China and US begin new round of trade negotiations

Delegates from China and the United States are set to hold face-to-face negotiations in Beijing aimed at easing a bitter trade war between the world’s two largest economies.

The two-day talks, due to start on Monday, come after Chinese President Xi Jinping and his US counterpart, Donald Trump, in December agreed to a truce in their escalating spat which has seen the two sides raise import tariffs on each other’s goods.

Speaking to reporters at the White House on Sunday, Trump said that trade talks with China were going “very well” and that Xi is “very much involved in the talks”.

“I really believe they want to make a deal. The tariffs have absolutely hurt China very badly.”

Meanwhile, Lu Kang, spokesperson for the Chinese foreign ministry, sounded a positive note leading up to the talks, saying the envoys will have “positive and constructive discussions” during the meetings in the Chinese capital.

Financial markets were being lifted early on Monday on expectations that the direct negotiations would lead to an easing in tensions between the two sides.

Lengthy wrangling ahead

The US side is led by a deputy US trade representative, Jeffrey D Gerrish. Neither side gave details of their agenda but Gerrish’s delegation includes agriculture, energy, commerce, treasury and State Department officials.

The Chinese government gave no details of who would represent Beijing.

The talks are going ahead despite tensions over the arrest of Meng Wanzhou, chief financial officer of Chinese technology giant Huawei, in Canada on US charges related to possible violations of trade sanctions against Iran.

Last year, Washington imposed tariff increases of up to 25 percent on $250bn of Chinese imports over complaints Beijing steals or pressures companies to hand over technology. Beijing responded by imposing penalties on $110bn of US goods, slowing customs clearance for US companies and suspending issuing licenses in finance and other businesses.

The dispute weighed on economic growth and sparked volatility on global markets amid mounting uncertainty.

As part of the 90-day ceasefire, Washington postponed a planned increase of tariffs on $200bn worth of Chinese imports from 10 percent currently to 25 percent. Beijing has compromised by suspending additional tariffs on US cars and by buying US soybeans.

But analysts say the 90-day postponement of additional tariff increases is too little time to settle all the disputes that bedevil the two sides’ relations, arguing that they face potentially lengthy wrangling over technology and the future of their economic relationship.

“China would like to see some sort of deal be had, even if it’s a temporary one that takes people through a few years,” Einar Tangen, a political analyst specialising on China and an adviser to the Chinese government on economic and development issues, told Al Jazeera from Beijing.

During that 90-day period, agreements “may not be reached until the last day”, according to Tu Xinquan, director of the China Institute for World Trade Organization Studies at the University of International Business and Economics in Beijing.

This week’s talks will focus on technical details before higher-level leaders “make hard political decisions”, Tu told The Associated Press news agency.

In the longer term, the final tariffs might “remain for several years”, Tu said. “I don’t think it will proceed that fast. It must take time.”

Cooling economic growth

The US, Europe and other trading partners complain China’s tactics violate its market-opening obligations.

The clash reflects US anxiety about China’s rise as a potential competitor in telecommunications and other technology. Trump wants Beijing to roll back initiatives like “Made in China 2025”, which calls for the state-led creation of global competitors in such fields as robotics and artificial intelligence. American officials worry those might erode US industrial leadership.

The ruling Communist Party is reluctant to give up initiatives it sees as a path to prosperity and global influence.

China’s leaders have tried to defuse complaints by emphasising the country’s potential as an export market.

They have announced a series of regulatory changes over the past year to increase foreign access to their car, finance and other industries.

Some Chinese officials suggest the technology initiatives might be opened to foreign companies. But they have given no details, leaving it unclear whether that will satisfy Washington.

Cooling economic growth in both countries is turning up the pressure to reach a settlement.

Chinese growth fell to a post-global crisis low of 6.5 percent in the quarter ending in September. Car sales tumbled 16 percent in November over a year earlier. Weak real estate sales are forcing developers to cut prices.

The US economy grew at an annual rate of 3.4 percent in the third quarter, and unemployment is at a five-decade low. But surveys show consumer confidence is weakening because of concern that growth will slow this year.

“Right now, it appears that China is [suffering the most] but if you start looking at what’s happening in the US, the volatility on the market, the long-term effects of this I think you’ll find that both are suffering,” Tangen said.

“The idea that somehow the US came out on top because of the last jobs report is not really an indicator of what’s going to be happening about 12 months down the road when a lot of the uncertainty comes to bear because people are not investing as much as they were and they are not [placing new] orders because they don’t know what’s going to happen – and that’s going to have an effect,” he added.

Beijing has tried in vain to recruit France, Germany, South Korea and other governments as allies against Trump. They criticise his tactics but echo US complaints about Chinese industrial policy and market barriers.

The European Union filed its own challenge in the World Trade Organization in June against Chinese rules that the 28-nation trade bloc said hamper the ability of foreign companies to protect and profit from their own technology.

For their part, Chinese officials are unhappy with US curbs on exports of “dual use” technology with possible military applications. They complain China’s companies are treated unfairly in national security reviews of proposed corporate acquisitions, though almost all deals are approved unchanged.

Some manufacturers that serve the US have shifted production to other countries to avoid Trump’s tariffs.

UBS said on Friday that 37 percent of 200 manufacturers surveyed by the bank have shifted out of China over the past 12 months. The threat of US tariff hikes was the “dominating factor” for nearly half, while others moved because of higher costs or tighter environmental regulation.

“Most firms expect the trade war to escalate,” the bank said.