Cautious hopes ahead of trade talks resuming in Shanghai

BEIJING • United States trade negotiators return to China this week for a fresh round of talks in a new city, but experts warn that a change of air is unlikely to quickly solve an impasse between the world's two biggest economies.

The meetings in Shanghai tomorrow and on Wednesday will be the first face-to-face discussions since negotiations collapsed in May after US President Donald Trump accused China of reneging on its commitments. Washington and Beijing have so far hit each other with punitive tariffs covering more than US$360 billion (S$493 billion) in two-way trade in the stand-off.

Despite an agreement by Mr Trump and Chinese President Xi Jinping at the Group of 20 summit in Japan to cease hostilities, there has been little progress. The US leader raised the stakes by claiming that China's slowing economy is forcing the Chinese to make a trade deal. The dispute has centred on US demands for China to curb the alleged theft of American technology and to provide a level playing field to US companies. Mr Trump has also angered China by blacklisting telecommunications giant Huawei over national security concerns.

Professor Wang Chuanxing of Tongji University said: "Basically, China tried to take this as a pure economic affair and just wants to make a deal, but on the US side, it seems... (they) try to connect the trade affairs with a strategic rivalry. The common ground is that both sides want to strike a deal, so this is very important."

The restarting of talks is seen as a positive step, and the change of location to the country's leading city of commerce, Shanghai, is also suggestive.

Finance professor Michael Pettis, from the Guanghua School of Management at Peking University, said: "It could be an attempt to distance the consequences of the negotiations from Xi Jinping and the people immediately around him."

Holding talks in Shanghai is also a nod to a time of better relations, as the city is the home of the 1972 Shanghai Communique - an important step in building diplomatic relations between the US and China.

US Treasury Secretary Steven Mnuchin told CNBC: "There's a significance to (China) of the Shanghai Communique and the symbolism obviously of that important agreement." He added that he would take the invite to Shanghai as "good news that we will be making progress next week".

However, Mr Mnuchin, who will be joined by US Trade Representative Robert Lighthizer in Shanghai, warned that there were "a lot of issues" and he expected follow-up talks in the US.

Said Shanghai-based Professor Shen Dingli: "It's not likely (they will sign a deal) this week."

The Global Times, a state-run nationalist daily, said in an editorial last Friday that it is "widely believed that trade talks will take a long time" and the chance of getting a deal could be missed if Washington continues to put pressure on Beijing.

Further lowering expectations was Mr Larry Kudlow, director of the US National Economic Council, who told CNBC last Friday that he "wouldn't expect any grand deal". "Talking to our negotiators, I think they're going to reset the stage and hopefully go back to where the talks left off last May," he said, adding that the two sides still need to address key structural issues such as intellectual property theft and forced transfers of technology.

As well as a fresh location, the new round of trade talks seems set to give a more prominent role to Chinese Commerce Minister Zhong Shan. While Vice-Premier Liu He will likely lead the talks for China again, the addition of Mr Zhong could change the tone of the discussions as he is seen as a hardliner.


Join ST's Telegram channel and get the latest breaking news delivered to you.

A version of this article appeared in the print edition of The Straits Times on July 29, 2019, with the headline Cautious hopes ahead of trade talks resuming in Shanghai. Subscribe