Yao Yang on China’s Leverage in the US Trade War (Part 3)

"My guess is that in the end it will come down to a licensing system. You want to import [rare earths]? Fine, we’ll give you a licence—but we’ll be watching you." — Yao Yang

This final instalment in Yao Yang’s analysis of China’s new era of “correction” turns from the strengths and weaknesses of the PRC’s economy to their geopolitical ramifications — above all, the evolving landscape of Sino–US trade. With the APEC summit on 31 October approaching, Yao assesses the prospects for a Sino–US deal and offers a series of original predictions on the roles played by rare earths, digital services and foreign investment within this potential agreement. Regarding the tariffs themselves, he expects them to remain at current levels. Yet in the longer run, he argues, global tariffs may ultimately favour Chinese firms — which operate at lower costs than many tariff-hit competitors and are increasingly establishing manufacturing bases throughout South-East Asia.

— James Farquharson