The markets were less jittery by the end of the week as a new round of talks between American and Chinese delegations ended without a specific announcement, but lasted longer and were more comprehensive than had originally been expected by those closely monitoring the ongoing trade dispute between the two governments.
Though the talks concluded without a concrete resolution to the current tit-for-tat that has characterised the relationship between Washington and Beijing, both sides walked out of the talks on an upbeat note, saying the discussions were “very serious”, as stated by China’s foreign ministry.
From the other side of the Atlantic, US President Donald J. Trump confirmed that “talks with China are going very well” but did not provide further details elaborating. His statement was, however, followed almost immediately by the release of a list by the Chinese side of five genetically modified crops whose import was previously prohibited, most of them US-produced strains of grain.
Beijing has begun purchasing American soybeans after supplies were disrupted when a 25% import duty was imposed in July of last year. The Chinese Communist Party later opted to cut tariffs on US cars and pledged to buy more US oil.
A spokesman for the Chinese foreign ministry later confirmed that both sides had agreed to extend the talks, but did confirm a report by news agency Reuters that the two delegations had, in fact, discussed forced technology transfers – the most contentious issue between the two sides.
“Both sides … held broad, deep and meticulous discussions on shared observations on trade issues and structural problems, laying the foundation for addressing areas of common concern,” a CNBC translation of the Chinese foreign ministry statement reads. Ministry spokesman, Gao Feng, confirmed that the two parties touched upon technology transfers, property rights, as well as tariffs and cyber attacks. “There has been progress,” he said.
Share prices in the United States and across Asia were reacting positively throughout the weeks, which reflected hope that the conflict between the world’s two biggest economies can deescalate. The stakes are high due to a March 2 deadline that was set by the Trump Administration which would see US tariffs on Chinese goods ratcheted up by 10-to-25% on €175 billion worth of Chinese imports.
Oil prices rose 2% by midweek, which pointed to market optimism that the flow of global trade seen before both Beijing and Washington began taking a hostile approach to one another over the course of the last year, can be restored. Those expectations were tempered somewhat by the end of the week as the markets opened slightly down when the two parties failed to come up with an official statement about any progress that had been made.
This week’s Sino-American negotiations are the first round since Trump and Chinese President Xi Jinping agreed in December to a 90-day moratorium on any new actions that would further inflame the tense trade situation.
A major slowdown of the Chinese economy has forced Beijing to reconsider its negotiating position after the current spat disrupted global trade flows and threatened to prematurely end the momentum of economic recovery, which also affected the export-driven economies of Europe.
Amid the global economic meltdown, China was forced to unleash a massive stimulus package equal to 19% of its GDP, which far outpaced the 5-6% of GDP that was introduced by former US President Barack Obama following the 2008 financial crisis.
For now, there is little question that the Chinese economy is slowing down as the country’ benchmark stock index experienced its worst performance in 2018 due to the trade spat with the US and an across-the-board slowdown in demand for Chinese consumer products.
US companies have made the case that China’ highly politicised and tightly controlled judiciary is biased when it comes to intellectual theft cases as it almost universally rules against cases that involve foreign firms. Beijing has rejected these allegations but is offering to set up an intellectual property court and draft legislation that will make it harder for Chinese officials to ask foreign firms to transfer their technology.
Washington has also demanded that China’s economic model of protectionist global market distortion through subsidies and cheap credit in strategic industrial sectors – including aerospace, chip-making, and electric cars – has rigged the market in China’s favour, as the Communist Party has thus far refused to open up sectors of its economy to foreign investment.
Europe’s views on the talks
In the light of the positive tone from the talks, the German industrial association DBI called on the European Union to adopt a tougher policy towards China, expressing concerns for price dumping and technology transfers. In a paper presented on December 10, the BDI backed the American position, sayingChina remains a closed and uncompetitive market through its use of 54 access barriers.
In December, the German government took steps to restrict Chinese takeovers of national companies in strategic sectors amid fears that China’s technology scouting is eroding Germany’s value-added advantage. The move came after China publicly stated that its objective is to dominate 10 global sectors of high-value manufacturing by 2025, a policy that has the potential to challenge the US and Europe’s technological edge and calls into question the sustainability of vital European and American interests.
Germany is, however, the only developed economy that enjoys a trade surplus with China, with exports in 2018 up 30%, year on year. However, Germany’s Chamber of Commerce and Industry cautions that over 900,000 jobs in Germany depend on Chinese exports.