Chinese central bank governor Yi Gang’s meeting with US Treasury Secretary Steven Mnuchin this weekend at a gathering of G20 finance leaders in Japan marks the first chance to break an impasse in the trade war since negotiations broke down a month ago. The scheduled bilateral meeting between the two senior officials could offer signs for a possible meeting between Chinese president Xi Jinping and his US counterpart Donald Trump at the G20 leaders summit in Osaka on June 28-29. Analysts said hopes for a solution to the current deadlock in the near term remained slim, with the direct involvement of Xi and Trump in the negotiations needed as a precondition to reach a deal to end the year-long trade war. “Trump and Xi are most likely confirmed to meet later this month but the question is under what kind of agenda?” said Zhou Hao, Asia senior emerging market economist at German bank Commerzbank. “The most important signal from this weekend would be whether both sides are still willing to continue talks.” But such expectations are at the same time clouded on Thursday by Trump’s reiterated threat to hit China with further tariffs on another US$300 billion of Chinese goods. The US has already put a formal review process on. Reuters reported that the US president said while talks were ongoing, no face-to-face meetings have been held since May 10, the day he more than doubled tariffs to 25 per cent on US$200 billion of imports from China. The US has also effectively banned American companies from selling components and software to Chinese telecommunications giant Huawei, sharply escalating the trade cum tech war that could suggest a long-run contest between the world’s two biggest economies. In retaliation, China has imposed tariffs on US$60 billion US imports, targeting states that represent Trump’s political base. The State Council issued a white paper on Sunday taking a more hardline stance on the talks, and is building its own “unreliable entities list” that would block foreign firms from doing business with domestic firms. On Thursday, China’s Commerce Ministry also said Beijing would have to adopt necessary countermeasures if Washington unilaterally escalates trade tensions, and that US pressure have caused serious setbacks to the negotiations. Yi and Mnuchin’s meeting during the two-day G20 finance ministers’ meeting was also unilaterally confirmed by the US Treasury department, with no formal word from the Chinese side. The damage from the trade war is likely to test G20 finance minister’s optimism about the global economic outlook. Raoul Leering, head of international trade analysis at ING Bank, said the strong setback to world trade growth would make 2019 the worst year for trade since the global financial crisis a decade ago, with only 0.2 per cent growth. The ability of many G20 countries to combat a global slowdown due to the trade war was limited, given many central bank have significantly less leeway to ease policy than they did before the global financial crisis, Leering said. Fiscal policy space is also constrained by high or rising public debt in some countries. In addition, ageing populations and low productivity growth weigh on the outlook in G20 advanced economies and certain emerging markets. Countries must carefully balance the need to stimulate their domestic economies with the need to stem capital outflows in the event that global financial conditions tighten again, he added. The most important signal from this weekend would be whether both sides are still willing to continue talks Zhou Hao The G20 economies are also expected to agree at their meeting in Fukuoka on a set of international rules specifying minimum effective corporate tax rates to combat the practice by many multilateral corporations of shifting their profits to tax havens countries with extremely low or zero tax rates to reduce their tax payments. The minimum tax levels are aimed at reducing tax avoidance, with the plan expected to be submitted to the G20 leaders summit meeting later in the month for their approval. Over 50 trade ministers and digital economy ministers will also meet in Tsukuba on Saturday and Sunday to discuss how G20 economies can ensure sustainable growth of the global economy. G20 leaders recognised the need to take up the thorny question of reforming World Trade Organisation (WTO) rules. Former Chinese central bank chief Zhou Xiaochuan said he expected the G20 summit to advance discussions and to reach a preliminary consensus on a reform plan of the WTO. Changes to the way the organisation works were urgently needed although reforms would be difficult to achieve, and some were not optimistic that they can happen, Zhou said. In addition, finance officials are expected to adopt a set of infrastructure investment principles to help alleviate concerns that infrastructure initiatives are pushing emerging nations too deeply into debt. The principles are expected to aim for economic efficiency so that project planning will take into account the ability of the recipient country to service debt or make a profit on a project, as well as the environmental and social impact. China has swiftly expanded its investment in overseas infrastructure projects in line with its Belt and Road Initiative, which in some cases, in developing Asian nations, has provided excessive loans that recipients have struggled to repay.