Opinion | With US trade deal, China kicks the can of economic reforms down the road – at greater cost to itself

The phase-one trade deal between China and the United States is not substantial enough to stop both economies from decoupling. The deal offers some psychological benefits but their impact is unlikely to last beyond the US presidential election in November. What we see now will only be a brief pause in the lasting rivalry between the two countries.

The US government is touting China’s promise to purchase an additional US$200 billion of US goods and services over two years, doubling China’s US imports. But given that China’s imports are not growing, this target looks far-fetched and is likely to be propaganda for Trump’s re-election campaign. China is unlikely to come close to this number.

To honour its promise to buy roughly US$80 billion in manufacturing goods, China may simply order more Boeing jets, advancing the orders for future demand. Boeing will not be able to deliver, as it is still in turmoil over the 737 MAX fiasco but China could claim that it is holding to its end of the bargain.

China cannot buy the latest American chips, given the US ban on selling chips with military applications. Given falling demand for mobile phones and a shrinking market, it is unlikely that China will be able to buy tens of billions of dollars of US chips.

And then there is the all-important agricultural commitment of US$40 billion per year, US$16 billion increase from the 2017 base. This is unlikely to happen for 2020 as it is already too late to place orders for many commodities, such as soybean. It could happen for 2021. But by then, expect the bickering to restart.

The demand that China boost purchases of US services by US$35 billion over two years is simply bizarre. Service happens when someone wants to be served. The Chinese government cannot pull it out of thin air. Maybe some state-owned enterprises would grant more consulting contracts. Increasing outbound tourism may be an option but the US has been making visas harder to get. The Chinese government would have a perfect excuse there.