China’s tussle to the end with the US

Amid the high-level economic and trade talks between China and the US that concluded on 10 June in London, China’s official mouthpiece, People’s Daily, ran a 3,000-word front-page interview with Huawei founder Ren Zhengfei.

Ren last frequently appeared in the headlines in 2019. His eldest daughter Meng Wanzhou had been detained in Vancouver for over six months, while the Commerce Department under the first Trump administration had added Huawei and its affiliates to the export control entity list — the company was in the trenches.

At the time, Ren compared Huawei to a World War II Soviet Ilyushin Il-2 plane shot full of holes, calling it a “damaged plane” that would still return safely despite being riddled with bullets. His most recent interview was in April 2020 with the South China Morning Post, in which he modestly described himself as a “puppet leader”, saying that Huawei’s operations no longer required his direct leadership.

Five years on, the 81-year-old “puppet leader” has reemerged, and his “damaged plane” has remarkably navigated the ups and downs. To have a full interview published prominently covering one-third of the front page of People’s Daily, is rare even for top-tier Chinese state leaders. The fact that China’s top leadership made an exception for Ren shows that he is seen not just as a successful private entrepreneur, but also as a symbol of China’s resilience under US tech sanctions, and a metaphor of victory for a nation in a tussle with the US while still managing to “fly safely”.

Chinese and international media have been quick to analyse Ren’s high-profile interview. Most international outlets have focused on Huawei’s first public comments regarding advanced semiconductor chips, linking it to the China-US talks in London, and interpreting it as China downplaying the impact of US export controls.

Indeed, Chinese authorities intend to send this message: China is not afraid of US sanctions. But it goes further. China is also signalling that it can and will build a self-sufficient technological supply chain, continue to open up, and seek major achievements in the artificial intelligence industry.

When it comes to advanced chips, Ren acknowledged that China’s single chips lag one generation behind those of the US, but Huawei is getting top-level results through methods such as cluster computing, and there is “no need to worry about the chip problem”. As for external technological blockades, Ren responded, “Don’t dwell on the difficulties, just get the job done.” 

This is a clear signal from China’s top leadership, conveyed through Ren: no matter the outcome of the London negotiations, China will not flinch.

Previously, many observers believed that China had gained the upper hand in its latest round of confrontation with the US by successfully leveraging the “rare earth card”. The message from People’s Daily, however, was that the “chip card” with which the US once choked China, is no longer a threat.

Besides rare earths, China has another trump card that could put the US in a “chokehold” — the pharmaceutical supply chain. Around 80% of the raw materials for amoxicillin, the antibiotic most commonly used by Americans, are controlled by China. Leland Miller, member of the US-China Economic and Security Review Commission, raised concerns at a hearing last week that more than 60% of all US drugs contained key inputs from China as well as India, and that India itself is heavily reliant on Chinese chemical inputs. 

From changes in the chips industry, to rare earths and pharmaceutical raw materials, the balance of power between China and the US has become more even in the Trump 2.0 era. This makes compromise not only necessary but also logical. Surprisingly, negotiations between the US and China took place at a faster pace than that between the US and its allies such as Japan and the EU.

Following talks in London, Trump was quick to announce on social media that a deal with China was done, claiming that any necessary rare earths and magnets would be supplied up front by China. 

However, China did not confirm this, and merely stated that it would fully consider the legitimate needs and concerns of other nations regarding rare earths for civilian use, and pledged to “continue to strengthen the approval process for such applications”. 

According to US media reports, import licences for rare earths granted to American manufacturers are valid for only six months; in other words, China still has a card up its sleeve. If the US were to impose further technological sanctions on China, Beijing could once again play the “rare earth card” to choke key US supply chains.

The mutual economic dependence between China and the US has created a new form of a balance of terror that restrains both sides even amid their competition. This could reduce the likelihood of a total fall-out of China-US relations, as neither can afford a full rupture.

The US is constrained by China when it comes to rare earths, but for China to realise overall economic development, it cannot neglect the US market, as well as the US-led Western world. This is an objective reality. In May, China’s export growth slowed to 4.8% year-on-year, with exports to the US plummeting by 34.6%. This creates real pressure, and are reasons why China must make concessions in trade talks with the US.

That said, China’s strategy in the Trump 2.0 era is no longer to seek a deal through negotiation, but to show a willingness to tussle to the end in response to the trade war and fight for a mutual compromise. Ultimately for China, the ideal outcome for China-US relations is “competition without falling out”; and the same holds true for the world. Yet in the age of China-US rivalry, even in the best-case scenario, the relationship between the two countries will be one of fragile balance or a balance of terror rife with undercurrents, with a high degree of uncertainty persisting for a very long time.

Meanwhile, this backdrop would also present new challenges for Chinese entrepreneurs. The private sector might enjoy greater scope to show its capabilities, but it would also face heightened expectations and pressure to be patriotic in the vein of Ren, and align themselves both politically and operationally with China’s national strategy. 

This is another signal conveyed by the People’s Daily’s full-page, front-cover interview with Ren — portrayed as a role model.

This article was first published in Lianhe Zaobao as “任正非在《人民日报》发出的信号”.

Related: China and the US enter a strategic stalemate as chips and rare earths chokehold is released | When the ‘Chinese dream’ goes head-to-head against ‘America First’