Economic Pressures Force China's Hand in U.S. Trade Negotiations

Hi, I'm Dong Shan. Welcome to Digging into China, where we explore China in depths to review unique perspectives. Xi Jinping's preoccupation with maintaining appearances can sometimes lead to self-inflicted harm. Consider the US China trade war. Initiating negotiations is a routine step, nothing extraordinary. Yet to uphold his anti-American stance domestically, the Chinese Communist Party adopts a hardline rhetoric, insisting they would never yield, claiming it's the US pleading for talks and that China only grudgingly agree to negotiate. However, recent developments between the US and China clearly indicate that China was the first to soften its position. It's evident that China is eager to expedite the negotiations as the cost of severing trade with the US is simply too severe to endure. In this video, we'll examine the concessions Xi Jinping has recently made. On May 2nd, the offshore UN surged by over 500 points during trading, peaking at 7.2. Chinese media celebrate this as a sign of the dollar's decline, the UN's triumph, and another victory for China. But what's the reality? Let's compare to UN's performance to other currencies such as those of China's Asian neighbors. By the close of May 2nd, the dollar fell 0.89% against offshore yen. In contrast, it dropped 2.52% against the South Korean one, 1.43% 43% against the Thai bar and an impressive 4.35% against the new Taiwan dollar. So where is the yan supposed to strength? Clearly the new Taiwan dollar outperformed all others standing along at the top. As I noted in previous video, the yan is currently in a precarious state. With the dollar weakening, major global currencies are appreciating, but the yen struggles to follow suit due to its weak fundamentals. It simply cannot sustain a rally. The offshore yan market is a small and heavily reliant on manipulations by the people's bank of China. The central bank is cunning in its approach, delegating exchange rate interventions to stateown the banks. This allows them to claim that offshore yan fluctuations are marketdriven with no central bank interference. While state-owned banks follow the central bank's directives, their specific transactions in the UN are technically market activities. This is why stateowned enterprises with their unique structure are so vital to the communist party. Their focus is not on profits, but on executing the party's policies and achieving its objectives. Despite the efforts of China's stateowned banks in Hong Kong to bolster the UN's exchange rate at all costs, China's economic fundamentals remain too weak and the UN continues to depreciate. Historical data provides clarity. Over the past decade, the US dollar index has reached around 100 on four occasions. What was the UN's exchange rate during those times? In March 2015, the first instance, the UN was at 6.2. In November 2016, the second it was at 6.9. In March 2020, the third it was at a 7.1. In September 2022, the fourth, it was at 6.9. Now, in May 2025, with the dollar index back at 100, the yuan is at its weakest ever, hovering around the 7.3 and even dipping to 7.4 at its lowest. Even when comparing China's own data, the truth is undeniable. A faltering economy has rendered the currency historically weak. Spending vast sums of dollar to prop up the US exchange rate comes at a significant cost and can only mitigate another reverse the currency's depreciation. Given China's economy is beset by both domestic and international challenges coupled with a severe slowdown, conceding in a US China trade war is unavoidable. Without the US China trade, there is no trade surplus. Without a trade surplus, foreign exchange reserve dwindle. And without these reserves, the offshore yan market risks collapse, rendering the yen worthless. That's the stark reality. Recent actions from China underscores its urgency to engage in talks with the US. Frankly, I found the terms like a kneeling distasteful. They are overly sensitive. Many nations have traded disputes with the US yet none perceive proactive negotiation is a blow to their national dignity. Why does the communist party seem stuck in theqing dynasty expecting foreigners to cow to the emperor's dowager? Moreover, for years, China has significantly benefited from its trade with the US. By the Communist Party's logic, doesn't that imply the US has been kneeling to China all along? They've allowed the technology transfers, accepted tariffs, and permitted China to form anti-American alliances globally. Now that the US is pushing back, how does that become bullying China into submission? For ordinary people, we should avoid being swayed by this domestic propaganda narratives of who's kneeling. Let's focus on outcomes. If the US and China can negotiate, that's the best result for the public. And if China makes concessions to facilitate a smoother talks, that's a positive step. Wouldn't you agree? China's first concession was to exempt certain US tariffs. It's confirmed that these exemptions cover approximately $40 billion in trade, representing about 25% of China's imports from the US. In contrast, the US exempted tariffs on roughly $12 billion of Chinese goods, which accounts for only 22% of its imports from China. Clearly, China's exemptions are more substantial. A departure from Xi Jinping's earlier uncompromising stance of matching every US tariffs increase precisely without yielding an inch. Naturally, the Communist Party has suppressed the domestic reporting on these US tariffs exemptions to maintain its hardline image against the US among its nationalist supporters. However, US Secretary of State Rubio has stated that the US agreed to friendly talks because it recognized China's genuine intent to deescalate