U.S. President Donald Trump and Chinese Vice Premier Liu He signed the 86-page phase one trade agreement at the White House in Washington on January 15. Trump characterized the agreement as “a momentous step – one that has never been taken before with China”. “This is the biggest deal anybody has ever seen.” but China was less enthusiastic. “The first phase of the agreement certainly leaves both sides with regret and unhappiness, which is exactly the response that a fair agreement will elicit. Arguing who lost and who won is superficial,” the Global Times commented.

Leading U.S. officials and about 200 representatives of business, government and diplomatic circles attended the signing ceremony, including 96-year-old former Secretary of State Henry Kissinger. Although U.S. tariffs remain on USD250 billion worth of Chinese goods, the U.S. has called off new tariffs on USD156 billion worth in Chinese goods in December and slashed by half a 15% tariff on USD120 billion worth of Chinese products. The U.S. also suggested further tariff relief if a phase two deal can be reached. It was Vice Premier Liu He’s seventh trip to the U.S. since the outbreak of the trade war. EU Trade Commissioner Phil Hogan dismissed the new deal as negative for competitiveness and jobs, underscoring the cautious reception the “phase one” pact has got from European officials and businesses. “The devil is in the detail,” Hogan told a conference in London, adding that so far, the details were “a bit sketchy”.

The average U.S. tariff on Chinese products will be 19% after the deal is implemented, compared to 3% before the trade war, research by the Peterson Institute for International Economics showed. An enforcement mechanism means the U.S. can unilaterally resurrect the tariffs should it deem that China has not upheld its side of the bargain.

The deal at least put the brakes on the 18-month trade war that has disrupted global supply chains and shaken markets. For Vice Premier Liu, the most significant value of the deal was that China and U.S. could manage their differences through dialogue, the South China Morning Post reports. The deal “has fully proved that, in spite of many differences, we can work together. This kind of cooperation is not only good for China and the U.S. but also the whole world,” he said.

The partial trade truce has also dashed talk of decoupling between the world’s two largest economies, Liu added. “I think it is very unrealistic. A few people without economic backgrounds are talking about decoupling between China and the U.S., but in reality it is impossible to take place – a global value chain has been formed with ‘part of me in you and part of you in me’,” he was quoted as saying. He said that domestically, the deal would promote fair play and curb unfair competition. “If we look back in 10 years, we may find that it had made a very positive push for the technological advancement of China,” Liu said.

China and the U.S. also differ on the next stage: phase two negotiations. U.S. President Donald Trump has announced that he would travel to Beijing in the not too distant future to launch the phase two talks, but Chinese Vice Premier Liu has told Chinese media it would be foolish to pursue a phase two trade deal with the United States when the ink on phase one is not yet dry. If China and the U.S. hurry ahead with phase two talks after only just signing a phase one deal, the two countries would be acting like “a bear losing itself in a corn field”, said Liu, referring to a Chinese proverb. “We might get nothing if we rush to a second job before the first one is properly done. I don’t think it is a wise choice to impatiently launch new stages of talks,” the Vice Premier told Chinese media in Washington after signing the partial trade agreement with Trump.

As part of the deal, China agreed to purchase at least USD200 billion in additional U.S. goods and services over two years, including USD32 billion of agricultural goods. This will require U.S. exports to China to grow 40% in 2020 and an additional 40% in 2021 – “implausibly large increases”, said David Dollar, Senior Fellow covering China at the Brookings Institution. The trade war has cost U.S. businesses USD46 billion since February 2018, Reuters has reported. In China, the phase one deal could boost GDP growth to 6% in 2020 as opposed to an earlier forecast of 5.8%, according to the IMF. The Chinese government said that increased imports from the U.S. would not reduce China’s import volume from other countries.

Ahead of the signing of the trade deal, the U.S. government decided to remove its designation of China as a currency manipulator. In its latest foreign exchange report, the U.S. Treasury Department reversed its earlier decision to label China as a currency manipulator, saying that terms in the phase one trade agreement addresses its concerns over China’s practices. In August 2019, when trade tensions between China and the U.S. were running high, the U.S. moved to brand China a currency manipulator without any concrete evidence, even by its own standards. Though the move was largely symbolic, it drew a fierce response from Chinese officials, who labeled the decision as politically motivated rather than fact-based.

Still, much work needs to be done. “Even after the phase one deal is signed, the most important part is not over. Both sides must implement the agreement,” Song Guoyou, Director of Fudan University’s Center for Economic Diplomacy in Shanghai, told the Global Times. China must be prepared for “potential changes to the deal in the implementation phase,” Song added. He pointed out that the U.S. has shown great unreliability previously and “we cannot rule out that potential new differences will emerge during the implementation process.” The two countries remain far apart on issues including China’s industrial policies and reforms of state-owned companies.

