By Bob Davis and Lingling Wei
Chinese President Xi Jinping has been on a telephone spree this
month, dialing the leaders of coronavirus-battered France, Italy,
Spain and Germany with offers of support, including masks and other
medical equipment. One phone number he hasn't tried is Donald
Trump's.
The last time the leaders of the world's two largest economies
talked was in early February when the virus was ravaging China but
not the U.S. The two talked about whether China would still buy as
many farm goods as it promised in a trade deal.
Since then, both governments have traded barbs over the
coronavirus, generating distrust that now stand in the way of
rescuing the global economy.
"How do you cooperate when you hear the president of the United
States referring to the epidemic as the 'Chinese virus' all day
long," said a Beijing government adviser. A senior U.S.
administration official countered that China's attempts to cast
suspicion that the virus originated in the U.S. "are dangerous,
counterproductive to relief efforts and something we're watching
closely."
On Thursday, Mr. Trump and Mr. Xi participated in a
videoconference of leaders of the Group-of-20 large economies,
whose members pledged to spend more than $5 trillion to help the
global economy. While China and the U.S. supported that goal, the
two leaders didn't address each other directly, said people
familiar with the meeting. Instead, the various participants
generally read prepared remarks and then approved the joint
statement.
As the global economy lurches toward recession, the world's two
largest economies are taking potshots at each other and ignoring
chances for coordination. A relationship that helped pull the world
out of a global recession a decade ago now is on the rocks, with
Mr. Xi looking to score points by courting Washington's allies and
Mr. Trump ignoring appeals to use the crisis to turn away from
protectionism.
Relations between the two giants have been frayed by two years
of conflict over trade, accusations of technology theft and China's
more assertive push for global influence. The trade war paused in
January with a deal that left in place U.S. tariffs on about
two-thirds of Chinese imports into the U.S. Any boost in goodwill
was short-lived.
In recent weeks, President Trump, Secretary of State Mike Pompeo
and other officials have taken to referring to the coronavirus as
the "China virus" or "Wuhan virus" to highlight China's role in the
pandemic. A Chinese Foreign Ministry spokesman, in retort, took to
Twitter, which is blocked in China, to promote unproven rumors that
U.S. military members brought the virus to Wuhan late last year.
Journalists in both countries have been caught in the cross-fire
and expelled.
"All the truculence is very unhelpful with respect to the areas
of cooperation that could be there," said Lawrence Summers, a top
economic policy official in the Obama White House during the
financial crisis. He ticked off ways the two sides could be working
better together, from developing vaccines to keeping supply chains
operating.
During the last global downturn in 2008 and 2009, the two
nations worked in lockstep to stimulate demand through massive
spending programs. They lobbied G-20 nations to do the same. The
U.S. also convinced China to hold on to its trillion-dollar cache
of U.S. government securities, despite Chinese concern that their
investments would tank.
U.S. President George W. Bush called Chinese leader Hu Jintao
twice within a month of the collapse of Lehman Brothers in
September 2018 that fueled a financial crisis that quickly spread
globally. Mr. Bush's message to Mr. Hu was, recalls a senior
Chinese official, "come join me, and help me save the global
economy."
Some discussion about the recently concluded trade deal and
other issues is taking place, though it is being handled at the
subcabinet level, with Undersecretary of Treasury Brent McIntosh
talking with Finance Vice Minister Liao Min.
Federal Reserve Chairman Jerome Powell has consulted with
People's Bank of China Governor Yi Gang, officials in both
countries say. But the two central banks can't act in concert --
and couldn't during the global financial crisis -- because the
People's Bank isn't an independent agency. For its most important
decisions, it needs the approval of the Chinese leadership. China
so far has resisted joining the Fed and other Western central banks
in aggressively slashing interest rates to help stimulate the
economy.
U.S. officials say the economic problems unleashed by the
coronavirus mainly require a domestic response, not one with a
starring role for China. That includes helping tide over workers
and companies until the pandemic fades, though the G-20 effort also
foresees significantly boosting global demand.
