Trading blows: Rana Mitter on the US-China Trade War

The US–China trade war feels as if it’s blown up very suddenly, but a long and unhappy history of trade between China and the west is still well-remembered in Beijing. Rana Mitter, a professor of the history and politics of modern China at the University of Oxford, offers analysis on the historic trade rifts for BBC World Histories Magazine

The US–China trade war feels as if it’s blown up very suddenly, but a long and unhappy history of trade between China and the west is still well-remembered in Beijing. Rana Mitter examines the history. (Illustration by Kate Hazell for BBC World Histories Magazine)

For nearly 100 years, from the mid-19th to the mid-20th centuries, China was not free to trade. In 1839, the first war with the British began over opium sales. China lost and, in 1842, had to sign the first of a century of ‘unequal treaties’, by which favourable territorial and trading rights were given to the British, the French, the Americans and, eventually, the Japanese, who became Asia’s most powerful imperialists.

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In 1854, the British established the Maritime Customs Service, an unusual hybrid organisation that provided tariff revenue for the Chinese government, but was run at the top level by foreign, mostly British, officials. For nearly half a century, till 1911, its most prominent figure was its Inspector-General, the Ulsterman Robert Hart, and the institution itself survived until 1952.

Yet from the early 20th century, it caused increasing resentment among Chinese nationalists, who argued that a system run by foreigners, however efficient, was humiliating for a country that should be able to set its own tariffs. It was only in 1930 that China’s then Nationalist (Guomindang) government, led by Chiang Kai-shek, was able to reclaim autonomy over import taxes. Even today, that experience is remembered in China as part of a ‘century of humiliation’ when the world was able to order China around.

When the Communists came to power in 1949, Mao Zedong declared that “the Chinese people have stood up”, not least by building on the Nationalists’ achievements in restoring China’s freedom to trade. Yet China was then isolated from the capitalist world. Diplomatic and trade relations with the United States were limited until the changes that came with Nixon’s visit in 1972, though more extensive informal links did commence with Japan. Instead, China became part of the new socialist economy centred on the USSR; however, that also became more fraught after the political split between Mao and Khrushchev in the early 1960s.

The reopening of diplomatic relations between the US and China in 1979 heralded a more mutually beneficial trading relationship. President Ronald Reagan’s US was happy to create debt as it issued dollar bills, and paramount leader Deng Xiaoping’s China was even happier to abandon much of the Soviet-style command economy to produce goods that Americans could buy with those dollars. The mutual dependency that historian Niall Ferguson called “Chimerica” had begun.

Yet closer trade relations don’t always mean closer diplomatic relations. In the past four decades, China has become richer and more tied in to the global economy, but it has become a major military power, too; it also retains strong barriers to entry into its domestic markets, particularly in sensitive areas such as internet services (Google, Facebook and Twitter are all banned in China). This has created new tensions between the US and China.

In the 20th century, China’s role in global trade was mainly as a manufacturer of goods. Its contemporary prosperity is based in large part on the fact that in the 1990s a large proportion of the world’s furniture, clothing, and toys were stamped ‘made in China’. But in this century China has become not just a producer but also an innovator.

It’s become well-known that China has been taking intellectual property from its partners, often without their knowledge. But the conventional wisdom that China has to steal information because it’s not capable of innovating is no longer true. Today, corporate powerhouses such as Huawei (producing mobile phones), Hikvision (CCTV) and Megvii (artificial intelligence), strongly connected to the Communist Party-run state, are producing world-leading virtual reality, AI and 5G technology. This has made the west profoundly nervous, as recent controversies over Huawei’s role in the UK’s telecom network have shown.

China’s status as an innovator is not new either. Inventions such as paper, gunpowder and the compass were developed in China. But China also played an important role in the circulation of global goods from the early modern era onward. In the 17th century, the mass reproduction of porcelain goods (‘china’) from factories in places such as Jingdezhen, in the south-east of the country, supplied and inspired the ceramics industry of England.

It was only in the 19th century, as China fell victim to the west’s imperial modernity, that this process of innovation was halted. Now it has started again, and the 21st century may see China become the power that the west seeks to emulate when it thinks about technology. Beijing is also establishing the Belt and Road Initiative (sometimes called the ‘new Silk Road’), a vast infrastructure project that will create a new China-friendly ecology of countries, stretching from east Africa to south-east Asia, with which Beijing can trade and develop its network of standards and practices.

Today’s US–China trade war is about immediate issues, such as whether China is being fair in opening (or not) its markets to foreign companies. But it is also about a wider dilemma. Will China become the world’s most powerful trading nation? And does America want to stop it? That may become a conundrum for many other powers beyond Washington and Beijing.

Rana Mitter is professor of the history and politics of modern China at the University of Oxford

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China’s growing power has made headlines throughout 2019 – yet it’s a story with long historical roots. Issue 17 of BBC World Histories Magazine, on sale on 18 July 2019, will focus on the history of China with expert analysis from the world’s leading historians. Find out how to get your copy here.