Beijing calls for talks with Washington, says Oct. 9 measures are intended as retaliatory rather than escalatory

Technocrats may have taken Trump for a ride when Washington rolled out a series of escalations after the Sept 15 Madrid talks. "That is how the entire Cold War unfolded," Chairman Rabbit says.

Below are my personal observations based entirely on open-sourced information.

China’s Ministry of Commerce just now October 12 issued a lengthy Q&A (ENG)

MOFCOM Spokesperson’s Remarks on China’s Recent Economic and Trade Policies and Measures

1.

Q: On October 9, the Ministry of Commerce and the General Administration of Customs published an announcement on imposing export control measures on related rare earth items. What are China’s considerations behind this?

A: China’s announcement of export control measures on rare earths and related items is a legitimate action by the Chinese government to refine its export control system in accordance with laws and regulations. In the context of turmoil and frequent military conflicts in the world, China has taken note of the important uses of medium and heavy rare earths and related items in the military field. China, as a responsible major country, employs export controls on related items according to the law, in order to better defend world peace and regional stability, and to fulfill non-proliferation and other international obligations.

China’s export controls are not export bans. Licenses will be granted for eligible applications. Before the measures were announced, China had already notified relevant countries and regions through bilateral export control dialogue mechanisms. China stands ready to work with the rest of the world to step up export control dialogue and exchange, so as to better safeguard the security and stability of global industrial and supply chains.

2

Q: We have noted that recently the Ministry of Commerce has issued an announcement strengthening export controls on rare earths and related items. Could you please introduce the follow-up measures of implementation?

A: As a responsible major country, China always firmly safeguards its national security and international common security, always takes a just and reasonable principled position and implements export control measures in a prudential and moderate manner. China had made thorough assessment of the measures’ possible impact on industrial and supply chains in advance and is certain that related impact is very limited. Before announcing the measures, China had notified relevant countries and regions through bilateral export control dialogue mechanisms.

Going forward, the Chinese government will conduct reviews in accordance with laws and regulations, grant licenses to eligible applications, as well as actively considering the applicability of facilitation measures such as general licenses and license exemptions to effectively promote legitimate trade. I want to emphasize that China’s export controls are not export bans. All applications of compliant export for civil use can get approval, so that relevant businesses have no need to worry. The Chinese government will work with all countries as always, to firmly safeguard world peace and stability in neighboring regions, and jointly maintain the stability of global industrial and supply chains.

3

Q: On October 10 EST, the U.S. announced that, in response to China’s export control on rare earths and related items, the U.S. will impose a tariff of 100% on China, and impose export control on all critical software. What are MOFCOM’s comments on this?

A: China has taken note of the situation. On October 9, China released export control measures on rare earths and related items, which are normal actions taken by the Chinese government in accordance with laws and regulations to refine its own export control system. As a responsible major country, China always firmly safeguards its national security and international common security, always takes a just and reasonable principled position and implements export control measures in a prudential and moderate manner. The U.S. remarks reflect textbook “double standard”. For a long time, the U.S. has been overstretching the concept of national security, abusing export control, taking discriminatory actions against China, and imposing unilateral long-arm jurisdiction measures on various products including semiconductor equipment and chips. The U.S. Commerce Control List (CCL) covers over 3000 items, whereas China’s Export Control List of Dual-use Items only cover about 900. The U.S. has long imposed the ‘de minimis’ rule for export controls, with a lowest threshold of 0%. These measures of U.S. side have seriously harmed the legitimate and lawful rights and interests of companies, severely disrupted the international economic and trade order, and gravely undermined the security and stability of global industrial and supply chains.

Particularly since the China-U.S. economic and trade talks in Madrid in September, the U.S., in just 20 days, has introduced a string of new restrictive measures targeting China. It has put multiple Chinese entities on the Entity List and Special Designated National List; arbitrarily expanded the scope of control over businesses with the Affiliates Rule that affects thousands of Chinese companies; and persisted with the implementation of Section 301 measures targeting China’s maritime, logistics and shipbuilding industries in disregard of China’s concerns and goodwill. The U.S. actions have severely harmed China’s interests and undermined the atmosphere of bilateral economic and trade talks, and China is resolutely opposed to them.

