US-China trade talks conclude as hopes of progress rise

Analysts warn that complicated questions remain despite desire on both sides to do a deal

Image result for xi jinping, donald trump, Mar-a-Lago, al jazeera, photos

U.S. President Donald Trump with his guest Xi Jinping at Mar-a-Lago, April 2017

Tom Hancock in Shanghai

Global markets moved higher as US and China officials concluded trade negotiations which had been extended into an unscheduled third day, spurring hopes the two countries had made progress on defusing a dispute weighing on both their economies.

While growing concerns about the economic slowdown on both sides are adding pressure to reach a deal, analysts cautioned that Beijing was unlikely to compromise on key issues such as industrial policy, with progress dependent on whether Washington would be satisfied with promises to purchase more US goods.

“Trade talks between China and the US have concluded, and the Chinese side will soon release the results,” Chinese state media cited a foreign ministry spokesman as saying on Wednesday afternoon.

The US did not immediately confirm any agreement. US President Donald Trump tweeted on Tuesday that the trade talks in Beijing were “going very well!”, with a member of the US trade delegation to Beijing telling Reuters that “its been a good one for us”, when asked about progress in the talks.

Markets reacted positively, with Shanghai’s CSI 300 up 1.95 per cent by early Wednesday afternoon, Japan’s Topix was up 1.1 per cent and Hong Kong’s Hang Seng index rose 1.99 per cent, as oil prices hit a three-week high.  The trade war launched last spring has led to tariffs being levied on more than $350bn of bilateral trade.

Beijing has repeatedly offered to increase purchases of US agricultural and energy goods while Washington has pushed for concessions on market access and intellectual property protection for American companies. Lu Xiang, a researcher at the Chinese Academy of Social Sciences, a state-run think-thank, said he did not believe Beijing would deviate significantly from its previous proposals as officials hoped that a weakening US economy would add to pressure on Washington to accept a quick deal.

“Maybe the US just realised that it’s a good offer now. The US seems to realise that the damage trade war causes is unbearable. The best option for the US is to collect a trophy and retreat,” he said. 

Recommended Explainer US-China trade dispute US-China trade talks: which side holds the advantage The two sides agreed on a three-month freeze on new tariffs in December, buying Beijing time to launch a fiscal and monetary stimulus to boost flagging growth.

Arend Kapteyn, global head of economic research at UBS, said “the willingness to negotiate on the US side is starting to increase” as evidence of the trade war’s impact on growth becomes evident in both countries. But he noted that Washington’s dual focus on reducing its trade deficit with China and gaining more market access and better treatment of US companies in the country added “confusion” to the talks.

“If everything was done to open up the [Chinese] market and deal with these other issues, that wouldn’t do anything about the bilateral deficit,” he said.  The US delegation is led by Jeffrey Gerrish, the deputy trade representative, who is close to Robert Lighthizer, the US trade representative, one of the most hawkish officials on China in the Trump administration who has pushed for concessions on the country’s industrial policy. Beijing views state control of its economy as essential to economic growth and is unlikely to compromise.

“It’s very hard for China to meet all Trump’s requests,” said Pang Zhongying, an international relations expert at the Ocean University of China.

“I have very few reasons to be optimistic.” 

Goldman Sachs wrote in a note this week that the relationship is “too multi-faceted and complex to resolve in such a short timeframe”. “We continue to see a comprehensive deal involving a full rollback of tariffs as unlikely by the March 1 deadline.

More likely scenarios are a further extension of time for negotiations or escalation,” they added. Beijing’s continued concerns about slowing economic growth were signalled late on Tuesday when a spokesman for China’s top planning agency said the government would look to boost sales of automobiles and home appliances, sending shares in manufacturers sharply higher on Wednesday.

Additional reporting by Xinning Liu in Beijing

https://www.ft.com/content/42e29b80-13c5-11e9-a581-4ff78404524e

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