China tones down expectations ahead of US trade war talks as Vice-Premier Liu He leads team to Washington

China tones down expectations ahead of US trade war talks as Vice-Premier Liu He leads team to Washington

The 13th round of talks will take place this week, but a source says that the Chinese delegation is already planning to cut short its stay in Washington by one night

China is subtly toning down expectations ahead of this week’s high-level trade talks with the United States in Washington as the respective camps remain sharply divided over fundamental issues.

Vice-Premier Liu He is again leading China’s delegation to Washington for the talks

on Thursday and Friday, according to an official statement released by China’s Ministry of Commerce on Tuesday, for the first meeting between top negotiators on US soil since the trade talks collapsed in May.

But on this occasion, which is the 13th round of talks between the two sides, Liu will not carry the title of “special envoy” for President Xi Jinping, an early indication that the 67-year-old vice-premier has not been given any particular instructions from China’s leader.

A source, who has been briefed on preparations for the trade talks, also told the South China Morning Post on condition of anonymity that the Chinese delegation may cut short their stay in Washington, removing the possible chance of the talks extending into Friday evening as the delegation would be expected to head to the airport instead of departing at some point on Saturday.

Vice-Premier Liu He will lead the Chinese delegation in Washington for talks with US Treasury Secretary Steven Mnuchin and US trade representative Robert Lighthizer. Photo: ReutersVice-Premier Liu He will lead the Chinese delegation in Washington for talks with US Treasury Secretary Steven Mnuchin and US trade representative Robert Lighthizer. Photo: Reuters

Vice-Premier Liu He will lead the Chinese delegation in Washington for talks with US Treasury Secretary Steven Mnuchin and US trade representative Robert Lighthizer.

“The original plan [for the Chinese delegation] was to leave Washington on [October] 12th, but the departure could be moved ahead to the 11th,” the source said. “There’s not much optimism.”

The two sides remain at odds over what caused the collapse of talks in May, with the US blaming China for reneging on earlier promises at the last minute, while Beijing accused Washington of trying to infringe on Chinese economic sovereignty.

The atmosphere for the talks this week is set to be particularly tense after US President Donald Trump said on Monday that anything “bad” in China’s handling of the ongoing unrest in Hong Kong could affect the outcome of the talks. China has forcefully and repeatedly demanded that the US stay out of the country’s internal affairs with regard to how it the handles the anti-government protests in Hong Kong.

In addition, on Monday the US placed 28 Chinese public security bureaus and technology companies on a trade blacklist over Beijing’s treatment of Uygur Muslims and other predominantly Muslim members of ethnic minority groups in Xinjiang.

To further complicate the situation, Trump has publicly requested that Beijing investigate the business affairs in China of former US vice-president Joe Biden, a current leading Democratic presidential candidate, and his son Hunter.

“Especially for the US side, domestic politics make it hard for the trade talks to really be immune from other problems,” said Louis Kuijs, the head of Asia Economics at Oxford Economics.

Until this week, Taoran Notes, a social media account affiliated with the official Economic Daily that is used by Beijing to manage public expectations, had been expressing optimism about the result of the trade talk. But on Tuesday, it wrote that the likely result of the talks was a continuation of “talking while fighting”.

“Some people may ask, if the US raises tariffs further, is it still necessary to continue the talks … the answer is that it’s as necessary to take countermeasures as to continue the talks,” read commentary from Taoran Notes, hinting that China is ready to retaliate if the US goes ahead with a planned tariff increase set to come into force next week.

The US is scheduled to increase tariffs on US$250 billion worth of Chinese products from 25 per cent to 30 per cent on Tuesday, having delayed the implementation from last week to avoid clashing with the 70th anniversary of the founding of People’s Republic of China on October 1.

In addition, the US is threatening to impose a 15 per cent tariff on US$160 billion worth of Chinese-made consumer goods on December 15, after a 15 per cent levy on US$115 billion worth of such goods took effect on September 1.

Kuijs at Oxford Economics said that the US would probably go ahead with the tariff plan on October 15, which would trigger “some retaliation” from China, although he still expects the two countries to reach a small deal to call off the December tariffs.“The bar for a small deal does not seem to be very high,” he said.

While officially demanding that the US withdraw all punitive tariffs, which now cover virtually all Chinese exports, China is continuing to place new orders for US farm products such as soybeans and pork before the talks to pave the way for a possible mini-deal involving China buying American agricultural and energy products.

In turn, the US would have to agree to postpone or scale back tariffs, sweeping thornier issues such as an enforcement mechanism, structural changes in Chinese intellectual property protections and government industrial subsidies aside at least in the short term.