In what the SCMP described as the "most dramatic sign to date that Beijing has given up hope of reaching a trade deal with the United States in the near term," President Xi called for the Chinese people to begin a new "Long March" and "start all over again."
Though he didn't specifically mention the trade spat, the message here is unequivocal: The Chinese people must prepare for economic hardship from the burgeoning trade spat. Xi delivered the speech from Jiangxi, the city where the defeated Red Army started the original "Long March" in 1934. And as if the implications for the trade war weren't already clear enough, Xi delivered his speech while accompanied by Vice Premier Liu He.
"We are here at the starting point of the Long March to remember the time when the Red Army began its journey," Xi told cheering crowds on Monday, in footage posted on state broadcaster CCTV’s website on Tuesday. "We are now embarking on a new Long March, and we must start all over again!"
For readers who aren't familiar with this singular triumph in the military history of Communist China, here's a quick explanation:
The Long March was a military retreat between 1934 to 1936 undertaken by the Red Army, the forerunner of the People’s Liberation Army, to evade Kuomintang troops during the Chinese civil war. The thousands of marchers covered some of the country’s harshest terrain and the feat is often evoked as a symbol of Chinese unity by the ruling Communist Party.
Xinhua echoed some of Xi's sentiments in an editorial, where he blamed Washington's "bullying" for the collapse of trade talks. Beijing has previously warned that there's no point in holding more talks if the US isn't "sincere" about wanting to achieve a fair outcome.
A long article by the official Xinhua News Agency on Monday claimed that "bullying by the US side" was the cause of the failed trade talks.
"The People’s Republic [of China] has been standing tall in the East for the last 70 years, it has never lowered its head and it has never feared anyone," Xinhua said. "History will prove again that bullying and threats by the US will not work."
Xinhua followed this up on Tuesday with a report of Xi’s tour, saying that "every generation has its own long march." It did not mention the trade war.
Washington's decision to blacklist Huawei has only strengthened the perception among the Chinese that the US is doing everything in its power to thwart China's rise. Yet, other than its tit-for-tat tariff hikes, Beijing has yet to announce any additional tariffs or other countermeasures, though dumping Treasuries has been discussed as a strategy for retaliation, while a rare-earth metals ban has also been the subject of speculation.
The historical 'Long March' took years. It appears China is digging in for a prolonged fight. Just wait until risk assets realize this.