US, China extend trade talks

American president Donald Trump has fired off some positive tweets, while the world holds it breath.

10 January 2019 | Economics

Vishnu VarathanMizuho Bank Economics Head"Even if a deal is cobbled together, the more strident trade hawks in the White House and Trump may not sign off."

United States and Chinese envoys extended trade talks into a third day yesterday, after President Donald Trump said negotiations aimed at ending a tariff war were "going very well!"

"Talks with China are going very well!" Trump said late Tuesday on Twitter.

The two sides announced no details, but Asian stock markets rose on news of the decision to extend negotiations that originally were planned for two days. Hong Kong's main market index rose 2.3% while Tokyo was up 1.3%.

Envoys are meeting face-to-face for the first time since Trump and his Chinese counterpart, Xi Jinping, agreed on 1 December to suspend further punitive actions against each other's imports for 90 days. The fight was sparked by American complaints that Beijing steals or pressures companies to hand over technology.

Washington is pressing Beijing for changes including rolling back plans for a government-led creation of Chinese global champions in robotics and other fields. Europe, Japan and other trading partners echo Washington's complaints that those violate Beijing's market-opening obligations.

Chinese officials have suggested Beijing might alter its industrial plans but reject pressure to abandon what they consider a path to prosperity and global influence. They have tried to defuse pressure for more sweeping changes by offering concessions including purchasing more American soybeans, natural gas and other exports.

Neither side has given any indication that their basic position has changed. Economists say the 90-day window is too short to resolve all the conflicts in trade relations between the biggest and second-biggest global economies.

Trump's "cheerleading tweet" feeds hopes for a settlement, Mizuho Bank's Vishnu Varathan said in a report. However, he cautioned, "Even if a deal is cobbled together, the more strident trade hawks in the White House and Trump may not sign off."

On Tuesday, an official Chinese newspaper warned Washington "cannot push China too far" and must avoid a situation that "spins out of control".

The talks went ahead despite tension over the arrest of a Chinese tech executive in Canada on US charges related to possible violations of trade sanctions against Iran.

Trump has imposed tariff increases of up to 25% on US$250 billion of Chinese imports. China responded by imposing penalties on US$110 billion of American goods, slowing customs clearance for US companies and suspending issuing licenses in finance and other businesses.

Cooling economic growth in both countries is increasing pressure to reach a settlement.

For its part, Beijing is unhappy with US export and investment curbs, suggesting it might demand concessions. Chinese officials complain about controls on "dual use" technology with possible military applications. They say China's companies are treated unfairly in national security reviews of proposed corporate acquisitions, though almost all deals are approved unchanged.

Yesterday a Reuters report said the US trade delegation in Beijing was "wrapping up" meetings with Chinese officials and would return to the United States later on Wednesday after a "good few days", quoting US Under Secretary of Agriculture for Trade and Foreign Agricultural Affairs, Ted McKinney.

"I think they went just fine," McKinney said of the talks. "It's been a good one for us," he said without elaborating.

However, people familiar with the talks said that the two sides were further apart on Chinese structural reforms that the Trump administration is demanding. If no deal is reached by 2 March, Trump has said he will proceed with raising tariffs further.

In what is widely seen as a goodwill gesture, China on Tuesday issued long-awaited approvals for the import of five genetically modified crops, which could boost its purchases of US grains as farmers decide which crops to plant in the spring. -Nampa/ AP/Reuters

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