China’s Ministry of Finance and the Office of the U.S. Trade Representative (USTR) meanwhile released the full text of the phase one trade agreement. The English text (PDF) is available here.

As China and the U.S. signed a phase one trade deal in an effort to put the brakes on the trade war, the controversy over alleged security risks of using Huawei’s equipment in 5G networks continued unabated. UK officials said that information presented by a U.S. delegation contained nothing its intelligence agencies had not already foreseen. As it ponders a decision on whether to allow UK telecom companies to buy Huawei’s equipment, the official position of the UK authorities is that that the security risk the Chinese company’s technology presents to British citizens is manageable. While UK Prime Minister Boris Johnson said that he would not put UK security at risk in upgrading the country’s 5G network, he also said that critics “must tell us what’s the alternative” to not using Huawei equipment. Johnson is due to make a final decision on whether to allow the tech firm to supply “non-core” parts of the UK telecoms system within weeks. In his first interview of the new year with BBC Breakfast, Johnson said: “The British public deserve to have access to the best possible technology. We want to put in gigabit broadband for everybody. Now if people oppose one brand or another then they have to tell us what’s the alternative,” the Guardian reports.

The U.S. is also trying to create a competitor for Huawei. New legislation introduced in the U.S. Senate aims to create a viable Western alternative to Huawei Technologies and undercut China’s dominance in global 5G networks. One of the biggest problems in Washington’s bid to counter Chinese strength in 5G networks is the lack of global alternatives to Huawei. The U.S. does not now have a viable competitor, while Finland’s Nokia, Sweden’s Ericsson and even South Korea’s Samsung cannot match the complete technological package and attractive financing that Huawei offers. The Senate bill tries to address that gap. If passed, it would spend more than USD1 billion to bolster Western competitiveness, allocate new spectrum and support research and development in the telecommunications industry, the South China Morning Post reports.

“We are at a critical point in history for defining the future of the U.S.-China relationship in the 21st century, and we cannot allow Chinese state-directed telecommunications companies to surpass American competitors,” said Republican Senator Marco Rubio of Florida, a sponsor of the bill. Speaking in Silicon Valley a day earlier, U.S. Secretary of State Mike Pompeo echoed the Senator’s contention that excluding Chinese carriers from 5G systems in the West was essential. “China – specifically the Chinese Communist Party – presents unique challenges, especially to your industry,” Pompeo told the Silicon Valley Leadership Group. “We’re putting our allies and partners on notice about the massive security and privacy risks connected to letting Huawei construct their 5G networks inside of their countries. This isn’t about selling American stuff. It’s not an American commercial effort. It’s a national security effort,” Pompeo added. The six Democratic and Republican Senators who introduced the bill – the Utilising Strategic Allied Telecommunications Act – underscore that moves aimed at challenging China enjoy broad bipartisan support in Washington these days.

Huawei said the bill was misguided. “Huawei has spent billions in 5G research, so it would be unfortunate to see such a waste of U.S. taxpayer’s money to duplicate efforts when there are more cost effective ways to ensure the security of a network,” said Donald J. Morrissey, the company’s U.S. Director of Government Affairs.

Meanwhile the case of Meng Wanzhou, Huawei’s CFO, is winding its way through Canadian courts. The U.S. extradition request hinges on allegations Meng made a fraudulent presentation to HSBC in 2013 over a Huawei subsidiary’s business ties in Iran, but recently revealed documents show the bank had been aware of Huawei’s business relationships in Iran for years earlier. The documents seen by the South China Morning Post show communications between HSBC staff and Huawei employees about the bank accounts of Skycom Tech dated from as early as 2010. Meng made her presentation to the bank in August 2013. The existence of the documents could raise questions about allegations that Meng had misled HSBC about Huawei’s financial connections with Skycom and the latter’s business in Iran, which Washington alleges violated U.S. sanctions. If extradited to and convicted in the U.S., she could face up to 30 years in prison on some of the charges.

The legal battle has become one of the most widely watched cases in the world, also causing a rapid deterioration in the bilateral relationship between Beijing and Ottawa. The British Columbia Supreme Court in Vancouver started hearing the case on January 20. New litigation to force Canada to disclose more documents related to her case could extend it beyond November and possibly into 2021.

The Chinese government downplayed its ‘Made in China 2025’ plan under pressure from the U.S., but is now aiming to rely on domestic production for 75% of its key components by creating 40 national manufacturing innovation centers by 2025, up from 15 at the end of 2019. Domestic production can currently only provide around a third of the key components required by China, but Li Yizhong, a former Minister of Industry and Information Technology, said that the level would be lifted to 40% by 2020 and 75% by 2025.