Willful threats of high tariffs are not the right way to get along with China. China’s position on the trade war is consistent: we do not want it, but we are not afraid of it. China urges the U.S. to promptly correct its wrong practices, adhere to the important consensuses of the phone calls between the two heads of state, protect the hard-won outcomes of consultations, continue to use the China-U.S. economic and trade consultation mechanism, and address respective concerns and properly manage differences through dialogues and on the basis of mutual respect and equal-footed consultation, so as to ensure the stable, sound and sustainable development of the China-U.S. economic and trade relationship. If the U.S. insists on going the wrong way, China will surely take resolute measures to protect its legitimate rights and interests.

4

Q: The U.S. will impose port fees on related Chinese vessels on October 14. We have noted that China has announced countermeasures in response. What is China’s comment?

A: On April 17, the USTR announced the final action of Section 301 investigation into China’s maritime, logistics and shipbuilding sectors and will impose port fees on related Chinese vessels from October 14. The U.S. practice severely violates the WTO rules and breaches the principle of equality and mutual benefit of the China-U.S. Maritime Transport Agreement, and is a typical act of unilateralism. China has repeatedly expressed its strong dissatisfaction and firm opposition.

Since the economic and trade talks in London, China has engaged in consultations and communications with the U.S. on the measures mentioned above, provided a written reply to the groundless accusations against China in the Section 301 investigation report, and made recommendations of potential bilateral cooperation in related industries. However, the U.S. has shown a negative attitude and willfully persists in implementing those measures, issuing a notice on October 3 setting out the specific requirements for imposing fees on Chinese vessels. In order to safeguard its legitimate and lawful rights and interests, China has to take countermeasures and decides to charge special port fees on U.S.-linked vessels in accordance with the Regulations of the People’s Republic of China on International Ocean Shipping and other laws and regulations. China’s countermeasures are necessary acts of passive defense and are aimed at maintaining the legitimate rights and interests of Chinese industries and enterprises, as well as the level playing-field of the international shipping and shipbuilding markets. It is hoped the U.S. will face up to its mistake, move with China in the same direction, and return to the right track of dialogue and consultation.

Reading between the lines, Beijing

1. calls for further talks

China urges the U.S. to promptly correct its wrong practices, adhere to the important consensuses of the phone calls between the two heads of state, protect the hard-won outcomes of consultations, continue to use the China-U.S. economic and trade consultation mechanism, and address respective concerns and properly manage differences through dialogues and on the basis of mutual respect and equal-footed consultation,

2. says its recent (read: largely Oct. 9) “Economic and Trade Policies and Measures” are intended as retaliatory rather than escalatory.

Particularly since the China-U.S. economic and trade talks in Madrid in September, the U.S., in just 20 days, has introduced a string of new restrictive measures targeting China. It has put multiple Chinese entities on the Entity List and Special Designated National List; arbitrarily expanded the scope of control over businesses with the Affiliates Rule that affects thousands of Chinese companies; and persisted with the implementation of Section 301 measures targeting China’s maritime, logistics and shipbuilding industries in disregard of China’s concerns and goodwill. The U.S. actions have severely harmed China’s interests and undermined the atmosphere of bilateral economic and trade talks, and China is resolutely opposed to them.

Point No. 2 is essential because a Wall Street Journal report on October 9 has muddied the waters with what it claims to be sourcing

While positioned as retaliation for recent U.S. export-control actions targeting Chinese tech companies, Beijing’s decision is a calculated power play, according to people familiar with the Chinese government’s decision-making process. China is trying to strengthen its leverage over Trump—whom it sees as eager to strike a deal—in a bid to extract concessions on tariffs and tech controls, the people said.

During the last round of negotiations with senior American officials in Madrid last month, China’s chief trade negotiator, Vice Premier He Lifeng, asked for the full removal of tariffs and export controls, The Wall Street Journal has reported. The latest rare-earth action, the people said, is a tactic aimed at achieving that goal.

The action, the people noted, is part of a pattern of China responding to what it perceives as feeble actions from Washington with disproportionately strong moves.

As an aside, note the Journal on Oct. 9 reported

During the last round of negotiations with senior American officials in Madrid last month, China’s chief trade negotiator, Vice Premier He Lifeng, asked for the full removal of tariffs and export controls, The Wall Street Journal has reported.

But its immediate September 15 report after the Madrid talks was “Beijing likely agreed to framework to keep alive China’s desire for a Trump visit”

I have nothing but respect for the formidable Journal’s reporting and its resourceful reporters. (But its management’s recent decision to massacre its China reporting staff is a massive own-goal, to put it mildly.)

