Trade talks open in Beijing amid optimism about an end to U.S.-China dispute

Trade talks open in Beijing amid optimism about an end to U.S.-China dispute

BEIJING — Chinese and American trade negotiators began talks in Beijing Monday amid mounting optimism that they will find a way to finally break the impasse in their rancorous nine-month-long dispute.

Chinese stock markets rose sharply on Monday, partly on hopes for progress on a trade deal. In a sign that the working-level meeting appeared to be off to a good start, China’s economic czar, Vice Premier Liu He, dropped by the talks to spur on the negotiators.

“These talks will have a positive outcome because both sides are trying to deal with the issue in an active and practical manner,” said Wei Jianguo, a former vice commerce minister. “I’m not saying there could be positive results, I think there definitely will be.” 

An American delegation led by deputy U.S. Trade Representative Jeffrey Gerrish arrived in Beijing at the weekend for two days of negotiations on Monday and Tuesday. These will be the first face-to-face talks since President Trump and Chinese leader Xi Jinping agreed to a 90-day cease-fire on Dec. 1.

Trump had vowed to increase tariffs on $200 billion worth of Chinese imports from 10 percent to 25 percent on Jan. 1. But, in return for increased Chinese purchases of American farm and industrial goods, he said he would give the negotiators until March 1 to reach a deal before raising the tariff rates.

“I really believe they want to make a deal,” Trump told reporters at the White House Sunday. “The tariffs have absolutely hurt China very badly.”

 But much has changed since Trump and Xi met on the sidelines of the G-20 meeting in Argentina last month.

“It’s an interesting scenario now,” said Ben Cavender, an analyst at China Market Research Group in Shanghai. “Trump would probably like something he can point to as a win, even if it’s not substantive, amid the wall and government shutdown chaos. And in China, there are definitely feelings of concern about the stability of the economy.”

Trump has repeatedly said that China is becoming more desperate to strike a deal because its economy is slowing. 

Some analysts here agree. “The Chinese are very eager to de-escalate the trade war because they’re worried about domestic economic situation,” said Trey McArver, co-founder at Trivium China, a Beijing-based consultancy.

Most independent economists expect China’s growth rate to fall to about 6 percent this year, which would be the lowest since 1990. 

To try to counteract the slowdown, the People’s Bank of China said Friday that it would reduce the amount of money that financial institutions have to hold by one percentage point. This will inject about $117 billion into the economy.

The government is also pouring money into infrastructure projects. In the last month alone, China has approved new rail projects worth more than $125 billion.

Foreign Ministry spokesman Lu Kang dismissed concerns about the Chinese economy. “We have adequate resilience and potential, and we have firm confidence in the long term sound fundamentals of Chinese economy,” he said at a press briefing Monday.

The Global Times, a nationalist state tabloid, said that China was not on the brink of surrendering. “It would be unrealistic to expect China to wave the white flag to the U.S.” it wrote in an editorial Monday. “We would have done it already if we had plans to.”

Although the U.S. economy has been performing strongly — it added 312,000 jobs in December, smashing expectations — both countries have experienced turmoil in their stock markets.

“Both markets are facing downward pressure” and that would create additional incentive for both to resolve the dispute, said Wei, the former vice commerce minister who is now vice chairman at the China Center for International Economic Exchanges.

The Shenzhen Component Index surged by 1.58 percent Monday, while the Shanghai Composite Index gained 0.72 percent.

Although China has pledged to increase its purchases of American goods to help narrow the $375 billion U.S. trade deficit with China, this will do nothing to address the structural causes for the imbalance.

Washington has demanded that Beijing level the playing field for American companies by granting greater access to the Chinese market, protecting U.S. intellectual property rights, and cutting down unfair government subsidies for Chinese firms.

Before this week’s talks, China has been proactively making gestures to show it is serious about committing to reforms unlike in past rounds of negotiations, when it waited before talks ended to take action, said Jake Parker, vice president at the U.S.-China Business Council.

For example, in recent weeks China has released a new draft foreign investment law that bans Chinese companies from forcing foreign partners to hand over their technology secrets and prohibits governments from illegally “interfering” with foreign companies’ operations — practices that have long riled Western firms. China has also resumed purchases of U.S. rice and soybeans as a gesture.

“There are positive signals of what we’d like to see on the implementation side,” Parker said. “We’re cautiously optimistic.”

Now, the question is not only whether China and the United States can reach a satisfactory deal this week on a list of “deliverables,” but also how to make sure China will keep its promises.

“The big sticking point is going to be what does enforcement look like?” said Cavender of China Market Research Group. “The U.S. wants free market access and stopping forced technology transfer. China can say okay, but what is actually going to change?”

Since last year, U.S. officials have proposed a framework to hold China accountable, possibly by a quarterly review process, but the details of the mechanism have yet to be thrashed out. 

If there is progress at these talks, U.S. Trade Representative Robert E. Lighthizer and China’s Liu are expected to pick up the baton. Liu was meant to go to Washington in September but the trip was canceled as the trade war became increasingly fractious.

Trump could also get involved by the end of the month. He is expected to travel to the World Economic Forum in Davos, Switzerland, that starts on Jan. 21. China’s Foreign Ministry Monday confirmed that Vice President Wang Qishan will attend.

Analysts say the two could meet to try to inject further momentum into the negotiations.

But Yao Xinchao, a professor of trade at the University of International Business and Economics in Beijing, said that both sides would continue to be suspicious of each other and harbor doubts about the other side’s sincerity. 

“As long as Trump is in office, nothing is for certain in China-U.S. relations,” he said. “He is quick to make promises and even quicker to break them. Americans might doubt the sincerity of the Chinese, but I think the opposite is also true.”

Wang Yuan, Liu Yang and Lyric Li contributed reporting.

 

 

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