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China says trade talks with USA set foundation to resolve concerns

12 January 2019

Beijing | China on Thursday said that the just-concluded round of talks with the USA to end a trade war were extensive and established a foundation for the resolution of each others' concerns, echoing positive sentiments expressed by American negotiators.

ANALYST'S TAKE: "While there was agreement on less thorny issues such as agriculture and energy, US demands for verification and enforceable targets on intellectual property rights, transfer of technologies and non-tariff barriers may not be that easily addressed", DBS Group Research strategists Eugene Leow and Neel Gopalakrishnan said in a commentary.

That pledge, addressing a trade deficit in goods, was however mentioned only at the end of the statement which focused on the USA demands for structural changes to China's domestic policies.

China's trade data for the full year of 2018 is due to be released on January 14, and economists see year-on-year export growth slowing in December from November.

Also, "Both parties agreed to continue to maintain close contact".

The US Trade Representative's office said officials broached those topics and discussed the need for any agreement to include "complete implementation subject to ongoing verification and effective enforcement". Without a breakthrough in talks, USA corporations are likely to experience a deepening decline in their Chinese sales, with Bank of America Merrill Lynch analysts even seeing an "informal boycott" in place.

Three days of U.S.

China has said it will not give up ground on issues that it perceives as core.

In March, when the tariff tit-for-tat was in its infancy, President Trump suggested the USA might impose up to $60 billion worth of tariffs on Chinese goods. "And China going forward will likely still want to increase the diversification of its sources of supply even for agricultural commodities".

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A Chinese foreign ministry spokesman, Lu Kang, announced the talks had ended. Economists say the 90-day window is too short to resolve all the conflicts between the biggest and second-biggest global economies. China responded by imposing penalties on $110 billion of American goods, slowing customs clearance for United States companies and suspending issuing licenses in finance and other businesses. Forecasters expect American orders to slump this year.

As the trade talks wound down, China's top economic official, Premier Li Keqiang, met with CEO Elon Musk of electric auto brand Tesla Inc. "This is what China has wished for, but I think the US will wait and see", Chiu said.

The US China Business Council, which represents American companies working in China, applauded the "substantive discussions" but urged both sides to make tangible progress on achieving equal treatment of foreign companies in China and changes to policies aimed at technology transfer.

China is the largest electric vehicle market and is strongly encouraging its development.

ANALYST'S TAKE: "The potential of movement on China-U.S. trade means a moderation of extreme bearishness around the outlook for global growth", Michael McCarthy, chief market strategist at CMC Markets in Sydney, said in an interview.

The US delegation, led by Deputy Trade Representative Jeffrey Gerrish, included representatives from the departments of energy, agriculture, treasury and commerce, while the Chinese side was led by Commerce Vice Minister Wang Shouwen. That reflects American frustration that the Chinese have failed to live up to past commitments.

USA companies also want action on Chinese policies they complain improperly favor local companies.

Companies in both countries just want to see a deal get done.

This week's talks went ahead despite tension over the arrest of a Chinese tech executive in Canada on USA charges related to possible violations of trade sanctions against Iran.

China says trade talks with USA set foundation to resolve concerns