Republican presidential candidate Donald Trump gestures while delivering a speech at the Alumisourse Building in Monessen, Pennsylvania.—Rueters
Republican presidential candidate Donald Trump gestures while delivering a speech at the Alumisourse Building in Monessen, Pennsylvania.—Rueters

US protectionism is self-defeating and a “symptom of paranoid delusions” that must not distract China from its path to modernisation, Chinese media said last Friday as Beijing kept up with its war of words with Washington while markets wilted.

President Donald Trump threatened last Monday to hit $200 billion of Chinese imports with 10 per cent tariffs if China retaliates against his previous targeting of $50bn in imports.

Investor fears of a full-blown trade war have weighed on markets, including Chinese shares, which posted their worst weekly loss since early February. Even ordinary Chinese people aired their unhappiness on social media.

China’s commerce ministry accused the United States last Thursday of being “capricious” over trade issues and warned that the interests of US workers and farmers would ultimately be hurt, vowing to hit back with “quantitative” and “qualitative” measures.

The official China Daily said in an editorial the United States had failed to understand that the business it does with China supported millions of American jobs and that the US approach was self-defeating

The official China Daily said in an editorial the United States had failed to understand that the business it does with China supported millions of American jobs and that the US approach was self-defeating.

The English-language newspaper cited research by the Rhodium Group saying Chinese investment in the United States declined 92pc to $1.8bn in the first five months of the year, its lowest level in seven years.

“The woes the administration is inflicting on Chinese companies do not simply translate into boons for US enterprises and the US economy,” it said in an editorial headlined “Protectionism symptom of paranoid delusions”.

“The fast-shrinking Chinese investment in the US reflects the damage being done to China-US-trade relations ... by the trade crusade of Trump and his trade hawks,” it said.

The US administration last Tuesday issued a report about how Chinese policies, and what it described as China’s economic aggression, were threatening the technologies and intellectual property of not just the United States but of the world.

While the White House report did not go beyond what the US has said previously — that China engages in theft of technologies and intellectual property (IP) — it did not help to soothe tension. China has repeatedly denied accusations of IP theft.

US firms: The 30-stock Dow Jones Industrial Average slumped for an eighth consecutive session last Thursday as shares including Caterpillar Inc and Boeing Co wilted.

Big US manufacturers and automakers were also under pressure after Germany’s Daimler cut its 2018 profit forecast and BMW said it was looking at “strategic options” due to the Sino-US trade war.

Shares of Apple Inc, whose iPhones are assembled in China by Foxconn, also declined.

Foxconn Chairman Terry Gou said on Friday the US-China trade war was the Taiwan company’s biggest challenge.

“What they are fighting is not really a trade war, it’s a tech war. A tech war is also a manufacturing war,” Gou said.

A Sino-US trade war could disrupt supply chains for the technology and auto industries — sectors heavily reliant on outsourced components such as those supplied by Foxconn — and derail growth for the global economy, analysts say.

Uncertainty over how the tariff war would unfold in the near term is also starting to move commercial decisions in the energy sector.

Industry sources told Reuters that Chinese oil buyers will keep taking crude from the United States through September, but plan to cut future purchases to avoid a likely import tariff.

China has put US energy products including crude and refined products on lists of goods that it will hit with import taxes. But no activation date has been specified for this cluster of products yet.

‘Tumbling’ index: Shares in Shanghai dropped 4.4pc for the week, while China’s blue-chip CSI300 index fell 3.8pc.

Hong Kong’s Hang Seng index shed 3.2pc for the week, its poorest weekly showing since late March.

The share losses have prompted sarcastic posts in China’s social media, while others compared the falling stocks to China’s 2015 market crash.

“The tumbling Shanghai Composite index must be China’s so-called quantitative and qualitative counter-measures,” one social media user mused.

Not helping sentiment, the yuan extended its decline against the dollar this week, falling to its lowest in more than five months last Friday.

“Chinese exports are now contained, domestic demand has long been weighed by soaring home prices, and the yuan will depreciate, so everyone, hurry up and convert to US dollars,” one social media user quipped.

The Global Times, a tabloid published by the ruling Communist Party’s official People’s Daily, said in an editorial China needed to be realistic about how it could handle the United States and look at other strategies.

“As long as China remains clear-minded in strategy, level-headed in its US policy, and avoids a full-fledged geopolitical competition or a strategic clash against the US, China will be able to withstand US pressure. In other words, China should focus on its domestic affairs.”

— Additional reporting by Ryan Woo and Lusha Zhang; editing by Paul Tait
— Reuters

Published in Dawn, The Business and Finance Weekly, June 25th, 2018

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