However, to observe its consistency in China reportage has now become crucial for two reasons:

1. It’s simply too influential.

2. It uses vague, and in my opinion, understandable but potentially misleading descriptions of its sources, such as the “people familiar with the Chinese government’s decision-making process.”

It’s understandable because, given the sad realities that we are in today, it’s crucial to protect sources. And as a former journalist who believes in journalism, I totally understand it.

However, it’s, in my opinion, potentially misleading because the descriptions create the perception that the sourcing could come from within the Chinese government, or, if not, from proactive leaking by the Chinese government. It may just be the inevitable perception due to having to obscure the description of the source.

One example is Brad W. Setser, a respected analyst at the Council on Foreign Relations and former U.S. government official, relying solely on the Journal’s Oct. 9 report, started his Twitter thread as saying

China -- per the excellent reporting on the WSJ… -- appears to be pursuing a strategy of applying maximum pressure in pursuit of maximum concessions ... full tariff rollback, rollback of export controls, relaxation of nat’l security review on Chinese investment

Again, come back to MOFCOM’s lengthy Q&A, there is nothing about China’s recent (read: largely Oct. 9) “Economic and Trade Policies and Measures” trying to extract the reported concessions from Trump laid out above.

There are two counterarguments to my analysis so far.

First, even if the recent (read: largely Oct. 9) “Economic and Trade Policies and Measures” are intended as retaliatory, they are escalatory in themselves. If this is true, then that leaves room in further talks for the two sides to dial back. Also, and this is important, what has been dubbed the Chinese version of U.S. foreign direct product rule (FDPR) has a strictly defined scope and isn’t an outright embargo that many U.S. experts have claimed. The devil is in the details, and you need to read Patrick Zhang’s extremely technical Geopolitechs

China‘s New Restriction on Rare Earths: What They Cover and Why They Were Made？

Second, one could plausibly argue that Beijing did want to extract many concessions from Washington with its Oct 9. Recent Economic and Trade Policies and Measures, as conveyed by the Journal via its vaguely described sourcing.

Then the question is why these matters come on Oct. 9 after a series of apparent escalations in Washington, namely:

It has put multiple Chinese entities on the Entity List and Special Designated National List; arbitrarily expanded the scope of control over businesses with the Affiliates Rule that affects thousands of Chinese companies; and persisted with the implementation of Section 301 measures targeting China’s maritime, logistics and shipbuilding industries

Remember Scott Bessent actually said something quite interesting after the Madrid talk on September 15, as reported by Bloomberg

Basically what they got was the promise of things that won’t happen rather than taking things off,” he said from a suite at the Madrid hotel where the US delegation was staying.

and also by Reuters

Rather than agree to remove existing tariffs and trade policies, the U.S. side agreed to refrain from taking certain future steps, Bessent said. “So basically, what they got was the promise of things that won’t happen rather than taking things off.”

He declined to be specific about the TikTok concessions, adding that there were also “procedural” requests by China that were met.

The MOFCOM Q&A also mentioned

Since the economic and trade talks in London, China has engaged in consultations and communications with the U.S. on the measures mentioned above, provided a written reply to the groundless accusations against China in the Section 301 investigation report, and made recommendations of potential bilateral cooperation in related industries.

Then Beijing should at least leak it.

Last but not least, technocrats in the U.S. government may have taken Trump, who seems to be the only noticeable figure in the U.S. government interested in de-escalation, for a ride.

Chairman Rabbit, a well-connected Chinese opinion leader with Harvard Kennedy School treaining wrote in his influential WeChat blog yesterday

Since the Madrid talks and the leaders’ phone call, the Trump administration has launched a new “combination punch” of China-related policies. There are essentially two possibilities.

Possibility One: “Bottom-up.”

Technocrats have been advancing relevant policies according to existing consensus, frameworks, strategies, and institutional inertia. Trump may or may not have been aware of this, but in any case, he certainly did not take it seriously. He neither understood the specifics nor saw the need to pay attention—because he had no idea what kind of reaction these policies might trigger from China. (Now he does.)

Possibility Two: “Top-down.”

Trump and his close confidants (such as Bessent and Lutnick) have orchestrated a coordinated, top-down strategy aimed at further suppressing and containing China, using the moves to strengthen their bargaining position ahead of a leaders’ summit with Beijing. In this view, it’s all part of a “grand chess game.”

