The trade conflict between the U.S. and China has reemerged in the news recently as the U.S. announced that it was considering increasing the level of tariffs — from 10 percent to 25 percent — it will place on an additional $200 billion of Chinese exports.
While tariffs and trade deficits have garnered a lot of headlines recently there is actually another key element of China's trade strategy that we want to talk about — the giant panda.
Usually when people consider pandas, they have positive emotions accompanied by images of cute and cuddly bears. And it's specifically this reaction that makes the panda a particularly effective, soft-power tool for China.
When a Chinese ambassador gives a speech, the message in that speech is often attributed to the Chinese government. In the same way, a non-human can also represent a government.
China owns every panda in the world and controls which countries receive pandas on loan to their zoos. Thus, every panda that is loaned out comes loaded with political meaning, with the location of each panda following clear-cut economic and political rationales.
In fact, if you were to look at countries with pandas on loan and compare them to countries that conduct trade with China, you would discover that countries with the most pandas tend to be the ones that also conduct the most trade with China. In essence, the presence of a panda bear in a foreign zoo provides a Chinese presence in nearly the same way that a Chinese embassy would. Except, unlike embassies, host countries are lining up to ask for more pandas and are gladly paying the $1 million annual donation required in order to get one.
If you still aren't persuaded that this is part of China's trade strategy, consider this: In 2015, there were 42 pandas in 12 countries but by the end of 2017, that number grew to 70 pandas in 20 countries - with President Xi Jinping personally approving each loan.
The practice of rewarding partner countries with panda bears isn't a new phenomenon. Back in 685 AD, the Empress of China gave a pair of pandas to Japan as a gift. More recently, Australia, France and Canada have been rewarded with pandas after agreeing to sell technology to China. On the flip side, pandas have also been used as punishment: China threatened to take back its panda from Austria after that country hosted the Dalai Lama. The situation was ultimately resolved with Austria publicly reiterating the One-China policy.
Our view: International trade is a complex and important issue, not only with regards to the different terms of trade but also the geopolitics involved. It would be an oversimplification to think that the U.S. will easily win a trade war with China simply because it imports more from China than China does from the U.S. There are many different non-tariff levers that can be pulled in this battle. And with each side believing it can win a drawn-out conflict, don't except a quick resolution.
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