China waited quite patiently until the end of 2019 to see what the consequences of Trump’s policies may be for the US – and whether he can face any reasonable competition in the upcoming elections. In the absence of worthwhile contenders – even as Trump is enduring yet another round of Washington drama, currently targeted in an impeachment process – Beijing has likely decided to give Trump a win now (even if it aids his re-election bid) rather than bet against him and then face him coming back with vengeance should he succeed in November.

Signing this agreement isn’t all that bad for China either – it can at least show that the country is not completely deaf to complaints and can be dealt with diplomatically.

It is often said, however, that the Chinese have a long term view – and in that perspective this deal has to be viewed as Beijing trying to minimize long term damage.

The problem for China is this – its leaders don’t want to appear weak by bending to foreign pressures, as it brings back the demons of the century of humiliation and the unequal treaties. On the other hand, however, any economic slowdown today translates into huge losses over many years as the compounded loss in GDP growth means trillions of dollars worth of lost economic activity.

In a very rough example, assuming an average 5% annual GDP growth over 20 years, a drop of that average to 4% results in a cumulative gap of $51 trillion dollars and annual GDP lower by about $6 trillion after those two decades.

This issue is made even more acute given unfavorable demographic trends – rapidly ageing society and shrinking labor force – which mean that China is under pressure to maximize its growth potential in every single year, because it will struggle to catch up when its society is older and smaller.

Chinese population is expected to peak at 1.44 billion by 2029 and then drop to 1.36 billion in 2050, 1.17 billion in 2065 and remain little over 1 billion in 2100. By then neighboring India may outnumber China by 400-500 million people.

By 2050 China is projected to be home to 350+ million 65+ year olds, including over 100 million above the age of 80 (as per UN calculations).

If it does not grow as fast as it can now it may not get the chance to do that later.

That said, because the signed deal carries no meaningful tariff relief and China has already been showing signs of economic slowing due to the trade war, Americans are winning not only the short term rivalry but the long term one as well.