Trump's trade war is rattling China's leaders

[BEIJING] China's leaders have sought to project confidence in the face of President Donald Trump's tariffs and trade threats. But as it becomes clear a protracted trade war with the United States may be unavoidable, there are growing signs of unease inside the Communist political establishment.

In recent days, officials from the Commerce Ministry, the police and other agencies have summoned exporters to ask about plans to lay off workers or shift supply chains to other countries.

With stocks slumping and the currency dropping 9 per cent against the dollar since mid-April, censors have been deleting a torrent of criticism online, some of it directed at President Xi Jinping's leadership.

State news outlets, by contrast, have sought to promote the official line, with the authorities restricting the use of the phrase "trade war".

Still, policy disputes over how to bolster the economy have at times spilled into the open, with the state media sometimes coming under attack for boasting about China's economic strengths.

If the trade war escalates - and Mr Trump has shown no sign of backing down - some worry that the public's faith in the economy could be shaken, exposing the nation to much more serious problems than a drop in exports. New economic data on Tuesday showed slower growth in investment and consumer spending, and there are fears that the financial crisis in Turkey could spread.

The Communist Party needs growth to justify its monopoly on power and is obsessed with preventing social instability. At the same time, Mr Xi's strongman grip may be hindering effective policymaking, as officials fail to pass on bad news, defer decisions to him and rigidly carry out his orders, for better or worse.

In public, the leadership has argued that China can weather the trade war with ease. A study by economists at Tsinghua University estimated that the tariffs imposed so far and those threatened would trim only 0.3 percentage point from China's growth rate, which has been running at a robust 6.7 per cent.

China so dominates some industries, such as smartphone manufacturing, that tariffs may not do much damage. In other industries, China might lose business to rivals such as South Korea but find opportunities to export its goods to other markets.

NYTIMES