Working closely with China could help the global economy recover
faster, according to some economists. "If you have a coordinated
stimulus, everyone can maintain an open trading system," said
Brookings Institution economist David Dollar, a former Treasury
representative in Beijing. "Some of the U.S. stimulus will spill
over to China and some of China's stimulus will spill over to the
U.S."
What China can or would be willing to do is far from clear.
China is trying to restart its economy after the near standstill
used to stifle the coronavirus. Beijing wants to do so without
aggravating an already burdensome debt load -- a hangover from its
2009 stimulus spending.
So far, the U.S. has worked internationally mainly through the
Group-of-Seven industrialized democracies -- the U.S., Canada,
Germany, Italy, France, Japan and Britain -- which the U.S. chairs
this year. The group doesn't include China.
On Tuesday, G-7 finance ministers and central bankers conferred
and released a statement stressing their commitment to do "whatever
is necessary" to restore confidence and ultimately revive economic
growth. The G-20 statement on Thursday largely repeated that
pledge.
A separate meeting of G-7 foreign ministers ended without a
joint statement, because members refused to go along with a U.S.
request to refer to the novel coronavirus as the "Wuhan virus,"
according to an official familiar with the matter.
The response to the global financial crisis represented a
high-water mark in economic relations between the U.S. and China,
as the two nations spent massively to pull the world out of
recession. But the recovery also put in motion forces that would
eventually fracture the relationship. China's $586 billion spending
program led to overproduction of a host of items, including steel,
aluminum, tires, furniture and glass. The excess swamped foreign
markets and clobbered domestic firms, alienating workers who
weren't sure whether to blame China or their bosses for offshoring
their jobs.
As a presidential candidate, Donald Trump capitalized on the
growing disillusionment with China. As president, he battled with
China for two years over trade by assessing heavy tariffs --
prompting Beijing to retaliate in kind -- and by trying to block
China telecom giant Huawei Technologies Co. from selling overseas,
asserting that the firm is used by Beijing to spy. Huawei denies
that charge.
The signing of the so-called phase-one trade deal on Jan. 15
promised an easing of U.S.-China tensions. In late January as the
virus spread across China, Chinese officials let American chartered
planes evacuate their citizens before other countries, according to
foreign diplomats involved in the efforts at the time. "We all had
to wait until after the Americans departed," one of the diplomats
said. "At least at that time, China wanted to show some good will
to the U.S."
Hostility soon resumed. In early February, Mr. Pompeo complained
in Kazakhstan that the virus "emanated" from China. Highlighting
Beijing's initial delay in notifying the world about the virus as
it spread in China has since become a talking point for U.S.
officials. President Trump dubbed the bug the "China virus," though
earlier in the week he at times dropped the phrase and suggested he
didn't want to stigmatize Asian-Americans.
President Xi, faced with criticism at home over his handling of
the outbreak, has encouraged officials to go after those seen as
"smearing China." Beijing has also gone on a public relations
offensive to portray the country and its Communist government as
having forcefully acted to contain the virus, buying the world time
to prepare for the pandemic.
By March, relations had fallen so precipitously, that the two
nations couldn't work out the details of a planned shipment of U.S.
medical supplies and other aid to China. Beijing finally told the
U.S. to send the supplies someplace else. They wound up going
elsewhere in the region.
"Given the fast spread of the pandemic," a Chinese foreign
ministry spokeswoman wrote on Twitter, the U.S. should pick a
country more in need and ship "asap."
On trade, Mr. Trump and his senior officials have shown no
interest in making overtures to China by cutting the U.S. tariffs
that remain on about three-quarters of Chinese goods, or starting
negotiations for a second phase of a trade deal that would
potentially reduce the current levies.
U.S. Trade Representative Robert Lighthizer said the
administration was cutting tariffs on medical imports from China in
response to the virus, but didn't plan to go beyond that. "That
part was our role," he said in an interview. "We ought to be steady
as it goes and not add undue uncertainty."
Write to Bob Davis at bob.davis@wsj.com and Lingling Wei at
lingling.wei@wsj.com
(END) Dow Jones Newswires
March 26, 2020 15:05 ET (19:05 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.