Understanding the US-China Relations: Insights from Nelson Wong

hello and welcome to uh strategic compass um today we are hosting uh Nelson Wong uh from Shanghai

uh he was with us some months back and he predicted what was in store between the United States and China he's one of

the leading political analysts of China and director of rimpac center based in China uh Shanghai now uh Nelson thank

you very much for joining us uh thank you professor it's uh an honor to be on your program again well thank

you very much it's uh it's our honor and let's get actually going immediately because there is quite a bit to talk

about um uh regarding the latest developments between not only China and the United

States but also United States and the whole world in a sense um as you were on uh our guest some months back you

predicted what sort of a severe competition was at uh was in store um as Trump took over um and you also pointed

out that um China was actually ready for any sort of competition with the United States either a competition of a

friendly kind very unlikely you said but or a competition of a severe kind or competition of a hostile kind you know

we are in between all of this these days now let me er give us your take first on what is the latest and then we will be

talking about the fundamentals of what is going on today uh well uh I think the latest is the

tariff wars actually so everybody is aware of it uh the what what is worthy of note I would say is that uh uh China

was very quick and swift in its retaliation when the Trump administration announced its first uh

tariff increase so uh which means that China was prepared mhm and uh in in actual

fact that China has the last 10 years 10 years to have prepared itself for this day and that's why the country was so

swift because I think Chinese government was expecting what what was

coming so uh and that's why there was no surprise and as I said uh when we met last time on your program I said China

does not have any unrealistic expectations towards America anymore so uh and I think uh the swift

reactions of the Chinese government speaks all this time okay um well can you also give us some

uh details about China's preparation it seems you know the minute basically uh uh Trump administration pressed the

button um it was uh as if um automatic that the Chinese side pressed the other button and it was so automatic and it

came up to the surprise of all the whole of the of the of of of many in the world actually and normally until say 10 20

years ago um China's response to this sort of thing would be a bit cautious a bit prudent this although China would

say you know it would prepared to protect its national interests here and there but this time

it was just ready you know whether you buy Chinese products or not whether you actually um apply this much tariffs to

Chinese products doesn't matter you know we are going to basically retaliate exactly in kind and then uh it means um

so give us some details about the Chinese preparation so China has actually expanded its export markets all

over the so that it could uh make up for any losses that it would incur in the United States market

yeah let me start by saying that uh by saying that uh China has the last 10 years to prepare itself for this

particular day uh what I really want to convey is if you look at the figures of China's

export to the US and that figure has been brought down tremendously to less than 15% of China's overall

export which means that even if the export is wiped out to America completely according to some expert

predictions that will only affect

0.5% of the country's GDP growth in theory now bear in mind that China has as you said the rest of the world to

look for and expand its uh export destinations the actual

effect is way below that 0.5% threshold so uh this actually shows how well the country has prepared

itself uh so uh and that's one thing by spreading uh the export destinations never put anything in one

single basket so that's one side of the preparation also I think it shows that

China has fully calculated the risks of a de facto economic decoupling with the

US although we keep reminding our US counterparts and the general public in America that uh uh you know our two

economies are actually interwoven but if the other side decides they don't want to do business with

China then we have to be prepared for that we cannot sit here and be hit just like

that so that's why uh we actually know what we are exporting to

America we have all the data and statistics well mostly is consumer products but at very competitive

prices and China has kept reminding the the American counterparts that uh for any tariff war if the US was going to

raise the tariff uh the the negative effect is actually taken on the American consumers because that will increase the

inflation uh for sure prices will go up uh in the meantime if you look at what China is buying from

America it's mostly agricultural and food products that China can

easily find alternative suppliers now yes the Americans may say that uh okay we're also buying critical

minerals from China which is uh you know critical for the defense industry for weaponry

uh yes they can find alternative suppliers from other parts of the

world but please do not forget the cost of excavation and

processing and also the time that is required to finish all of that so China does believe

that China holds a much tighter grip over the US in terms of this competition although I think personally