tensions. Without access beyond the China's internet firewall, many Chinese citizens may remain unaware of the full picture. China's second concession lies in the subtle softening of its official rhetoric on the US China trade war. Though it's so discreet that it might go unnoticed without a close scrutiny. Initially, China's position was resolute. No negotiations unless the US first lifts its reciprocal tariffs. Now the stance has shifted to as long as the US seizes its aggressive action and shows readiness to lift reciprocal tariffs, discussions can proceed. Notice the difference. China no longer demands prior US action. When China wants to talk, it finds a rationale to justify it. China's domestic propaganda excels at such linguistic slates of hand. Without careful attention, one might assume China's stance has remained unwavering. But a closer look reveals a softened position. Moving from requiring the US to lift the tariffs first to merely being ready to do so is a notable retreat. What constitutes readiness? Who determines it? It's all subject to China's interpretation. If the propaganda declares the US ready, then it's ready. Yet, no US official, not the Secretary of State, the Treasury Secretary, nor the president has committed to lifting reciprocal tariffs. They've only indicated that the 125% tariffs previously imposed on China are unsustainable and should be reduced, not eliminated. The US doesn't extend such leniency even to close allies like Japan or South Korea. So why would China receive it? A recent Wall Street Journal report highlighted China's third concession. China proactively proposed using the fentinel issue as a starting point for negotiations with the US. They even plan to dispatch public security minister Wong Xiao Hong to lead a delegation to the US or meet in a third country. This information comes from the journal's Chinese American reporter Ling Lingling Wii. I've read her prior analysis of China's economic policies and her Beijing sources are generally reliable, lending credibility to this report. We've also observed China's proactive efforts to restore trade relations with the US, making the fentanyl issue a plausible entry point for talks. Several peripheral developments in the US China trade war are worth noting. First, the European Union continues to undermine China. It recently imposed another substantial fine on Tik Tok, citing user privacy and security concerns. This follows a 2023 fine of €345 million euro for children's data privacy violations. This time the penalty was a€ 530 million euro with the possibility of even stricter measures if Tik Tok fails to comply with the EU requirements within 6 months. The EU doesn't solely target China. Last month it finded the US tech giants Apple and Meta€700 million euro. We've grown accustomed to EU's reliance on fines to generate revenue particularly from wealthy tech firms. However, these penalties disproportionately impact China at present. The EU is also closely monitoring China's trade, establishing a task force to oversee Chinese exports. Any evidence of dumping will prompt immediate action. Through these measures, the EU signals to China, we are not your anti-American partner. We stand independently. This international isolation likely contributes to China's haste in adjusting its stance and pursuing US trade talks. On the US side, gestures of goodwill toward China are scarce. Surprisingly, President Trump appears the most amicable, frequently citing his friendship with Xi Jinping and pledging to lower tariffs on China. In contrast, Treasury Secretary Bissant takes a far harder line that is a primary figure in trade negotiations. His perspective is telling. In the recent interview, Bent revisited the 2019 trade agreement, asserting that China still owes the US significant unfulfilled purchases, a debt the US intends to collect. Bant has consistently projected confidence, claiming China lacks the resolve to stand firm. He argues that losing the US as its largest trading partner could result in 5 to 10 million job losses in China. He also boasts of holding numerous unplayed cards to restrain China, asserting that China is already capitulating, revealing itself as a mere paper tiger. In the past, such daily public criticism from Bent would have prompted China to retaliate with the sanctions or sharp rebuttals. Yet, has China directly addressed the Treasury Secretary's provocations? Not a word. Secretary of State Rubio remains on China's sanctions list, but it's now Bent who's consistently targeting China. This indicates a marked softening in China's posture. They are less inclined to retaliate, especially since Bant le trade talks and China must engage with the US Treasury Department. For Xi Jinping to tolerate such affronts is indeed uncommon. Two Republican senators recently proposed the dellisting 25 Chinese companies from US markets due to potential ties to the Chinese military with Alibaba prominently included. This underscores that the US stance toward China remains unchanged. The progress in trade talks stem solely from China's shift in attitude. I reiterate, debating whose kneeling is pointless. A nation's leadership must prioritize pragmatism. Focusing on economic stability, public welfare, and practical realities. Initiating US China trade talks regardless of who made the first move is beneficial. The Communist Party must posture for domestic propaganda, but the public must remain discerning, disregard their rhetoric entirely, and judge based on results alone. Thank you so much for watching. If you find this video helpful, please like it, drop a comment below, and hit the subscribe button right here. It really helps YouTube suggest my video to others. I'll be back with more content soon. Until then, be well.