11 October 2019 19:36

Belt and Road Initiative Silk Road Beijing

China's latest trade war card isn't as strong as Beijing thinks

China accounted for 80% of all rare earth minerals imported by the US between 2014 and 2017, according to the United States Geological Survey, and they were among the few items not hit by US tariffs in Washington's most recent trade war escalation. Global Times, a nationalist tabloid, said Xi's visit had "offered huge support to the critical industry that has been widely viewed as a form of leverage for China in the trade war with the US." "It will take many years if the US wants to rebuild its rare-earth industry and increase its domestic supply to reduce its dependence on China's minerals," Global Times said. "That's long enough for China to win a trade war against the US, during which time China's monopoly on the production of rare earths will help Beijing control the lifeblood of the US high-technology sector." In 2010, following a dispute with Japan over contested islands during which a Chinese fishing boat captain was detained by Tokyo, China cut off rare earth exports to that country. Rick Helfenbein, the president of the American Apparel & Footwear Association, called the measure a "self-inflicted wound" that he said would be "catastrophic." While footwear and apparel were largely spared from Mr. Trump's first two rounds of tariffs, they are on the list of items that would be taxed if the president follows through with his threat to raise taxes on an additional $300 billion worth of goods. China said it would delay the higher rates until June 1, while Mr. Trump's new 25 percent rate affects only products sent to the United States as of May 10, leaving a two- to four-week gap from the time most goods leave China by boat to when they arrive at an American port.

As the United States and China volley round after round in an escalating trade war, a second front of conflict is brewing in the contested South China Sea, one that could soon force smaller regional states to take geopolitical sides. This week, a US Navy guided-missile destroyer was deployed near the Scarborough Shoal, a sea feature occupied by China since 2012 but claimed by the Philippines as part of its exclusive economic zone (EEZ). This year, China has doubled down on its military and para-military deployments in the South China Sea, prompting concerns about potential clashes with smaller claimant states. For the first time, the US, Japan, India and the Philippines conducted (May 9) joint FONOP exercises in route to Singapore for the second phase of the Association of Southeast Asian Nations (ASEAN) Defense Ministers Meeting Plus Maritime Security Field Training Exercise. But the festering disputes in the South China Sea – with Beijing deploying hundreds of para-military vessels in the vicinity of Philippine-held land features, namely the strategic Thitu Island – has compelled his government to quietly upgrade security cooperation with its US treaty ally.

Many in the Philippine defense establishment felt the US should have been more forthright with its treaty obligations when China seized control of the Scarborough Shoal after a months-long naval standoff in 2012. Those operations include daily US Air Force patrols over the South China Sea to ensure freedom of overflight, according to Charles Brown Jr, the force's Pacific commander, told a news briefing last week in Manila. "We're joined by a lot of countries who see the potential erosion of international law as a problem not only in the South China Sea but [with] broader implications," Schriver said. That message will resonate in certain Philippine quarters, significantly at a time Beijing is taking hard aim at Filipinos who have spoken out against its perceived aggression in the South China Sea. The Philippines won an arbitral award against China's wide-ranging claims to the South China Sea at a tribunal at The Hague in July 2016. On May 9, the Beijing Municipal Human Resources and Social Security Bureau announced plans to raise the city's minimum wage from July 1, 2019.

With the increase, Beijing and Shenzhen will both have the second highest monthly minimum wage in mainland China, following Shanghai at RMB 2,480 (US$361). In addition to basic wages, employers must also make social insurance and housing provident fund contributions for full-time employees. Depending on the region, regulations vary as to whether the individual contributions of social insurances and housing provident fund are included or excluded in the basic wage or the minimum wage. Sichuan province, for example, includes the individual social insurance and housing provident fund contribution in the minimum wage, which means that except for the basic wage, the employer only needs to cover the additional overtime pay and special allowances for the employees. Su Hainan, the vice president of the China Labor Association, said the minimum wages that do not include "five social insurance and one housing fund" have a higher "gold content" because employers need to pay additional money and employees get more take-home pay.

So far, four regions in China have raised or announced plans to raise the minimum wage this year: Beijing, Shanghai, Chongqing, and Shaanxi. Resources and Social Security requires Chinese provinces and regions to adjust the minimum wage standard at least every two or three years based on the local economic situation. These regions therefore may raise their minimum wages later in the year. While many on both sides are likely looking for a face-saving solution to the trade war, there are longstanding concerns that not just the U.S. but many other countries and companies have had about China's actions over the years, he said. "If we look at China's behavior, it does so many things to lift up their people, but it is also known as a vindictive nation, (it does) so many things to countries and companies they don't necessarily like," said Chin.