I don't believe that this is going to uh the situation is going to last forever because sooner or later the two sides

will have to come together to negotiate to find a solution this is not the only way by

increasing the tariff like this this is not the only way to solve this trade imbalance for the US because the US for

decades for more than half a century the United States has adopted this policy this financial

policy of buying from the rest of the world opening up its market uh and pay everyone with the dollar which increased

the liquidity of the dollar and that's how they monetize they they

theyaponize the currency so they're working what Donald Trump is doing is actually working

against uh the American interest yep so well he's running his country based on his own understandings and

perceptions but uh you know the people outside the country uh are in no place to criticize him for for what

he does actually we we all have to react and respond accordingly well yes um thank you on that and um uh

the the other point um I think to basically um support your argument uh all along the

um quite a number of American companies who have invested heavily in China one of which was Apple and its director

general Tim Cook I think was on record yesterday or the day before yesterday saying it is not just cheap labor that

keeps us in China it is the complete complete investment climate you know the way their engineers work the way their

uh technical personnel work the day the way the uh workers actually produce produce more and more and more

efficiently and in a better quality all the time it's not just you know uh dismantling the factory here taking back

to the United States and then uh basically uh uh pressing the button and starting mass production in the United

States of the same product no he's saying it is not that so get to your get your senses you know it's not going to

be easy it's going to be absolutely destructive for the United States um now there is the other uh um uh the the the

other thing between China and the United States on the one hand to a great extent but also between the United States and

to the rest of and the rest of the world that is the uh uh monetization of the economy so you've got basically they

have littered all the economies of the world with their dollars now um they have stopped producing and okay it's a

luxury way of uh life you don't do much about production and all that but then all you do um print money and you buy

somebody else's manufactured products and you pay uh in your dollar and your dollar uh becomes your best weapon in

the world now with regard to dollar I think China seems to have a another I mean against the weaponization of dollar

China has another weapon that is it is bringing down its basically reserves um um on on on US federal reserves so

basically including dollars and the Federal Reserves papers and all that China is bringing its stocks down to a

considerable extent now on that point what would you like to say um uh to our viewers because um my understanding is

that over the last few years China has really um been selling US uh Federal Reserves uh both dollars and papers and

what have you u you're absolutely right professor to have pointed out that uh

uh there are other avenues of this trade war between the two countries actually uh on that note I would like to uh uh to

to to bring everyone's attention to uh the war between Russia and the west in Ukraine actually because what Russia has

suffered Among all the 23,000 and more sanctions from the

west their reserves in the west in Europe and in America have been

confiscated and that has run a bell a big bell to China to realize that

uh you know our competitors may not have any bottom lines as to what

they might do so no bottom lines to their piracy that's right so that's why China has uh

as you have pointed out has uh has been reducing its holding of US treasury bonds uh steadily steadily so uh what we

are expecting uh in the days to come is uh China's resolve to keep reducing its holding of the treasury bonds so I think

uh yes China does have uh uh more cards to play uh if we look at from you know our side of the table um but uh uh I'm

always of the uh opinion that we should never ever underestimated uh the capability of the other

side and uh nothing is perhaps as what it seems uh Trump might have bigger dreams and

bigger plans and what we are seeing and witnessing and experiencing right now might be only the tip of the

iceberg there are a lot more to come so uh we will really have to uh get ourselves prepared for the unpredictable

because what can be predicted about President Trump is his

unpredictability he's totally unpredictable in that sense it certainly is well let's move then uh

to the um strategic aspects of the whole transformation of the world order now um with Trump back in the White House he

basically uh uh made some uh right steps in the right direction for instance trying to

resolve the conflict in Ukraine directly negotiating with Russia and putting aside all the European you know

uh chatterers if you like european Union has turned into some sort of chattering class um with no uh proper strategic

