On Friday, China’s Ministry of Foreign Affairs ordered the closure of the U.S. consulate in Chengdu, the capital city of Sichuan province in southwestern China. In a statement, Beijing said the move was a direct retaliation for the U.S. abruptly closing the Chinese consulate in Houston. The statement did not specify a timeframe to leave the consulate, but the Chinese state media outlet the Global Times reports that the consulate must close within 72 hours, similar to the order given by the U.S. government regarding China’s Houston consulate.
“The measure taken by China is a legitimate and necessary response to the unjustified act by the U.S. [in Houston],” the statement said. “We once again urge the US to immediately retract its wrong decision and create necessary conditions for bringing the bilateral relationship back on track.”
The announcement sent stock markets reeling across Asia on Friday. At closing, the Shanghai composite index had fallen nearly 4% from opening bell, while Hong Kong’s Hang Sang index was down over 2% and the Shenzhen composite index had declined 5%. Indexes in South Korea, Japan, and Australia similarly reported losses.
The tit-for-tat measures over the consulates mark a low point in deteriorating U.S.-China relations, and also threaten the functional economic ties that each of the embassies play in promoting trade between the two countries.
The Chengdu consulate was opened in 1985 and has grown to a staff of nearly 200 personnel, according to the U.S. State Department. In addition to performing functions like processing visa requests and facilitating cultural exchange programs, the Chengdu consulate also has specific offices to promote U.S. business in China. The Foreign Commercial Service, for example, promotes the growth of U.S. exports to the region while the Agricultural Trade Office specifically works on enhancing U.S. agricultural trade.
The U.S consulate in Chengdu has been responsible for covering a wide swath of China’s Southwest, a region that holds nearly 200 million people across Sichuan, Guizhou, and Yunnan provinces, as well as Chongqing Municipality and the Tibet Autonomous Region.
In recent years, this region has experienced some of the highest growth levels in all of China. In 2019, Yunnan, Guizhou, and Tibet were the fastest growing economies in China, as each reported nearly 9% GDP growth rates, nearly three percentage points higher than the national average of roughly 6%. In 2019, Sichuan Province also named the U.S. as one of its top trade partners.
If the closure of the U.S consulate in Chengdu will make it more difficult for Chinese businesses in the region to connect with U.S. suppliers, the general state of U.S.-China relations won’t make trade any easier.
On Thursday, U.S. Secretary of State Mike Pompeo delivered a speech saying that “We must not continue… the old paradigm of blind engagement with China.” Central to this disengagement, Pompeo said, was reevaluating how American business operates and trades with China. Pompeo also quoted a speech made by U.S. Attorney General William Barr last week to explain why the U.S. needs to challenge China on a number of different economic fronts.
“The ultimate ambition of China’s rulers isn’t to trade with the United States. It is to raid the United States,” Barr said.
For its part, China decried the U.S.’ actions for allowing relations to reach this point in its statement on Thursday regarding the consulate closure.
“The current situation in China-U.S. relations is not what China desires to see, and the U.S. is responsible for all this,” the Ministry of Foreign Affairs said.