Why US and China trade talks may offer hope for agricultural, medical and tech firms

Presence of senior Chinese officials overseeing relevant sectors could offer a clue as to potential areas of progress

PUBLISHED : Wednesday, 16 May, 2018, 10:10pm
UPDATED : Thursday, 17 May, 2018, 12:25am

China and the US could be inching towards deals in specific sectors such as agriculture, medicine and technology in the latest round of trade talks between the two sides in Washington.

Observers highlighted the potential areas for compromise after vice-premier Liu He, the top economic aide for Chinese President Xi Jinping, arrived in the US capital on Tuesday for talks aimed at averting a trade war that will continue until Saturday. 

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Liu was accompanied by top Chinese officials such as central bank governor Yi Gang, deputy minister of industry and information technology Luo Wen and deputy agricultural minister Han Jun, according to the state news agency Xinhua – a sign that their respective areas of responsibility were likely to form key parts of the agenda. Neither Luo nor Han took part in an earlier round of talks with US officials in Beijing that ended with no agreement. 

Although fundamental disagreements between both sides remain, China is expected to have brought “gifts” to the US this week – which may include promises to reduce the trade deficit, reduce tariffs, and expand market access, according to Du Lan from the China Institute of International Studies.

“The US delegation came [to Beijing in May] with a very high asking price, but the demands from both sides should be lower this time, as reflected by Trump’s signals about resolving the ZTE issue,” she said.

Trump defends ZTE support as part of ‘larger trade deal’ with China

Her comments referred to the US President’s surprise tweet on Monday, in which he said he had ordered the Commerce Department to get ZTE back on its feet, after the US banned companies from working with the Chinese telecoms giant for violating sanctions on Iran. 

However, subsequent tweets by the US President highlighted some of the potential sticking points as he insisted that “nothing has happened with ZTE except as it pertains to the larger trade deal”. 

He also repeated his claim that US was “losing hundreds of billions of dollars a year to China”, adding that US has “little to give because we have given so much over the years. China has much to give!”.

If Trump does follow through on his initial pledge to help ZTE, Beijing may make concessions on agriculture, where the bulk of Chinese tariffs on US goods will fall, Nick Marro, an analyst with the Economist Intelligence Unit, said.

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China has threatened to impose a 25 per cent tariffs on a range of American products, including soybeans, which will hit the agricultural states where support for Trump is particularly strong. 

“There is obviously an awareness on the Chinese side that agriculture is a key kind of flashpoint, and it’s something that Trump obviously cares about,” Julian Evans-Pritchard, senior China economist at Capital Economics in Singapore, said. 

“The Chinese might offer something in those areas, I’d imagine, to compensate for the fact that they’re not willing to offer the big changes on industrial policy that people like the US Trade Representative [Robert Lighthizer] are really pushing for.”

The presence of top economic officials in the Chinese trade delegation, such as Yi, the head of the People’s Bank of China, could also indicate a willingness to open up the financial sector.

These may include a specific timeline for liberalising foreign ownership rules in the car industry, something Xi promised last month, and approving bank applications to increase their stakes in securities.

In parallel with the talks in Washington, vice-president Wang Qishan also sat down with key American business leaders, including Thomas Donohue, the head US Chamber of Commerce. 

Others there included representatives from major US technology, medical and financial companies, including leading names such as Cisco and Qualcomm.

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The meeting could indicate a willingness from the Chinese side to open its technology markets to foreign firms, while maintaining Beijing’s red line of keeping Xi’s signature “Made in China 2025” initiative for to develop the domestic hi-tech sector.

“There at least seems to be willingness to give face time to the US, show that we’re listening to your concerns about market access in the information technology industry,” Marro said.

One of the attendees at the meeting with Wang was Daniel Rosen, founder of the New York-based consulting group Rhodium Group, who argued that Liu may address structural issues in the Chinese economy, such as the slow progress in reforming state enterprises and wasteful financing, during the Washington talks.

“Liu He was responsible for broad and strong criticisms of the structural problems in China’s economy in recent years,” Rosen said, adding that it was likely he was seriously engaged with his US counterparts on issues such as these. 

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In addition to meeting Wang, US business representatives met other senior Chinese figures at a forum in Beijing. 

Delegates included representatives from the US medical industry, such as the chief executive for nutrition company Herbalife International and pharmaceutical company Merck & Co, according to a report by China Business News.

Marro said US pharmaceutical companies were likely to be lobbying the Chinese government to introduce shorter timelines for granting approval to their products, adding that the businesses could be part of the US business coalition Beijing hopes will offer a “moderating voice” to influence Washington.

Additional reporting by Catherine Wong