alt="CHINADebate" width="100%" /></td></tr><tr><td class="nl-post"><p class="caption">Bloomberg</p><p class="excerpt">&lsquo;Zhong has a reputation as a tough negotiator and is seen by some on the U.S. side as a hard-liner who could make discussions even more hostile than they have been already.&rsquo;</p><p><strong>&lsquo;After spending most of the past year</strong> in the relative shadows of the talks, Chinese Commerce Minister Zhong Shan has joined two conference calls with U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin in recent weeks and is expected to be at the table when the two sides start meeting in Shanghai on Tuesday next week,&rsquo; Bloomberg <a href="https://www.bloomberg.com/news/articles/2019-07-25/new-entrant-to-u-s-china-trade-negotiations-raises-questions" target="_blank">reports</a>.</p><p><strong>&lsquo;But why Beijing</strong> has chosen to elevate him is unclear, said the official, and there are questions over how he could affect the tone in the talks.&rsquo;</p><ul><li><strong>&lsquo;Zhong has a reputation</strong> as a tough negotiator and is seen by some on the U.S. side as a hard-liner who could make discussions even more hostile than they have been already.&rsquo;</li></ul><p><strong>&lsquo;Since the talks collapsed in</strong> May, Zhong&rsquo;s rhetoric toward the U.S. has become less complimentary than it once was.&rsquo;</p><ul><li><strong>&ldquo;The U.S. has started</strong> trade frictions with us. It violates the WTO rules and is typical unilateralism and protectionism,&rdquo; he said in a recent interview with the People&rsquo;s Daily. &ldquo;We need to uphold the spirit of struggle and firmly defend the interest of our nation and people, as well as the multilateral trading system.&rdquo;</li></ul><p><strong>&lsquo;Part of Zhong&rsquo;s strength</strong> in China comes from his long-running links to Chinese President Xi Jinping.&rsquo;</p><ul><li><strong>&lsquo;He became deputy governor</strong> of Zhejiang province in 2003 and worked under Xi, then the provincial party chief, before moving to Beijing as vice commerce minister in 2008.&rsquo;</li><li><strong>&lsquo;He was appointed</strong> China&rsquo;s international trade representative in 2013 and was involved in the negotiation of a number of bilateral free-trade agreements.&rsquo;</li><li><strong>&lsquo;He was also dispatched</strong> to deal with the European Union on trade conflicts over solar products and telecommunication equipment.&rsquo;</li></ul><p><strong>&ldquo;With more experience</strong> in dealing with the nitty-gritty of trade negotiations than Liu and a lower political rank, Zhong is more likely to stick to detail and defer major decisions to the very top leadership,&rdquo; said Bonnie Glaser, director of the China Power Project at the Center for Strategic and International Studies in Washington.&rsquo;</p><ul><li><strong>&ldquo;People who are working</strong> for the Chinese Communist party in these kinds of negotiations are all hardliners,&rdquo; she said. &ldquo;You will not find the gaps that you see in the United States between a Lighthizer and a Mnuchin, with which you can very clearly find differences in approach and differences in their views on what a deal might look like.&rdquo;</li></ul></td></tr>

5. ‘The Continuing Chinese Drag on the Global Economy’

