China-US trade talks jarred by North Korean nuclear test
FOR CHINA, the most important achievement of the 100 days of trade talks with the US now coming to a close might be keeping its counterpart at the table.
Negotiations due to end on July 16 have yielded some progress already, such as getting American beef back in Chinese stores, a small step toward addressing the US$ 347 billion ( RM1.6 trillion) US deficit on US$ 578.6 billion in trade last year.
But even amid continued engagement, major breakthroughs look less likely with President Xi Jinping complaining of a “negative” turn in relations just before his expected meeting with Donald Trump last week, and escalating tension over North Korea that the US links to trade.
For the world’s second-largest economy, the talks are a goodwill gesture to maintain friendly economic ties and avoid White House ire, said Wang Youxin, an analyst at Bank of China’s Institute of International Finance in Beijing.
“We make some concessions, give them a sweetener,” he said.
The lifting of China’s 14-year ban on US beef imports is one of the initial deals, dubbed “early harvests,” that allow both sides to say they’re making progress. Related benefits include a surge in US crude oil imports since April and an increase in the purchase of American liquid natural gas.
In addition, China has approved two out of eight biotechnology product applications from the US, and the central bank said this week it will allow foreignowned financial services firms to compile and issue credit ratings in the domestic bond market.
“The talks show China understands US concerns – we’re paying attention, we’re willing to cooperate, and we’re determined to produce deliverables,” said Wei Jianguo, a former vice commerce minister and now vice chairman of the China Center for International Economic Exchanges, a Beijing-based think tank.
The negotiation style fits Trump’s temperament and can help send positive messages, he said. Still, that dialog is being interrupted by the standoff between the US and North Korea over the latter’s nuclear programme.
After Pyongyang’s testing of a intercontinental ballistic missile this week, Trump has linked his frustration over the regime to his
The talks show China understands US concerns – we’re paying attention, we’re willing to cooperate, and we’re determined to produce deliverables.
willingness to compromise on trade with China.
“Trade between China and North Korea grew almost 40 per cent in the first quarter. So much for China working with us – but we had to give it a try!” Trump said last Wednesday on Twitter.
Ministry of Commerce data show trade with North Korea rose 13.7 per cent in the first five months from a year earlier. Exports rose 32 per cent while imports contracted 9.3 per cent.
“Trump and China have had a good start, but now it’s hit a bump on the North Korea issue,” said Wang Huiyao, director of Beijingbased think tank China Center For Globalisation.
“There are opportunities for China and the US to sit down and talk to find a way out as the 100day trade talks are still ongoing, Xi and Trump are set to meet at G-20, and Trump is going to visit China this year. China-US trade is the basis of bilateral relations and none can afford a trade war. The world can’t either.”
“China’s economic relations with the US are always not just about the economic issues, and there are always other interests involved. The recent North Korea provocations could possibly exert some negative impact, as Trump may get impatient and anxious and start to pressure China,” Song Hong, a senior fellow at the Chinese Academy of Social Sciences, which advises the government on policy. The 100- day talks are making good progress, according to Zhu Guangyao, China’s vice finance minister.
The two countries have contacts “every morning and every evening,” Zhu said at a press conference at the G- 20 meeting in Hamburg on Thursday.
China has also studied Trump’s books on how to do deals, Zhu, who is also a lead negotiator in the trade talks, said. Some Chinese analysts share the view that what truly matters about the 100- day talks is keeping both sides together at the negotiation table and avoiding a trade war, according to Lu Zhengwei, chief economist at Industrial Bank Co. in Shanghai.
Agriculture and energy are the trade domains most likely to show additional progress, according to Lester Ross, a partner in the Beijing office of US law firm Wilmer Hale who also leads the policy committee of the American Chamber of Commerce in China.
China’s commerce ministry said in a May report that it wants to increase US agricultural imports such as soybeans and cotton, along with energy products including liquid natural gas, crude oil and refined oil, plus aircraft, integrated circuits and machine tools.
Such gains are less impressive in a broader context of the world’s largest trading nation: China’s customs data show total beef imports stood at US$ 2.5 billion in 2016, while crude purchases totalled US$ 116.5 billion – and machinery imports came in at US$ 771.4 billion.
Allowing foreign credit rating firms to compete in the domestic market was a long- awaited step that’s part of a broader reform plan to open up the financial system.
The trade plan could erode some of China’s trade surplus with the US, and to a larger extent if the imports boost expands to more sectors, said Wang. But the bigger challenge in the negotiations will be to persuade China to further open service sectors including education, finance and health care, he said.
Wei Jianguo, a former vice commerce minister