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The mountain does not need the cloud to be majestic

Tong Kooi Ong & Asia Analytica

(Aug 26): On the morning of July 31, at the Xijiao Conference Centre of the State Guest Hotel in Shanghai, the US trade delegation, led by Trade Representative Robert Lighthizer and Treasury Secretary Steve Mnuchin, sat across the table from the Chinese dele-gation, led by Vice-Premier Liu He. The evening before, the Chinese had hosted their guests at a banquet.

A huge “decoration”, overwhelming the entire room, was placed at the centre, looking right onto the negotiation table (see photo). Was this decoration, of Chinese characters, of any relevance?

The US-China trade dispute started a year ago. The chart shows the escalating tariffs imposed by the US, countered by China. With no end in sight, the world fears this escalation will lead to a currency war, deteriorating global growth prospects, creating debt and leverage issues and resulting in global financial instability. It is likely to extend beyond economics to national security and other geopolitical tensions.

Almost all analyses and predictions of where trade discussions might lead to and their impact are by Western journalists, analysts and fund managers. It is certain their interpretations will be made through coloured glasses, based on their own values, ideas, experiences and civilisation.   

Understanding the mindset, values and fundamental beliefs of the Chinese will be useful in determining whether, how and when this trade dispute between the US and China might come to an end. 

And here is why we wrote this piece this week. The answer appears to be written on the wall. The “decoration” that hung strategically and prominently at the Xijiao Conference Center was the message, thought, way forward, value and fundamental beliefs of the Chinese. It is intriguing, sophisticated and a more subtle way of communicating, and it probably was not understood by the US delegation until after they left for home. Or maybe they did, and that was why that meeting lasted only one morning. 

That “decoration” is an abbreviated poetry by Zhang Yanghao, who lived during the Yuan Dynasty. We consulted people who read and understand Mandarin, and are borrowing the English translation by Frank Li from the website, econintersect.com.

Admittedly, it may not be possible to fully translate it, given the sophistication of the poetry and the subtlety and nuances of the language.

First column: The mountain is more beautiful, when the cloud comes. 

Second column: The mountain remains a picture, when the cloud is gone. 

Third column: The mountain shines or darkens because of the cloud.

Fourth column: The mountain and the cloud contrast each other in height.

Fifth column: You may rely on a crutch to withstand the cloud and the headwind (by turning around).

Sixth column: When you turn back, the mountain is still there.

The mountain is China. The mountain is there, and always will be there. The Chinese characters used (small or lesser seal) was standardised by the Qin dynasty. It was the first imperial dynasty of China. The Qin dynasty unified China for the first time in 221 BC. The first emperor was Qin Shi Huang (or Shi Huangdi), who laid the foundation of the Great Wall of China, irrigated lands by extending the Yangtze and built the terracotta soldiers. The writing, the message to the US delegates, was on that wall. And China has been in existence for more than 2,000 years, like the mountain.  

The mountain does not move. It is the cloud that moves. The cloud is the US. 

Right after the meeting on July 31, the Chinese issued a statement saying that the talk was candid, highly effective and constructive and a deep exchange on major trade and economic issues of mutual interests. That was no more than a morning meeting. Perhaps China was referring more to the message on the wall than anything that was said.

The Chinese have a long history and civilisation, where the message is not what the mouth says but what the heart speaks. 

On Aug 2, US President Donald Trump tweeted that “the US will start, on September 1st, putting a small additional Tariff of 10% on the remaining 300 Billion Dollars of goods and products coming from China into our Country”. Was it because he finally understood the message on the wall?

On Aug 14, Commerce Secretary Wilbur Ross suggested that Trump delayed some new duties without getting concessions from Beijing — indicating, perhaps, that the Aug 2 tweet might have been provoked and not carefully considered.

What does this mean for the global economy and capital markets? This dispute is going to stay far longer than we hoped. The mountain does not move. It would be better if there were a trade agreement. Otherwise, China will ride out the consequences. 

China anticipates and will withstand the hardship of the cloud and the headwind (from the US). But when it is over and done, China will be there (the mountain is still there). 

The cloud and the mountain contrast each other in height. China sees itself equal to the US, without one dominating the other. The trade negotiations will have to be on terms that satisfy each other.  

It is the cloud that must move. Trump has an upcoming election and will not want to hurt the US economy. But his image of a macho chief and successful negotiator is all-important. As an excellent communicator, the end-result could be Trump triumphally announcing victory, even if he does not get his way. 

China sees the benefit and wants to have an agreement. Since the leadership of China is not subject to popular opinions and Western media narratives, it will have no reason to dispute Trump’s bloated claims, if he chose to make them. We may be wrong. If we are, it is still a very good story.

The Global Portfolio rose 3.6% for the week ended Aug 22, as global stocks traded on a firmer footing. All stocks in the portfolio ended higher. Home Depot’s share price surged 9.3% after the company reporting solid earnings in the last quarter.

Tong Kooi Ong is chairman of The Edge Media Group, which owns The Edge Singapore

Disclaimer: This is a personal portfolio for information purposes only and does not constitute a recommendation or solicitation or expression of views to influence readers to buy/sell stocks, including the particular stocks mentioned herein. It does not take into account an individual investor’s particular financial situation, investment objectives, investment horizon, risk profile and/or risk preference. Our shareholders, directors and employees may have positions in or may be materially interested in any of the stocks. We may also have or have had dealings with or may provide or have provided content services to the companies mentioned in the reports

This story first appeared in The Edge Singapore (Issue 896, week of Aug 29) which is on sale now. Not a subscriber? Click here