Published on July 15, 2019.
Based on an article in the Sankei Shimbun, this piece examines the grave impact of the U.S.-China trade war on the Chinese Communist regime.
Through the Trump administration’s punitive tariffs, preferential treatment for state-owned enterprises, uncertainty among private firms, discontent among reformist economists, and Xi Jinping’s concentration of power, it argues that China is facing one of its greatest crises in decades.

July 15, 2019.
The escalation of confrontation with the United States will probably become China’s greatest crisis in the past several decades.
Although it has not yet appeared conspicuously, the impact will be quite large.
The following is from an article published on page 6 of today’s Sankei Shimbun.
The emphases in the text, apart from the headings, are mine.
China’s tightrope management of government.
Trade war.
Discontent erupts from reformists.
【Beijing＝Yoshiaki Nishimi】The reason China’s Xi Jinping leadership is showing a stance of not yielding an inch to the Trump administration’s offensive of punitive tariffs is that concessions made in a form of yielding to pressure could shake Xi’s political centripetal force.
On the other hand, as trade friction deepens, discontent with the current leadership is erupting from reformist economists.
The “external pressure” from the United States is beginning to create a line struggle within domestic economic policy, and the Xi leadership appears likely to be forced, for the time being, into tightrope management of government.
While the U.S. side regards as problems the monopoly and oligopoly of markets by China’s state-owned enterprises and preferential measures such as subsidies, the Xi leadership has promoted the “expansion” of state-owned enterprises.
According to Chinese media, moves to absorb and merge private companies are intensifying, with state capital having already entered about twenty listed companies this year alone.
“China’s private enterprises have already fulfilled their mission of helping the development of the public economy.
They should gradually exit.”
A document published on the Internet this month by a person claiming to be a financial expert spread instantly and caused ripples.
The People’s Daily, the party organ, rushed to extinguish the fire, saying that “the state’s support for the development of the private economy has been consistent,” but behind the uproar lies uncertainty about the future of private enterprises, which account for more than 60 percent of gross domestic product（GDP）.
On the 16th of this month, a 20th-anniversary event for a discussion meeting by prominent economists was held at the Diaoyutai State Guesthouse in Beijing, and many leading reformist figures attended, including Wu Jinglian, who served as a brain for former Premier Zhu Rongji.
According to some media, with Vice Premier Liu He, a close aide of Xi, also in attendance, criticism reportedly followed one after another against preferential policies for state-owned enterprises and the stagnation of economic liberalization.
While the Xi leadership advocates “the promotion of reform and opening,” it is also being forced to tighten power.
A Beijing political researcher analyzed, “The escalation of confrontation with the United States will probably become China’s greatest crisis in the past several decades.
Although it has not yet appeared conspicuously, the impact will be quite large.”
He pointed out, “The Xi leadership will probably seek further concentration and strengthening of political power and try to raise its centripetal force.”
Steve Bannon, former chief strategist and close aide to U.S. President Trump, said in an exclusive interview with the Hong Kong newspaper South China Morning Post（dated the 22nd）that he was confident the United States would win the trade war.
He revealed that many Chinese high officials “were using every means possible to put their own money into purchasing real estate in San Francisco, Los Angeles, and Manhattan,” and argued that this was a sign of “a serious lack of confidence in their own economy.”
（See page 1）