understanding of what they need to do now um with regard to Russia um do you see any

um any any sign or do you feel uh do you do you see any danger um to be directed at China at some um well you know in the

years ahead that Trump and the United States may want to um um take Russia out of China friendship and then you know

together with Russia put pressure on China to contain China and all that um the Russians seem to be adamant that you

know the Russia China friendship and also alliance is on a solid rock ground yeah what is your sense on that well I

think uh there's been a lot of talk actually at different uh conferences and uh forums uh the question uh has been uh

uh asked by a lot of people quite openly actually that uh uh because we are still uh uh fresh with our memories in the 70s

when uh you know the US government came to uh China to shake hand to establish diplomatic relations with China in order

to wing over China in its uh containment of the Soviet union at that time so uh uh you know yes with Trump

back in power he has openly declared that he's going to uh uh to uh to to separate China from Russia uh so he's

showing a lot of you know saying a lot of friendly words uh with President Putin and then he's trying to wing over

Putin uh that that is a fact about what Trump is

trying to do now whether he's able to accomplish this uh I have a big question mark and I think uh we have all the

reasons uh to believe that the relations between China and Russia uh has been taken not only to its all-time high but

also this mutual trust and strategic partnership has been built upon the full

understanding ing with each other and the understanding of our two country leaders and of our governments about how

we see the world moving forward and I think the US government have proven throughout the

years of its unworthiness of people's trust in them so uh uh and that's why uh we we really

well people in China do not have much doubt and I've been talking to uh uh our friends and colleagues in Russia as well

uh uh and this topic has been brought up quite uh openly among ourselves and I think uh our Russian counterparts have

all confirmed that the time is different and the relations between the strategic partnership between China and

Russia is unbreakable uh at this stage and also in the immediate future that we can uh foresee

because uh the relationship has built on quite a solid foundation number one we have solved all

of our border issues by having signed more than 100 contracts so there is absolutely no

dispute between China and Russia over our mutual border and that's not easy it's a big accomplishment

and number two we both realize that we are against the hegemonic control of the world by one superpower which is the US

and we are all looking for and aspire for a multi-olar world which means that the whole world is going to

be governed and supported by not only two not only three maybe quite a more a lot more countries

uh that have a regional power and influence so

countries like India countries like Turkey countries like South Africa and many other countries in Latin America

countries like Brazil the these are all regional powers that all have to be

recognized to form the pillars of a future multipolar world and people would have to respect each other so although I

keep saying that multipolarity and a multipolar world really needs to be further

defined literally because we talk about it but we don't exactly know or agree on what it actually means

but what is there for sure is that we are not ready to see the future world to be

dominated and governed and manipulated by any country so uh that's an aspiration and we all

know that it is difficult to achieve just like this but with devoted efforts and conviction I think we are working

towards that direction good uh well what um uh let's move on to the um hegemonic uh power or hegemonic

aspirations of the United States or the collective world uh west you know there was a collective west um until sometime

some months ago until Trump came back to the white house now um with regard to the uh hegemonic

aspirations of the United States or of the collective west um um how would you respond to Trump's basically very

um Trump's efforts to actually dismantle the collective west now he's he's not only talking about Greenland

um to be uh part of the United States the United States taking control of the Greenland also uh Canada joining up um

United States as the 51st uh you know state of the United States and all that um um so basically his

disregard for the whole Europe um um first of all how do you uh basically what is your take on all of

that and the second is um for instance um do the Europeans um have any

um any line of their own with regard to China you know they used to be part of the United