<tr><td class="bg-holder"><img src="https://assets.website-files.com/5c864c33af62620dca1373ac/5d3b86cab1eba4aa2f16a463_Brad%20Setser%20copy.jpg" alt="CHINADebate" width="100%" /></td></tr><tr><td class="nl-post"><p class="caption">CFR</p><p class="excerpt">&lsquo;Trump's trade policies aren't the only reason for the slowdown in global trade.&rsquo;</p><p><strong>&lsquo;The June trade data </strong>shows a rising Chinese trade surplus,&rsquo; writes Brad Setser of the Council on Foreign Relations.</p><ul><li><strong>&lsquo;And that</strong> isn&rsquo;t just a function of lower oil prices.&rsquo;</li><li><strong>&lsquo;China&rsquo;s manufacturing trade surplus</strong> is up significantly.&rsquo;</li></ul><p><strong>&lsquo;And that rise</strong> has come even as China&rsquo;s manufacturing surplus with the United States has fallen a bit&mdash;which by definition means that China&rsquo;s surplus with the rest of the world is rising.&rsquo;</p><ul><li><strong>&lsquo;In fact,</strong> China's manufacturing surplus with countries not-governed by Donald J. Trump is up about $100 billion over the last 12 months.&rsquo;</li></ul><img src="https://cfrd8-files.cfr.org/sites/default/files/styles/large_xl/public/image/2019/07/China%20Manufacturing%20Trade%20Balance%20%20with%20U.S.%20vs.%20RoW%20%28T12M%20Sums%2C%20USD%20Billions%2C%20U.S.%20is%20from%20the%20U.S%20.Data%29_1.png" alt="CHINADebate" width="100%" /><p><strong>&lsquo;The rise</strong> in China's overall surplus in manufacturing trade hasn&rsquo;t come from particularly strong Chinese exports.&rsquo;</p><ul><li><strong>&lsquo;Take out trade</strong> with the United States and Chinese exports are up a bit. But the pace of growth is modest.&rsquo;</li><li><strong>&lsquo;The rise</strong> in the surplus is mostly the result of weak Chinese imports.&rsquo;</li></ul><img src="https://cfrd8-files.cfr.org/sites/default/files/styles/large_xl/public/image/2019/07/China%27s%20Trade%20in%20Manufactures%2C%20Excluding%20the%20United%20States.png" alt="CHINADebate" width="100%" /><p><strong>&lsquo;Of course,</strong> some of that change is nominal.&rsquo;</p><ul><li><strong>&lsquo;We normally</strong> think of swings in prices impacting commodity trade, not manufactured trade.&rsquo;</li><li><strong>&lsquo;But China imported</strong> about $300 billion in imported circuits last year, and <a href="https://www.wsj.com/articles/memory-boost-unlikely-to-last-11562940800" target="_blank">memory chip prices were way down </a>before the recent trade fight between Korea and Taiwan.&rsquo;</li><li><strong>&lsquo;Falling prices on chips</strong> though should reduce the nominal value of both China's imports and its exports (imported semiconductors are re-exported as computers and smart phones and networking equipment)&mdash;it doesn't completely explain the current gap between China's import and export growth.&rsquo;</li></ul><p><strong>&lsquo;And some of the fall</strong> in imports reflects falling exports to the United States, as roughly a third of China&rsquo;s imports are for re-export.&rsquo;</p><ul><li><strong>&lsquo;But if China's exports</strong> to the U.S. are down by just over 10% ($60 billion, roughly) that only works out to a $20 billion fall in China's imports from the rest of the world.&rsquo;</li></ul><p><strong>&lsquo;The rise</strong> in China's surplus consequently seems to reflect ongoing domestic weakness), not just weakness in China's exports.&rsquo;</p><ul><li><strong>&lsquo;And that's impacting</strong> all of China's trading partners.&rsquo;</li><li><strong>&lsquo;No one is doing</strong> particularly well selling to China right now.&rsquo;</li></ul><img src="https://cfrd8-files.cfr.org/sites/default/files/styles/large_xl/public/image/2019/07/China%27s%20Manufacturing%20Trade%20%28exc.%20the%20United%20States%2C%20T12M%20Sums%2C%20USD%20billions%29.png" alt="CHINADebate" width="100%" /><p><strong>&lsquo;So China's trade surplus</strong> with countries that haven't raised tariffs is rising. What of the United States?&rsquo;</p><ul><li><strong>&lsquo;U.S. imports</strong> of manufactures of non-Chinese manufactures are still up 5 percent year over year in the most recent data (last data point is May).&rsquo;</li><li><strong>&lsquo;The U.S. </strong>isn&rsquo;t providing the kind of big positive impulse to the world economy that it provided in the first part of 2018 (nothing like a 10 percent y/y increase in the world's largest importer of manufactures to juice global trade numbers).&rsquo;</li><li><strong>&lsquo;However,</strong> if you set China aside, the net impulse to global trade from the United States is still positive.&rsquo;</li></ul><img src="https://cfrd8-files.cfr.org/sites/default/files/styles/large_xl/public/image/2019/07/U.S.%20vs.%20Chinese%20Manufacturing%20Imports%20from%20Third%20Party%20Markets.png" alt="CHINADebate" width="100%" /><p><strong>&lsquo;And, well,</strong> the United States hasn't been competing that effectively for global demand either.&rsquo;</p><ul><li><strong>&lsquo;U.S. exports</strong> of manufactures are now down year over year. Unlike China.&rsquo;</li></ul><img src="https://cfrd8-files.cfr.org/sites/default/files/styles/large_xl/public/image/2019/07/U.S.%20vs.%20Chinese%20Manufacturing%20Exports%20to%20Third%20Party%20Markets_0.png" alt="CHINADebate" width="100%" /><p><strong>&lsquo;Some of the growth</strong> in U.S. imports may be the product of the diversion of trade away from China (but likely not that much in aggregate, even if the effect is significant for specific countries&mdash;U.S. imports from Vietnam are up a lot, but imports from Vietnam are roughly 1/10th as large as imports from China).&rsquo;</p><ul><li><strong>&lsquo;And it is possible</strong> that China&rsquo;s weakness is a function of the broader uncertainty that Trump has introduced into the global trading system.&rsquo;</li><li><strong>&lsquo;Thus Trump's tariffs</strong> have an impact that extends well beyond their direct impact on bilateral Sino-American trade.&rsquo;</li></ul><p><strong>&lsquo;But right now,</strong> it looks like China&rsquo;s own self-induced slowdown&mdash;China tightened policy out of concerns about excessive credit growth back in 2018, and China's auto market has been in the doldrums for reasons completely independent from the trade war&mdash;has been an important independent factor in slowing global trade.&rsquo;</p><p><strong>&lsquo;And,</strong> for the non-Chinese world, the United States remains a demand locomotive.&rsquo;</p><img src="https://cfrd8-files.cfr.org/sites/default/files/styles/large_xl/public/image/2019/07/U.S.%20Trade%20Balance%20in%20Manufacturing%20Trade%20%28exc.%20China%2C%20T4Q%20Sums%2C%20USD%20Billions%29.png" alt="CHINADebate" width="100%" /><p>&nbsp;</p></td></tr>

III. CONGRESS & THE PRESIDENT REACT
IV. EXTRADITION LAW:PRO & CON