Based on our understanding of Trump, his advisers, and how the U.S. government actually functions, the first scenario is far more plausible. This conclusion does not rest on direct evidence but rather on indirect indicators—Trump’s habitual attitudes and behavioral patterns toward China, the domestic political agendas currently consuming his attention, and the tone of his recent posts and speeches.

It is also worth emphasizing Trump’s personal traits. As analyzed earlier, Trump craves success and visible victories—achievements he can showcase to the world. The China issue, however, gives him none of that. To him, it has been a source of frustration and failure, particularly with regard to tariffs and rare earths. The only area where he feels he has made progress is TikTok. Beyond that, he has little interest in prolonged confrontation with China and prefers to focus on matters that promise quick, tangible results. The Gaza cease-fire, for instance, has recently consumed much of his energy, and he is clearly elated by what he sees as progress there. (This explains the bombastic tone of his angry posts.)

At the same time, Trump is not a detail-oriented or long-range planner. He is not someone who engages in top-level design or carefully coordinated “grand strategies.” On issues that do not personally interest him, he tends to grasp the big picture while ignoring the specifics. The sanctioning tool he understands best is tariffs—his one signature move. Other restrictions, such as export controls, are most likely measures proposed by his aides.

……

Some analysts interpret the recent moves as part of “pre-negotiations” or a larger strategic design—arguing that everything is coordinated behind the scenes. In my view, such interpretations are overcomplicated and overread the situation. The reality is much simpler. The Trump administration is highly chaotic, operates like an improvised troupe, and is characterized by inconsistent, self-contradictory policymaking.

The most realistic scenario, therefore, is that the administration lacks unified coordination, and that technocrats have been advancing these measures “from the bottom up” under the broad framework of America’s China policy. In their view, these policies have followed proper reporting channels, the leadership is informed, and the process is procedurally sound—just as it has been in the past. It is even possible that some senior officials saw an opportunity to introduce such measures before the U.S.–China summit as a strategic prelude. Managing timing and sequencing, after all, is a core skill of the so-called “deep state.”

Afterward, confrontation between China and the United States indeed escalated. If you are a technocrat deeply convinced that countering China is America’s paramount strategic objective, you would welcome such an outcome—it would help draw the president’s attention back to China. This is precisely what you designed. That is how the entire Cold War unfolded; that is also how the war in Ukraine erupted. And we can reasonably infer that this represents the long-term orientation of U.S. policy—one that will likely become even more pronounced in the post-Trump era.

What’s a potentially structural solution to mitigate if not prevent unintended consequences? It’s not going to happen, but let’s at least remember Stephen Roach tried very hard to sell it several years ago

A joint U.S.-China Secretariat offers that structure. Traditionally, secretariats enhance the bureaucratic functionality of multilateral organizations, like the United Nations and the World Trade Organization. Secretariats provide important service functions — dialogues for intercommunication, a forum for negotiations, and a synthesis of nuanced views on shared issues. A U.S.-China secretariat would provide, at a minimum, sorely needed administrative cohesion between the United States and China. It would be the first such effort involving just two nations.

But this deeply troubled relationship needs far more than a new bureaucracy. A U.S.-China secretariat should, first and foremost, be a keeper of the collective consciousness of relationship management. This must be based on a shared determination of both nations to convert conflict escalation into conflict resolution — before it is too late.

The place to start is by taking a clear-eyed look at what has gone wrong. Previous high-level Strategic and Economic Dialogues accomplished little. Long on the choreography of grand summits, there was little momentum after these meetings. The process lacked continuity, and a foundation of focus and expertise. A U.S.-China secretariat would shift the attention on relationship issues from part-time to full-time, leaving no need to resurrect earlier failed dialogue structures.

The offices of the new secretariat should be in a neutral jurisdiction, like Switzerland or Singapore, and staffed by equal complements of American and Chinese professionals for whom the relationship would be a 24-7 responsibility. It would serve as a collaborative platform focused on all aspects of U.S.-China relations — from economics and trade, to innovation policy and technology transfer, to human rights, climate change, global health, and cybersecurity. The new secretariat, organized functionally rather than as two stand-alone, siloed, country-specific efforts…

But it’s not likely to happen because it’s conditioned upon engagement.

The devil is in the details, and you need to read Patrick Zhang’s extremely technical Geopolitechs

China‘s New Restriction on Rare Earths: What They Cover and Why They Were Made？