Prospects for China's politics in 2020
Relations with Washington are Beijing’s main challenge; there may be tariff relief, but strategic rivalry will deepen
A China-US trade deal involving partial removal of tariffs is likely, but the negative long-term trajectory of the bilateral relationship in almost all areas appears fixed, even if a Democrat is elected as US president next year. China is scheduled to conclude a long-awaited bilateral investment treaty with the EU by September 2020, but controversies over 5G infrastructure overshadow relations. North Korea’s threat of renewed confrontation with Washington would inevitably embroil Beijing.
What next
China will attempt to limit the damage from US trade and investment policies by negotiating tariff relief and diversifying its economic relationships. Its need for closer economic engagement with its neighbours reduces the chance of conflict over contested territory or waters. However, relations with Taiwan would improve only in the unlikely event that a China-friendly government is elected in January.
Strategic summary
- Beijing will likely limit action against Taiwan to threats and covert interference.
- Beijing will not use its influence over Pyongyang as a bargaining chip in trade negotiations with Washington.
- Regardless of how China-US relations develop, Beijing will promote self-reliance in critical technologies and acceptance of its own regulations and standards overseas.
- The political crisis in Hong Kong will drag on, even if violent protests subside.
- Human rights abuses in Xinjiang will damage China’s international image and risk sanctions, but are unlikely to become a decisive factor in the country’s international relationships.
Analysis
President Xi Jinping has warned that China faces a decades-long struggle with the United States.
New US restrictions on technology exports and Chinese investment stem from national security concerns and a heightened sense of geostrategic competition. China likely sees these policies as permanent.
Nevertheless, Beijing also sees opportunities to reduce the damage to China's economy in the short term by negotiating the removal of tariffs.
A deal in 2020 would likely require China to offer some concessions on intellectual property protection, market access and 'forced technology transfer', and bulk purchase of US agricultural products.
Regardless, China will persevere with efforts to achieve self-reliance in critical technologies, foremost among them advanced computer chips.
Even a Democrat victory in the US election would probably not change the basic trajectory of US-China relations.
China's acquisition of critical US technology is a bipartisan concern
China's preferred candidate is probably Joe Biden, who represents pro-trade, Obama-era moderation and would likely allow a reversal of tariffs. Bernie Sanders and Elizabeth Warren are more inclined to protectionism. Both have spoken about the damage to US workers and industry by Chinese competition and are likely to sustain the trade war in some form.
Regional trade relations
China will seek to expand its trade relationships in Asia to offset tariff pressure and reduce its dependence on the United States.
Beijing's priorities include finalising the Regional Comprehensive Economic Partnership (RCEP), a free-trade agreement that leaders from 15 Asia-Pacific economies recently declared their intention to sign in 2020.
RCEP would strengthen China's economic relationships in the region, potentially complicating US efforts to dissuade governments there from accepting Chinese infrastructure loans and 5G telecommunications equipment.
China will continue low-key efforts to access new markets in Japan and South Korea. However, negotiations over a trilateral free-trade agreement have dragged on for years and now a rancorous dispute between Tokyo and Seoul over wartime history has spilled over into trade sanctions (see JAPAN/SOUTH KOREA: Animosities will deepen trade spat - July 17, 2019).
Progress beyond summitry is unlikely in North-east Asia
Maritime disputes
Xi is scheduled to make his first state visit to Japan in early 2020, reducing the likelihood that China will launch new provocations in the East China Sea.
China has fortified its island outposts in the South China Sea over the past three years. Pressing for further gains now would risk undermining China's simultaneous efforts to court its South-east Asian neighbours, but growing capabilities give it more options to test its rivals' responses (see CHINA: ASEAN will overlook Chinese maritime expansion - September 23, 2019).
North Korea
Pyongyang has implied that it will resume provocative activities in 2020 if the Trump administration fails to deliver new proposals on sanctions relief in exchange for denuclearisation (see PROSPECTS 2020: North Korea - November 27, 2019).
Tension between Washington and Pyongyang drains China's diplomatic resources and attracts unwanted scrutiny of China's economic relations with North Korea.
Beijing is unlikely to use its influence over Pyongyang as a way to extract concessions from Washington over trade. China recognises the fragility of negotiations with the Trump administration; involving North Korea would only introduce yet another unpredictable element.
Taiwan
Ahead of Taiwan's concurrent presidential and parliamentary elections in January, Beijing is resorting to military posturing and Russia-style election interference, particularly the spread of misinformation over social media (see CHINA: Disinformation activities may spread abroad - November 19, 2019). Western governments will watch closely, lest Beijing employ these methods elsewhere in the coming years.
A victory for Taiwan's China-friendly opposition party would ease tensions and revive economic cooperation. A victory for the incumbent China-sceptic Democratic Progressive Party would prolong a four-year freeze in cross-Strait ties. The latter is the more likely, particuarly as events in Hong Kong turn public opinion more firmly against China.
Hong Kong
Protests in Hong Kong have waned recently in numbers and destructiveness, but new forms of protest will emerge. The anti-government camp has been given a 'democratic mandate' by an overwhelming victory in city-wide district council elections, even though these councils wield no direct political power (see HONG KONG: Election shows support for protest movement - November 25, 2019).
Beijing might tell Chief Executive Carrie Lam to resign, but this would only renew demands that her successor be elected by universal suffrage.
The Communist Party's Fourth Plenum meeting in October hinted at a tougher approach towards Hong Kong (see CHINA: Party plenum strengthens Xi’s grip - November 5, 2019).
Should Beijing opt to take a harder line, one option is to press the Hong Kong government to enact long-discussed legislation known as 'Article 23', which would criminalise certain forms of dissent. That would strengthen the government's options for repression in the medium term but attempting to pass it would trigger a renewed wave of protests.
More likely, China's leaders will maintain their arm's-length approach, letting the Hong Kong government bear the brunt of public anger. Doing more would invite unpredictable consequences, potentially including US sanctions (see HONG KONG: US law will create uncertainty for firms - November 20, 2019).
Xinjiang
More evidence of human rights abuses in the Xinjiang region will emerge, making it harder for Western governments to justify friendly cooperation with China in areas beyond essential matters such as trade and climate change.
Human rights abuses in Xinjiang have provoked the US Congress to sanction leading Chinese surveillance companies (see CHINA: Beijing may export technology of repression - September 4, 2018). Further measures are possible.
Foreign pressure will not persuade China to alter repressive policies that it is convinced work.
China and the EU
Brussels hopes to sign a long-awaited bilateral investment treaty at the EU-China Summit in September 2020.
European leaders are pushing for a far-reaching agreement that addresses their concerns over market reciprocity and discrimination against foreign companies bidding for Chinese government tenders. The European Commission has proposed retaliatory protectionist measures should the EU and China fail to reach agreement.
In March this year, the Commission signalled a tougher line by labelling China a 'systemic rival'. In April, an EU-wide screening mechanism for foreign acquisitions in strategic sectors took effect.
Nevertheless, there is disagreement in Europe over how much further to go. France is pushing for a tougher, EU-wide approach. Germany is hedging. Several governments have broken ranks to express pro-China positions on key issues.
