US-China trade war
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Vice-Premier Liu He will lead the Chinese delegation in Washington for talks with US Treasury Secretary Steven Mnuchin and US trade representative Robert Lighthizer. Photo: Reuters

China tones down expectations ahead of US trade war talks as Vice-Premier Liu He leads team to Washington

  • The 13th round of talks will take place this week, but a source says the Chinese delegation is already planning to cut short its stay in Washington by one night
  • The US is expected to raise tariffs on Chinese imports next week, while the issues surrounding Joe Biden and the Hong Kong protests also hang over the talks

China is subtly toning down expectations ahead of this week’s high-level trade talks with the United States in Washington as the two camps remain sharply divided over fundamental issues.

Vice-Premier Liu He is again leading China’s delegation to Washington for the talks on Thursday and Friday, according to an official statement released by China’s Ministry of Commerce on Tuesday.

It will be the first meeting between the two countries’ top negotiators on US soil since the talks collapsed in May.

But for this round of discussions – the 13th between the sides –, Liu will not carry the title of “special envoy” for President Xi Jinping, an early indication that the 67-year-old vice-premier has received no particular instructions from China’s leader.

“The original plan [for the Chinese delegation] was to leave Washington on [October] 12th, but the departure could be moved ahead to the 11th. There’s not much optimism
Unnamed source

Speaking on condition of anonymity, a source briefed on preparations for the talks also told the South China Morning Post that the Chinese delegation may head to the airport on Friday after completion of the talks instead of following an earlier plan of departing on the next day of October 12th.

“The original plan [for the Chinese delegation] was to leave Washington on [October] 12th, but the departure could be moved ahead to the 11th,” the source said. “There’s not much optimism.”

The Global Times, a newspaper affiliated with the People’s Daily, said in an editorial on Wednesday that the China delegation will leave on the evening of October 11 after completing all negotiations agenda.

“The upcoming talks will be very difficult and the outcome is highly uncertain,” the newspaper said.

The two sides remain at odds over what caused the collapse of talks in May, with the US blaming China for reneging on earlier promises at the last minute, and Beijing accusing Washington of trying to infringe on China’s economic sovereignty.

The atmosphere for the talks this week is set to be particularly tense after US President Donald Trump said on Monday that anything “bad” in China’s handling of the ongoing unrest in Hong Kong could affect the discussions’ outcome.

China has forcefully and repeatedly demanded that the US stay out of the country’s internal affairs with regard to how it handles the anti-government protests in Hong Kong.

In addition, on Monday the US placed 28 Chinese public security bureaus and technology companies on a trade blacklist over Beijing’s treatment of Uygur Muslims and other predominantly Muslim members of ethnic minority groups in Xinjiang.

The situation has been further complicated by Trump’s public request that Beijing investigate the business affairs in China of former US vice-president Joe Biden, a current leading Democratic presidential candidate, and his son Hunter.

“Especially for the US side, domestic politics make it hard for the trade talks to really be immune from other problems,” said Louis Kuijs, the head of Asia Economics at Oxford Economics.

Until this week, Taoran Notes – a social media account affiliated with the official Economic Daily that Beijing uses to manage public expectations – had been expressing optimism about the upcoming talks. But on Tuesday, it wrote that the likely result of the talks was a continuation of “talking while fighting”.

“Some people may ask, if the US raises tariffs further, is it still necessary to continue the talks … the answer is that it’s as necessary to take countermeasures as to continue the talks,” a Taoran Notes posting read.

The commentary seemed to imply that China was ready to retaliate if the US went ahead with a planned tariff increase set to take effect next week.

The US is expected to increase tariffs on US$250 billion worth of Chinese products from 25 per cent to 30 per cent on Tuesday, having delayed the implementation from last week to avoid clashing with the 70th anniversary of the founding of the People’s Republic of China, marked on October 1.

The bar for a small deal does not seem to be very high
Louis Kuijs

In addition, the US is threatening to impose a 15 per cent tariff on US$160 billion worth of Chinese-made consumer goods on December 15, after a 15 per cent levy on US$115 billion worth of such goods took effect on September 1.

Kuijs at Oxford Economics said the US would probably go ahead with the tariff plan on October 15, triggering “some retaliation” from China, but he expected the parties would reach a small deal to stop the December tariffs.

“The bar for a small deal does not seem to be very high,” he said.

While officially demanding that the US withdraw all punitive tariffs, which now cover virtually all Chinese exports, China has continued to place new orders for US farm products such as soybeans and pork to pave the way for a possible mini-deal that would see the Asian country buying American agricultural and energy products.

In turn, the US would have to agree to postpone or scale back tariffs and to sweep aside, at least in the short term, the thorny issues of an enforcement mechanism for any broad agreement, structural changes in Chinese intellectual property protections and the curbing of government industrial subsidies.

Trump, though, has said he prefers a comprehensive deal involving all elements rather than a small agreement on relatively easy issues.

“We’ve come this far. We’re doing well. I would much prefer a big deal and I think that’s what we’re shooting for,” Trump said on Monday.

Shen Jianguang, a veteran Chinese economy watcher and now the chief economist at JD Digit, said there was still a good chance the Washington talks could produce a tariff truce.

“In previous rounds of talks when there were high expectations, a deal was always out of reach; the expectations for this new round of talks are low, but it doesn’t mean there won’t be anything,” Shen said.

“It won’t be a comprehensive deal, but a formal truce is likely as both economies are gradually feeling the pain of the trade war.”

This article appeared in the South China Morning Post print edition as: Beijing keeping expectations low for trade talks