States you know determined policies they used to be part of the United States attitude towards China and supposedly

they are supposed to come up with some sort of European uh policy line do you see any sign of

that coming out of Europe or they are still talking and talking in their chatting club

okay uh two major questions from you very good questions actually uh thank you uh well first of all I have to admit

that I have mixed feelings towards President Trump uh on the one hand I believe he has

seen the major flaws uh in the governors of the US uh until now so he's launching if I may

call it a revolution uh domestically and he's got a full plate

actually domestically right uh there are uh a lot of talks of Trump uh being the new

emperor of the US actually he's you know you can hardly find another uh US president that is as powerful as Trump

right now uh so uh and he's running the country like he's running his own company all right and uh so

yes he promised something he said he was going to do something and is doing it uh Panama

uh Canada Greenland yeah whether he's able to accomplish all of this that's a

different matter but he's showing to the rest of the world that he's doing what he vowed he was going to do all right

yes he said he's going to put a stop to the war in Ukraine within 24 hours and he knew I believe he knew that it's not

possible but he's doing he's trying right so that's the good part of it that's the good part of

it because uh I think the rest of the world have suffered tremendously by the hegemonic control uh by the US uh for

over a century by now actually and uh this collective west uh the so-called collective west uh is is really uh you

know a term that will go into history uh for sure uh to my understanding uh

but yes he's dismantled trump has dismantled what was known as the collective

west which means that the US was the big brother and the European countries and some other Anglo-Saxon countries even

including Asian countries like Japan and Korea uh they're all his followers actually junior brothers uh so uh and

that brings to uh my answers to your second question about Europe yes because under the previous scenario

Europe has never had its own autonomy or foreign policy since you know the end of the Second

World War because there isn't any there isn't any foreign policy to talk about

whatever the US said they will just follow and economically and militarily they are

actually the free riders and and that's why Trump got upset and he wants to put a

stop on that the big brother doesn't want to look after you anymore and you have to

look after yourself so wake up of course what we what we've seen at the Munich Security Conference

uh was more than a drama it was a disaster for Europe yes it was a disaster for Europe so but I think uh to

some extent it's good that Europe is waking up to its to the reality now whether they can with the 27

plus countries to come up with a consensus to agree on everything that's a different matter and it's going

to be a difficult process we've already seen uh you know divisions of

countries and uh let us don't forget if I may use conspiracy theory let us don't forget that it is in the US absolute

interest to dismantle the European Union it certainly is not to mention the euro

so the fight between or the war uh between America and Europe is still going to be on actually uh except it

will take different shapes and uh on different avenues but uh we are uh you know set to expect some very

bumpy years ahead but again that provides opport opportunities for other countries for

other countries and on that particular note I have to uh to uh to admire I have to say that I do admire uh

the position of your country professor uh for being a member of NATO but not a member of the EU and uh well to start

with the the EU was reluctant to admit Turkey but I think nowadays it is

Turkey that is not only reluctant but is not even interested in joining the EU so it it actually gives uh you know a lot

of flexibility and freedom for other countries like Turkey like China uh even like Russia to forge you know its new

relations uh with Europe or the European countries whether the European Union is going to

hold on uh for a long time that's a question and it remains a big question good now um the just one note

on the attitude of the European Union in general um it seems for instance they haven't been able to come up with any

clearcut policy toward China you know this is my understanding from what you've said um um uh and with regard to

their general foreign policy again uh there doesn't appear to be any uh any uh realization that they are going to be

left on their own uh to confront Russia if they were to carry on uh with their old policy if you like um so the

European leaders are a different type of political politicians you know these days and they are also undermining their

uh political constituencies with now for instance the IFD the AFD um is coming up and according to the latest polls um it

is actually the biggest party now um according to the latest poll last week I think so the Europe is is I think

hopeless As you said 27 plus countries coming together and then you have to basically

uh try and get the understanding and agreement of all the of all these countries on uh every given issues so

they can't come up with any anything uh any proper line of policy towards China that would be in their national interest

in the interest of the European Union whatever it is um now let's move to the um you know uh I'll keep you a few more

uh minutes and then let's talk about the um attitude of the um Asia-Pacific countries and particularly the far east

for instance Japan Korea Korea and China for instance when Trump was uh making all his threats about tariffs and what

