China phase one deal with US will allow chance for domestic reform, despite short-term sting

China’s long-awaited phase one trade deal with the United States could hurt certain domestic industries and harm economic growth in the short term

But Vice-Premier Liu He says it offers China a chance to push ahead with necessary reforms

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Vice-Premier Liu He (left) said the phase one deal he signed with US President Donald Trump will allow China to carry out domestic economic reform. Photo: DPA

Published: 7:44pm, 16 Jan 2020Updated: 7:46pm, 16 Jan 2020

China’s phase one trade deal with the United States could generate short-term pain for the economy, but help it in the long run by creating a stable trading environment and introducing competition to its increasingly rigid state-led development model, officials and analysts said.

The long-awaited trade deal, which requires that China significantly boost purchases of US products and improve intellectual property protection, put the brakes on an 18-month trade war that has disrupted global supply chains and shaken markets.

Vice-Premier Liu He said the phase one deal, which included an agreement to purchase an additional US$200 billion American goods and services, offered China a chance to push ahead with “reform and development needs”.

“The deal has created favourable conditions for all market participants to engage in fair competition and break monopolies,” Liu was quoted as saying at the White House by Chinese magazine Caixin.

The deal has created favourable conditions for all market participants to engage in fair competition and break monopolies

Liu He

Liu, President Xi Jinping’s most trusted economic aide, said pledges to improve intellectual property rights protection, for example, were not just concessions to US demands, but necessary steps to encourage technology innovation in China.