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【Finaical Times】China’s vice-premier DC-bound for trade talks

Friday,May 11, 2018

Liu He visit renews cautious optimism of resolution to trade impasse

Beijing’s top economic adviser is to visit Washington next week, rekindling cautious optimism that China and the US can negotiate their way out of a trade impasse.

The White House on Monday confirmed the visit of Liu He, China’s vice-premier, with experts saying the move suggested — despite their hardline rhetoric — that both Beijing and Washington were eager to avoid triggering a trade war.

“It will be the second leg of the high-level consultation, showing that both sides hope to keep on the momentum of consultation,” said He Weiwen, a former commerce ministry official and now a senior fellow at the Center for China and Globalization(CCG), a Beijing think-tank.

“We are working on something that we think will be great for everybody,” Sarah Sanders, White House press secretary, told reporters.

The continuation of talks came after the two nations dug their heels during last week’s first round of trade negotiations.

The US demanded a $200bn reduction in two years of America’s $337bn trade deficit with China by 2020. It also wants Beijing to halve subsidies under its Made in China 2025 plan, a key economic policy that supports domestic industrial sectors at the expense of foreign businesses, according to the US.

In return, China has called for the US to drop its opposition to it being treated as a market economy in the World Trade Organization, something Beijing has long insisted it became entitled to on the 15th anniversary of its entry into the WTO in 2016. Market economy status would make it more difficult for the US to defend its anti-dumping rulings against Chinese companies.

China views the US request to effectively abandon its key industrial policy as unacceptable, stalling last week’s talks.

“Simply because one country opposes [Made in China 2025] does not mean we can relinquish this kind of national development strategy. It is non-negotiable,” said Sun Yongfu, a retired Chinese diplomat and former commerce ministry official. “On core issues, there is no possibility for China to yield any ground.”

China also views American demands to reduce the two countries’ trade gap by $200bn as illogical given Washington’s restrictions on the export of US high-tech products to China.?

“Reduce $200bn in the trade gap only through soyabeans, other agricultural products or aeroplanes is impossible,” said Mr Sun.

“Anyone with common sense on economics knows that it is impossible for China to reduce such a large number in the trade deficit with the US in such a short time,” said Lu Xiang, an expert on US-China relations from the Chinese Academy of Social Sciences. “China is willing to increase imports from the US, but Trump cannot just think of a number out of blue.”

Mr Sun said there could be incremental progress during the upcoming talks if the US focuses on its lesser demands for China to further liberalise its foreign investment rules.

Yet he cautioned that the likelihood of a breakthrough during Mr Liu’s visit to Washington next week were low: “There may be some areas that we can draw closer on, but to address all issues in one to two meetings will be impossible.”?

Last month, China set a timeline for loosening restrictions on foreign investment in the automobiles, manufacturing and financial services sectors. However, foreign multinationals have said the reforms are too little, too late given Chinese entities already dominate domestic market share in these sectors.

 

 

From Finaical Times, 2018-5-8