Hopes rise for U.S.-China ties

Dis­cus­sions on­go­ing for Xi, Trump to meet next month

The Detroit News - - Trump Administration - BY CHRISTO­PHER BODEEN AND MARTIN CRUTSINGER Associated Press

Bei­jing – With China and the United States open­ing the door to a meet­ing next month be­tween Pres­i­dents Xi Jin­ping and Don­ald Trump, hopes are ris­ing for a po­ten­tial eas­ing of ten­sions in the trade war be­tween the world’s two largest economies.

Wor­ries about the in­creased tar­iffs the two sides have im­posed on each other’s goods have con­trib­uted to this week’s dizzy­ing volatil­ity in fi­nan­cial mar­kets. The higher tar­iffs have el­e­vated costs for com­pa­nies in both coun­tries, and econ­o­mists say that if they re­main in place in­def­i­nitely, they could de­press eco­nomic growth.

A Xi-Trump meet­ing, if it hap­pens, would take place dur­ing a sum­mit of lead­ers of the Group of 20 big­gest global economies in Ar­gentina in late Novem­ber.

In Bali, In­done­sia, where he’s at­tend­ing global fi­nance meet­ings, Trea­sury Sec­re­tary Steven Mnuchin said, “We are hav­ing dis­cus­sions about a po­ten­tial meet­ing.”

Later Fri­day, Larry Kud­low, Trump’s top eco­nomic ad­viser, said in Washington that prepa­ra­tions for the talks were un­der way.

“It looks like there will be a meet­ing in Buenos Aires at the G-20,” Kud­low said in an in­ter­view with CNBC. “We are look­ing at it. The Chi­nese are look­ing at it. Prepa­ra­tions are be­ing made. I can’t say 100 per­cent cer­tainty, but there is no ques­tion ev­ery­body is look­ing at it.”

Kud­low said that so far, the ad­min­is­tra­tion viewed China’s ne­go­ti­at­ing of­fers as “rather un­sat­is­fac­tory” but that “maybe talks be­tween the two heads of state will bear fruit.”

The trade feud has been fu­eled by U.S. ac­cu­sa­tions that China en­gages in cy­ber-theft and co­erces for­eign com­pa­nies into hand­ing over tech­nol­ogy in re­turn for ac­cess to the Chi­nese mar­ket, as well as by Trump’s anger over China’s trade sur­plus with the U.S. It is far from clear that the U.S. might be pre­par­ing to con­sider lift­ing penalty tar­iffs on about $250 bil­lion of Chi­nese prod­ucts.

Mnuchin sug­gested that the two lead­ers could meet next month if the Trump ad­min­is­tra­tion felt trade dis­cus­sions were mov­ing in a pos­i­tive di­rec­tion.

“We need to do work in ad­vance to be sure there are changes and we can have a more bal­anced trad­ing re­la­tion­ship,” the Trea­sury sec­re­tary said. “And that we’re go­ing to be make sure we don’t have forced joint trans­fers and forced trans­fer of tech­nol­ogy.”

Lu Kang, a spokesman for China’s For­eign Min­istry, of­fered no specifics Fri­day but said, “I have also seen the rel­e­vant re­ports.”

The Wall Street Jour­nal and the Washington Post have cited of­fi­cials as say­ing Trump has de­cided to pro­ceed with a meet­ing with Xi.

Global in­dexes bounced back sharply Fri­day af­ter their re­cent plunges, on word of the pos­si­ble pres­i­den­tial meet­ing, along with strong Chi­nese ex­port data. Ja­pan’s Nikkei 225 in­dex gained 0.5 per­cent to 22,694.66 af­ter a nearly 4 per­cent loss on Thurs­day.

Hong Kong’s Hang Seng surged 2.1 per­cent to 25,801.49. The Shang­hai Com­pos­ite in­dex ad­vanced 0.9 per­cent to 2,606.91. Shares re­cov­ered in Tai­wan and rose through­out South­east Asia.

On Wall Street, the Dow Jones In­dus­trial Av­er­age jumped 305 points, or 1.2 per­cent, in late-morn­ing trad­ing, and the Nas­daq com­pos­ite surged 138 points, or 1.9 per­cent. Later, both stock in­dexes gave up much of their gains.

Fri­day’s volatil­ity fol­lowed a swoon over the previous two days that erased 1,300 points from the Dow and dragged the S&P 500 down more than 5 per­cent.

Re­ports that Mnuchin has ad­vised against la­bel­ing China a cur­rency ma­nip­u­la­tor – a sta­tus that could trig­ger penal­ties – were also seen as eas­ing ten­sions. The Chi­nese cur­rency has been fall­ing in value against the dol­lar in re­cent months, rais­ing con­cerns that Bei­jing is de­valu­ing its cur­rency to make Chi­nese goods more com­pet­i­tive against U.S. prod­ucts.

In his com­ments in Bali, Mnuchin did not say what the forth­com­ing Trea­sury re­port, set to come out next week, will con­clude about China’s cur­rency prac­tices. In the past, Trea­sury has placed China on a watch-list but found that Bei­jing did not meet the thresh­old to be la­beled a cur­rency ma­nip­u­la­tor.

Mnuchin met Thurs­day with Yi Gang, head of China’s cen­tral bank.

“I ex­pressed my con­cerns about the weak­ness of the cur­rency.” Mnuchin said.

He said that in the dis­cus­sions he had with the Chi­nese, they had made clear that they didn’t see a fur­ther weak­en­ing of the Chi­nese yuan as be­ing in their in­ter­ests.

Con­cerns have been raised that China, the largest for­eign holder of U.S. Trea­surys, might start dump­ing its hold­ings as a way to pres­sure the United States in the trade dis­pute. But Mnuchin said this pos­si­bil­ity didn’t con­cern him be­cause it would be con­trary to Bei­jing’s eco­nomic in­ter­ests to start dump­ing its Trea­sury hold­ings.

“That would be very costly for them,” Mnuchin said.

Andy Wong / AP

A Xi-Trump meet­ing, if it hap­pens, would take place dur­ing a G-20 sum­mit in Ar­gentina in late Novem­ber.

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