ATLANTA, Georgia: The relationship between the United States and China has worsened in recent days after bargaining broke down, leading someone to suggest that we are heading for a new "Cold War".
President Donald Trump blames resumption of hostilities on China.
In particular, he and his dealers say that their Chinese counterparts backtracked on an agreement to amend the law to enforce the agreement, causing Trump to raise $ 200 billion in import and China tariffs to retaliate. Only a few weeks earlier, the two sides seemed very close to a deal.
So what led to China's change of heart ̵[ads1]1; if it was one?
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As an expert on China's development and economic reforms, I believe the answer lies in trying to understand the situation from the Chinese perspective.
CHINA'S RISE ]
China was a poor country not long ago. Its leaders effectively developed their productive and institutional abilities by learning from abroad while allowing domestic companies to flourish over four decades of reform.
Whilst this is legitimate, as my research shows, and any other development economy should imitate, it has also been controversial, especially since China's economy has become the world's second largest.
In 2015, a 10-year plan known as Made in China 2025 set a set of incentives to encourage Chinese companies to move from basic production to high-tech sectors such as electric cars, robotics, and artificial intelligence. China's goal is to get its companies globally competitive in these sectors by 2025.
To meet these ambitious goals, Chinese companies must, in some cases, rely on subsidies, state funding, forced technology transfer and intellectual property theft.
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Now that China has established strong capabilities, the threat of taking over the US in high-tech areas such as AI seems real and the methods used are unfair. Therefore, as part of the negotiations, the Trump administration tried to get China to terminate its forced technology transfer practice by changing its laws.
The United States said China agreed to do so, but the Chinese rejected these claims.
CHINA'S INTERNAL DEBATE
While China will understandably not abandon its development goals to satisfy the United States, the methods used to achieve them are also controversial in China.
It is those who will continue to reform the economy by making it more effective and letting private companies – rather than the government – handle business decisions. Others want to keep the government at the center of things by running state-owned companies and providing support to other sectors of the economy, old and new.
It is generally accepted that the reformers want to see some of the many changes that the Trump administration has pushed, such as more protection of intellectual property rights, open competition and a modern financial system to enable better global integration and a free flow currency.
However, reforms that these carry risk, however. China's economy has gone slow, and some politicians worry that it's not time to shut down the boat. In times of economic distress, China has tended to fall back on top-down controls that were the norm when China had a centrally planned economy.
China has been here before. Based on my research on the process that led to China's entry into the World Trade Organization in 2001, China's internal debates were intense.
Some politicians believe that China gave too much to the privilege, including by changing many domestic laws – just as the Trump administration is seeking. These memories probably affect the debate in China today.
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A third factor gives an overall context that is deeply integrated with the first two: China's leaders and people will not tolerate "humiliation" of foreigners.
In the 1800s, Western forces won two so-called opium wars and gained control of the treaty gates in China, so that they could put better conditions for acting for themselves. "The following century of humiliation" that followed is known to all Chinese, and China's leaders have promised that it will never happen again.
Up until today, and President Xi Jinping's "China Dream" is to establish China as a leading world power on a par with the United States. Therefore, President Xi cannot be seen at home as weak by giving American demands. China feels that it must maintain its path to domestic economic strength and decide for itself what changes to its economic system.
These sensitivities underlie the instability of today's negotiations between the United States and China and the relationship in general. They also show why, although China does not want a trade war with the United States, it is not impossible to find an agreement that satisfies both countries. But it will be difficult.
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China's reformers appear to have lost the upper part in recent weeks, making it even less likely that the Chinese will make changes that are compatible with what the United States wants.
Finally, any agreement would have to convey to Chinese citizens that President Xi did the right thing for the country.
Combine this with the fact that Trump may seem to Americans to have "won" the commercial war just by showing tough on China – whether a deal is beaten – and the prospect of a positive resolution looks weak.
Penelope B Prime is a clinical professor of international trade at Georgia State University. This comment first appeared on The Conversation. Read it here.