Echoes from history in China's latest trade trouble
The country has long had a complex relationship with international openness
by George Magnus	/ September 3, 2018 / Leave a comment
Chinese President Xi Jinping. Photo: Li Xueren/Xinhua News Agency/PA Images
The Monument to the People's Heroes in Tiananmen Square records several revolutionary events in China's recent history, starting with the Burning of Opium in Humen. It was on the banks of the Pearl River Delta in 1839 that China seized and destroyed 1,000 tonnes of opium from British merchants, triggering the First Opium War and the start of what the Chinese call their "century of humiliation" by foreigners. It is a reminder that for China, trade and openness to the outside world have been historically both an agent of progress and a cause of profound instability.
This dichotomy is newly relevant given the challenges facing Xi Jinping's China, especially as President Trump prepares to widen the trade war in which probably half, and perhaps all bilateral trade between the two countries will be affected.
As I explain in my forthcoming book Red Flags: Why Xi's China is in Jeopardy, Britain's 19th century insistence on the use of opium for payment in trade, the legalisation of opium for sale in China, and tariffs structured for Britain's own benefit comprised the early agenda to force China to open its markets. The Chinese had to accept unequal treaties, pay indemnities and cede territory to foreign jurisdiction including treaty ports such as Hong Kong. Other European powers joined the fray, along with Russia, Japan, and eventually the United States.
Foreign powers carved up China and undermined its sovereignty, and the country was certainly forced to trade on unfavourable terms. But foreigners also brought new technologies in transportation, finance and commerce, along with employment opportunities and outlets for the sale of tea and silk that paid for industrial imports and essential infrastructure.
Fast forward to the present day and you can still see the ambivalence that trade represents for China. The country has been a major beneficiary of globalisation, and there is no question that the policies adopted to prepare for World Trade Organisation membership in 2001 (and take advantage of it afterwards) helped propel Chinese economic development. Today, China professes to champion globalisation as Donald Trump's America backs away from it, arguing that US trade policies are tantamount to an attack on the Chinese state.
Yet China is in the cross-hairs for exploiting global rules governing trade and investment for its advantage. Intellectual property theft and plagiarism, technology transfer requirements to do business locally, restricted market access for foreign companies and a heavily biased regulatory, procurement and competitive environment that favours local…
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