Now for the hard part – making good on China’s trade war truce promises

  • The 90-day ceasefire gives Beijing time to tackle some of Washington’s biggest concerns but it all rests on just how far China will go
PUBLISHED : Sunday, 02 December, 2018, 9:33pm
UPDATED : Monday, 03 December, 2018, 11:11am

Beijing and Washington may have reached a ceasefire in further tariffs but China is facing a greater challenge to deliver on its promises to change its economic policy, observers said.

Analysts on both sides of the Pacific said the 90-day truce in the trade war between the world’s two biggest economies would buy Beijing time to address some of Washington’s greatest concerns, including intellectual property protections and market access. But much would depend on how far China was willing to go, they said.

After what both sides said was as a “highly successful meeting” between the leaders of the two countries in Buenos Aires on Saturday, US President Donald Trump agreed to hold off on plans to increase in tariffs on US$200 billion worth of Chinese imports from the 10 per cent now to 25 per cent on January 1.

The US-China trade war: from first shots to a truce

In return, China agreed to “immediately begin negotiations on structural changes with respect to forced technology transfer, intellectual property protection, non-tariff barriers, cyber intrusions and cybertheft, services and agriculture”, according to the White House.

But the US could still go ahead with the 25 per cent tariff increase if both sides failed to reach an agreement within the 90 days, it said.

One of the key questions was just “how far China is willing to go and how hard of a line the Trump administration is going to hold”, said Nicholas Consonery, director of research firm Rhodium Group.

“We’ve got a window now to see how serious the Chinese government is about moving forward with structural economic reform,” Consonery said. “And recent history doesn’t lead us to a very optimistic place.”

Xi-Trump dinner: some key takeaways

Wu Xinbo, director of Fudan University’s Centre for American Studies, said he expected China would try to address US concerns by offering more concrete measures to reform its economy and open up its market. But a breakthrough in the 90 days depended on how determined China was in these areas, Wu said.

“The upcoming negotiations will be critical as we need to solve both short-term issues but also formulate a framework that would solve the long-term, structural issues,” he said.

Meanwhile in China there was no mention of the 90-day deadline, with state media focusing instead on Beijing’s “strong” stand in the trade talks.

A commentary posted on the social media account of state news agency Xinhua said Beijing had “stood firm in protecting its core interests” and struck back in a “strong and powerful manner”.

Trump and Xi signal trade war truce, no new tariffs for now

“We can see that the Chinese side has not lost its rational thinking because of bullying, nor did it panic in the face of the unprecedented trade war,” the commentary said.

Wang Yong, director of the Centre for International Political Economy at Peking University, said China would still need to be ready to deal with an increasingly hawkish Trump administration.

“China will still need to prepare for the worst scenario of a ‘decoupling’ of the Chinese and American economies, in particular in the hi-tech sector,” Wang said.

China would need to seize the moment to push for market reform, while at the same time redouble its efforts to develop home-grown technology through innovation, as well as diversify its trade partners, he said.

“It is possible that China will make adjustments on its industrial policies including expanding market access and intellectual property protection, but a fundamental change to its economic structure will be difficult to achieve,” Wang said. “The US will need to adjust its expectations in the next round of talks.”

US sets 90-day deadline for China to agree comprehensive trade deal

William Zarit, chairman of the American Chamber of Commerce in China, said the most challenging area to resolve would be China’s discriminatory economic policies based on state support and protection of the domestic market.

“[These] need to be addressed in order to level the playing field and have a sustainable commercial relationship based on fairness and reciprocal treatment.”

Additional reporting by Robert Delaney