It’s good to talk, but China, US remain locked in a strategic struggle, observers say

  • Telephone conversation between Xi Jinping and Donald Trump was ‘extremely positive’, foreign ministry says
  • Plan for dinner will create a better atmosphere for dialogue on trade, but a single meeting cannot resolve all the troubles China, US are facing, observers say
PUBLISHED : Friday, 02 November, 2018, 10:31pm
UPDATED : Saturday, 03 November, 2018, 2:54am

A telephone call between Presidents Xi Jinping and Donald Trump might have increased the possibility of a truce in the trade war, but the strategic dispute between Beijing and Washington is a long way from being resolved, according to a Chinese government adviser and other observers.

In their talks on Thursday night, Xi told Trump that the two sides had to come up with a proposal to settle the trade war, while Trump said the two men had a “long and very good conversation” on several issues, including trade and North Korea. They also agreed to meet on the sidelines of the Group of 20 summit meeting in Buenos Aires, Argentina, at the end of the month.

Donald Trump plans ‘meeting plus dinner’ with Xi Jinping after G20 summit in Argentina

The direct talks were the first between the two leaders to have been reported since May.

Trump also offered to host a “Western-style” dinner for Xi on December 1, after the G20 leaders’ meeting, an invitation that Beijing had tentatively accepted, people familiar with the matter told the South China Morning Post.

The meal would give the two leaders more time to talk and create an atmosphere more conducive to negotiations, the sources said. Bloomberg cited unnamed sources as saying that Trump had also asked his team to begin drafting terms for an agreement on trade with China, although economic adviser Larry Kudlow later denied that claim.

Chinese foreign ministry spokesman Lu Kang was upbeat about the phone call, saying it had been “extremely positive”.

“The two leaders agreed to strengthen economic exchanges,” he said, though he gave no indication of whether they had made any progress on settling the trade dispute.

Despite the positive message from Beijing, analysts were more pragmatic about what could be achieved by the leaders’ meeting given the two sides’ huge differences on strategic and ideological issues, as well as the growing hostility towards China in the United States.

China signals big shift in economic course due to US trade war headwinds

“The best possible outcome of the Xi-Trump meeting would be a suspension of imposing tariffs on each other, but the US would continue its all-out blockade on China’s technology development,” said Shi Yinhong, a professor on international relations at Renmin University and an adviser to Beijing.

“Bilateral tensions over strategic issues such as Taiwan, the South China Sea and the arms race will continue and may be at risk of escalating,” he said. “I am very cautious regarding the outcome of their meeting.”

Shi also said he thought China had only a limited role to play on the North Korea issue. Beijing would be unwilling to risk jeopardising its improving relations with Pyongyang and as a result had “very few tools to work with”, he said.

Meanwhile, Jake Parker, vice-president for China operations at the US-China Business Council, said that the presidents’ telephone call created an opportunity for the two countries to discuss their many disputes – from the trade imbalance to China’s forced technology transfers – but none of them would be easy to resolve.

“They are maybe too complex to be solved in just one meeting,” he said. “But the leadership summit could lay the groundwork for how to proceed.”

Despite the promise offered by the Trump-Xi telephone call, the level of tension between the two nations was demonstrated just hours after it ended when the US filed charges against Chinese technology firm Fujian Jinhua Integrated Circuit Co and its Taiwanese partner.

Washington accuses the two companies of stealing trade secrets from US memory chip maker Micron Technology, but China’s commerce ministry opposes the charges and has demanded Washington “remedy the mistake”.

China’s top leaders prepare for worse as economy takes hits from US trade war

Lu Xiang, a specialist on US affairs at the Chinese Academy of Social Sciences, said that Beijing had been preparing for a “worse than the worst” confrontation with the US, and added that any further escalation would be fatal to an already highly volatile US stock market.

It was “hard to know what Trump wants most from China” because of a fragmented administration that had yet to strike a balance among the priorities of various vested interest groups, he said.

“Given his [Trump’s] poor track record on policy credibility in the past year, we’d better not hold out too much hope,” Lu said.

James Zimmerman, a partner with the Beijing office of law firm Perkins Coie and former chairman of the American Chamber of Commerce in China, questioned Trump’s sincerity with regards to a possible trade deal.

“Trump’s so-called directive to his staff to draft an agreement is either a hollow gesture or an ostentatious move, or both,” he said.

“He either plans to shove it down Xi Jinping’s throat or is simply claiming a deal is forthcoming as a midterm election political stunt.”

Trade war tightens credit for China’s small businesses, regulator warns

Zimmerman also said that the announcement of the indictment against the Chinese tech company, which “was more of a political stunt than anything”, would not bring the two countries any closer to resolving “a host of contentious issues”.

“The Trump administration should not miscalculate China’s tolerance for what they perceive as bullying tactics,” he said. “The result is that the trust deficit widens.”

Still, the telephone call did appear to improve the market sentiment, with stocks and yuan/dollar rates rebounding overnight and on Friday morning. It also fuelled speculation that Chinese Vice-Premier Liu He’s trip to the US, which had originally been scheduled for September but was cancelled due to the escalation of the trade dispute, might be back in the cards.

Washington and Beijing have been locked in a trade war since July, slapping tariffs of up to 25 per cent on imports of each other’s products. Trump has also threatened to extend the tariffs to all Chinese imports if the meeting in Argentina fails to produce “a good deal”.

Tensions have increased in recent months with US officials accusing China of meddling in the US midterm elections, conducting cyber espionage and military aggression.

Asian markets soar with the ‘meeting plus dinner’ between Trump and Xi

“We will see what happens at the G20 and with Liu’s talks, but I am not optimistic that anything momentous will come out of this,” Zimmerman said.

In their May telephone conversation, Xi and Trump set out to resolve their trade disputes, but the talks ended in stalemate and the first tariffs followed just weeks later.