Trade war and China's reform

First, Xi has initiated an unprecedented anti-corruption campaign aiming at keeping the government effective and clean, which is essential for the government to be up to the task as an initiator, coordinator and mediator of the reform.

Second, Xi's government has formulated an ambitious plan "China Manufacturing 2025", which aims to build a variety of strategic industries to an internationally advanced level by 2025.

Third, endorsement of Belt & Road Initiative. By focusing on building infrastructure covering countries in Eurasia this initiative is expected to open more markets for Chinese industries.

Without the trade war imposed by the US president Donald Trump, Xi's policies would lift China out of the mud and set China free in its course of replacing the US as the largest economy in the world.

The trade war has abruptly disrupted China's rhythm. The real danger for China is that if employment is affected, the Chinese government will have to stimulate the economy. This will further stretch the highly leveraged Chinese financial institutions.  Given sluggish export and manufacturing, the capital is likely to end up in the housing sector where bubbles are already large. If such bubbles burst possibly causing a massive devaluation of the yuan, outflow of capital to overseas, high inflation and social unrest, it would bring the economy into a standstill.

However it is the political sector where the impact of the trade war is more dramatic and complex.

China is never short of supporters of western values. If their view was suppressed in the past, the trade war has emboldened them to speak out. Never in the history of the PRC have those opinions, opposed to government positions, circulated so extensively in public, through the Chinese social media such as Weibo and WeChat.

To the people in this camp, China has no chance of winning a trade war with the US. Furthermore they see the pressure imposed by the US could trigger major political changes in China. Some influential articles reaching readers in millions explicitly call for establishment of western democratic systems in China.

The government faces challenge not only from the right but also the left. Maoists openly blame Deng Xiaoping for his reform leading to renaissance of capitalism in China  and resulted in disastrous outcomes such as polarization of the society, severe environmental damage, widespread corruption and deterioration of social moral standard.

The criticism on the government and tense situation promote some dissidents inside and outside China claiming that China's collapse is imminent.

This is an irresponsible exaggeration.

The majority of Chinese are supportive to the government position to the trade war. They believe obeying the command of the Americans is fundamentally inconsistent with the interests of the nation. In addition, the vast majority of Chinese want stability. Political turmoil can only bring chaos and destruction.