The View | How much will Xi Jinping’s G20 steak dinner with Trump cost China? Possibly US$300 billion a year

Hao Zhou says Beijing is willing to pay the price to ease trade tensions with Washington and buy more time for economic development, but unresolved issues between the two sides mean the trade dispute may not dissipate in 90 days

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Workers move imported soybean products at a port in Nantong, Jiangsu province. The US and China have called a trade truce, with the Chinese agreeing to resume buying US agricultural products. Photo: Reuters

Published: 1:00am, 6 Dec 2018Updated: 11:06am, 6 Dec 2018

Chinese President Xi Jinping may have eaten the most expensive steak in his life at the working dinner with US President Donald Trump in Buenos Aires. In this much-anticipated meeting, a 90-day trade truce was declared.

According to the statement issued by the White House, China has agreed to purchase a “very substantial” amount of US goods to reduce the bilateral trade imbalance, and agricultural goods are at the top of the list. This is an obvious breakthrough in trade negotiations, offering hope that a comprehensive trade deal will be reached by the end of the 90 days.

As China runs an annual trade surplus of about US$300 billion with the US – it was US$276 billion in 2017 – a hefty bill looms for Xi. But Beijing is probably willing to pay this price to ease trade tensions and buy more time for further economic development and reforms. In fact, the fourth plenary session of the Communist Party’s Central Committee has been postponed for more than a month, due to the uncertain external environment.

A de-escalation of the trade war gives the Chinese government a breather, so it may turn its attention to domestic issues. It is putting together a large-scale tax reduction package to boost weakening domestic demand, which requires much detailed work. The ceasefire has come at the right time.

In financial markets, the knee-jerk reaction to the trade truce was a broad risk-on rally. Trump also fuelled investor enthusiasm with a tweet that hinted at a possible trade deal. He said China had agreed to “reduce and remove” tariffs on car imports, which are now at 40 per cent. If so, General Motors may no longer need to undergo aggressive restructuring.

However, it is too optimistic to predict that the dispute between the US and China will be resolved soon, even though Beijing is willing to pay the price. There are still unresolved issues between the two countries. For example, the US takes a dim view of China’s implicit subsidies to its state-owned enterprises, which Washington sees as unfair advantages.

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.css-1m2rp1p{color:#34b8b5;}The View | How much will Xi Jinping’s G20 steak dinner with Trump cost China? Possibly US$300 billion a year

The View | How much will Xi Jinping’s G20 steak dinner with Trump cost China? Possibly US$300 billion a year