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MoneyWeek

US WANTS SHAKE-UP IN CHINA TRADE TALKS

Xi Jinping: talk but little action

Senior Trump administration officials insist that the Huawei crackdown (see above) has nothing to do with this week’s trade talks between the US and China, even if Beijing is unlikely to see it that way, says the Financial Times. If the US and China can’t strike a deal, US tariffs on $200bn of Chinese goods will rise from 10% to 25% on 2 March. Both sides are under pressure. China’s economy is slowing and President Trump needs some good political news. Beijing does not want to be cut off from US technology critical to upgrading its economy, says Tom Mitchell in the FT. In a move intended to “smooth” talks, the Chinese government announced plans to rush a new foreign investment law through that will “formally ban ‘forced’ technology transfers and other illegal interference by government officials in the operations of foreign-invested enterprises”.

More than a “few regulatory tweaks” are needed, says Michael Schuman in The Atlantic. Aside from wanting China to stop forcing US firms to disgorge their commercial secrets, Washington wants Beijing to cut back on the subsidies it “lavishes” on favoured industries and to widen access to China’s lucrative domestic market to foreign companies. This requires a “shake-up of the entire relationship between state and business in China”. President Xi Jinping, for all his talk of free trade, has shown little inclination for such change. Indeed, since coming to power in 2012, a priority has been to strengthen Communist Party control. This means that a “truly comprehensive trade pact will be difficult, perhaps even impossible, to reach”.

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