China turning its back on reform and opening up would be the real tragedy of a trade war

Beijing and Washington have, in recent weeks, engaged in commercial skirmishes, but the wrangling over the trade deficit is only a secondary effect of an emerging rivalry over technological primacy between China and the United States. The Chinese products the US has targeted with a 25 per cent tariff are mostly related to “Made in China 2025” – China’s effort to leapfrog the US and lead in technologies that will shape the economic infrastructure of the 21st century.

So pivotal has this competition become that the Defence Innovation Unit Experimental – the Pentagon’s unit in Silicon Valley – advised that restrictions be placed on visas for Chinese researchers in technical disciplines to counter China’s efforts to eclipse US technological eminence. 

With Sino-US economic competition expanding to the technological strategic realm, the progression from trade skirmishes to a prolonged commercial war of attrition is a plausible outcome. Will the Chinese economy survive the stress and remain the locomotive for global growth?  

While China’s economy is less dependent on trade than just a few years ago, trade dependency – the combined imports and exports as a percentage of Chinese gross domestic product – remains at 37 per cent, with the US market being the prime destination for Chinese exports. Obstructed access will affect Chinese GDP expansion and slow the Chinese economy.