Although there is no off-ramp in sight for the trade war between the U.S. and China, stability and energy security are more important for the Chinese leadership than the need to ‘win’ the trade war with the U.S., according to ESAI Energy’s latest ChinaWatch report.
The first version of the $16 billion list of products facing the latest Chinese tariffs included crude, fuels and other petroleum products. China’s imports of U.S. crude oil have, until recently, been over 400,000 b/d, close to 5 percent of China’s total crude imports. This volume was removed from the final version of the $16 billion list.
At a high-level meeting on July 31, Xi Jinping stressed that the policy priority for the second half of the year was to ensure stability of employment, the financial system, foreign trade, foreign and domestic investment, and market expectations. The meeting was held amid rumors of rifts within China’s Communist Party (CCP) leaders caused by the trade war.
A trade war is clearly not part of Xi’s plan to fulfill his promise for China’s transition to a consumption and innovation-led economy that is more equal, prosperous, sustainable at home and influential worldwide. Furthermore, he wants to avoid tensions between China and the U.S. escalating and evolving into confrontations beyond trade. No one knows what that would look like, but the government will surely try to avoid it. “Over the years, Beijing has consistently tried to prevent any instability that could put the CCP’s rule at risk. Mr. Xi is no exception,” points out Asia Energy Analyst, Amrit Naresh.