have you um for the first time the three countries came together for instance Japan has been a steadfast uh follower

of the United States in US policy of containment of China and all that but uh is there any sign or can you see any

sign in Japan's policy towards China any difference and also Korea's policy and other countries

um um uh of the same type you know all followers of the United until recently

uh absolutely uh you're very uh you know correct and sharp in pointing out the the the the coming together of the three

countries or the possible coming together of the three countries China Japan and Korea uh let me remind you

that uh uh there is actually uh an institution called uh the three party uh well I forgot the the

the trilateral the trilateral secretariat yes that is the term the trilateral secretariat

uh which was uh initiated uh at the turn of the century at the turn of the century and

so the the mechanism is there for China Korea and Japan to come together to form a tax-free trading zone

that was the original idea because when you look at these three countries e economic size because all three you know

are almost all in the top 10 biggest economies of the world with now Korea lagging behind from time to time but

sometimes within the top 10 so when these three countries can come together to trade under a free trade zone

concept that economic power that this unity can hold is humongous

so these three countries actually did see the need to forge this economic alliance but it was

brutally stopped by the US government the then US government uh so uh uh the mechanism is still

there is still there but uh uh you know countries like Japan and Korea uh simply didn't you know play

up you know to the uh to the expectation but I think uh with Trump back in power now and particularly with

its attitude towards its traditional allies uh it is you know totally

understandable that Japan and Korea will think twice now and and that's why we have seen

signs of showing perhaps a reproshing the willingness to forge a

closer working relationship with China and that's totally expected now

also when you say the west Pacific or the east the west Pacific because I I think it is

general understanding that uh this is uh the part of the world that is going to see a tremendous increase in economic

performance in a worldwide context because first of all we have three countries countries China Korea and

Japan uh having a very strong economies but let us don't forget

ASEAN the ASEAN countries assean country is now the biggest trading partner of

China and the concept or the the the other economic zone called uh ARP that was started by

ASEAN and have now and this organization or this trading block is now already included already included Japan Korea

and New Zealand and Australia even so uh and this is why I think uh what Trump is

doing is really putting the US on the wrong wrong side of history it is good that he's being practical he's not

talking about rulesbased order he's not talking about uh uh the the democratic world leader of the free world that's

good he wants to do business but perhaps the way he's handling you know uh his reform if I may

call it is uh a bit out of everybody's expectation uh because he's not living

up to uh you know the expectation of people that uh you know what uh global governance is all about yes he doesn't

like any of uh the global organizations uh but then how are we going to talk how are we going to talk

he's handling uh the foreign relations totally on a one-on-one basis that's a little bit wide of the mark

actually because it is a lot more complicated uh than running a country uh running a

company and also uh you know the global arena is not the stock market it's not the stock market

no that your gain is always taken on the loss of another because that's where we talk

about wingwing situation there is the real economy and plus even in your own company you don't

take so risky decisions all the time exactly you may take risk when it is worth it um

otherwise there are uh words like caution prudence that that's why I said he was like uh he's like an

emperor you know a president or a president of a company even he doesn't have a board of directors or a

supervisory board to overlook him certainly certainly not well thank you very much we've come

almost to the end you know if uh unless you have some other remarks you would like to make um you know we can call it

a day thank you very much for joining us well thank you professor uh let's uh hope that our way forward is uh not

going to be so bumpy uh let's get ourselves prepared and better prepared for the

unexpected well um two points here for the states um let's hope that it is not going to be

uh terribly bumpy in the days and months and years ahead but for experts like you and me who make their living out of all

these bumpiness it is it it is just my selfish you know selfish side of me you

know well well that's you know if there is there is the the more bumpy it is the

more business we have you know thanks okay thank you very much indeed and hope to see you um either online

again in the months ahead or face to face somewhere okay in a international conference bye-bye for now thank you

professor bye-bye