China reported 17 new cases of infection by a new corona virus in Wuhan on January 19, including three in a severe condition. Those infected range from 30 to 79 years old. The virus has now infected 62 people in Wuhan, city authorities said, with eight in a severe condition, 19 cured and discharged from hospital, and the rest remaining in isolation receiving treatment. Cases were also reported in Beijing, Shanghai and Shenzhen as hundreds of million of Chinese are traveling home to celebrate the Spring Festival on January 25. The Chinese Center for Disease Control and Prevention said the new virus is not SARS, and dismissed claims there has been a cover-up in the reporting of cases outside Wuhan. However, the South China Morning Post report that a doctor in Shanghai, where a suspected case has been reported, says his hospital is preparing staff to deal with a possible pneumonia outbreak. China’s National Health Commission reiterated that the outbreak was “preventable and controllable”, despite the fact that that the source of the virus has yet to be found and its path has yet to be fully mapped.

Three airports in major U.S. hubs will begin screening passengers arriving from Wuhan in response to the outbreak. The screening will start at airports in New York, San Francisco and Los Angeles, the Centers for Disease Control and Prevention announced. Medical personnel will begin taking temperatures and asking about symptoms of passengers who travelled from the city. The illness was first reported in December. Fears of a more widespread outbreak arose last week when two cases were found in Thailand and one in Japan, carrying the same virus. At least a half-dozen countries in Asia, including Thailand and Japan, have started screening incoming airline passengers from central China.

Over the next few weeks, some 5,000 passengers are likely to be screened in the U.S., said Dr Martin Cetron, Director of CDC’s Division of Global Migration and Quarantine. The chance for an epidemic in the US is deemed low, the officer at the CDC said, and the agency’s response is preventive. The CDC is deploying about 100 experts to the three airports. Roughly 60,000 to 65,000 people a year travel from Wuhan to the U.S. New York and San Francisco are the only two cities that have direct flights from Wuhan. Those passengers arriving in Los Angeles are on connecting flights.

More than 40 cases of the newly identified coronavirus have been confirmed in Asia, including two deaths – at least one involving a previous medical condition. Most of the patients are believed to have contracted the virus from exposure to animals to a specific seafood and meat market in Wuhan, but it is no increasingly likely that the disease can also spread from person to person. Chinese authorities said that no illnesses were reported among several hundred health care workers caring for the patients, but a recent case in China was a patient who did not go to the markets, the South China Morning Post reports.

A different coronavirus caused the SARS outbreak in 2003, which originated in China and was spread to other countries by travelers, infecting more than 8,000 people and killing nearly 800.

Imperial College London has published a 4-page report on the outbreak which can be downloaded in PDF here.

The fight for power and global influence between the U.S. and China may have found another focal point: the Arctic region, the South China Morning Post reports. In a 2018 white paper, Beijing – referring to itself as a “near-Arctic state” – announced that it would incorporate the region into its Belt and Road Initiative. China will “play a major role in expanding the network of shipping routes in the Arctic and facilitating the economic and social progress of the coastal states along the routes”, the paper read. Last May: U.S. Secretary of State Mike Pompeo attacked China at a meeting of the Arctic Council. “There are only Arctic states and non-Arctic states. No third category exists, and claiming otherwise entitles China to exactly nothing,” Pompeo said, indicating that he was very suspicious of the idea of China building a “polar Silk Road”.

The rapid decrease in Arctic summer sea ice in recent decades has attracted the interest of many more countries than China to the region because it opens previously frozen sea lanes, allowing faster, shorter and cheaper commercial trade between Asia and Europe. By the middle of this century, shipping between the continents will be 10 to 12 days quicker through the Arctic than through the Suez Canal, according to one study commissioned by the British government. The Northern Sea Route Information Office said around 20 vessels a year had already been plying the northern route in recent years. The Arctic economy has four centers of growth – mineral resources, fisheries, logistics and tourism – according to the study published in 2017, which estimates the region could attract USD100 billion in investment through 2027. “The Arctic is the last frontier for China’s dramatically expanding world vision,” said Zhang Xin, Associate Professor at the School of Advanced International and Area Studies at Shanghai’s East China Normal University. He compared the Arctic frontier sentiment in China to the U.S. quest to put a man on the moon in the 1960s and the European age of exploration in the 15th and 16th centuries.

China has opened a joint research facility with Iceland, with agreements for similar centers signed with Finnish and Russian scientific institutions. Scientific progress is the “most meaningful” of China’s Arctic objectives, according to Liu Xu, Assistant Professor in the School of International Studies at Renmin University in Beijing. The others were sea routes, energy resources, environmental protection, and forging closer ties with Arctic countries, he said. But the U.S. is worried that China might also use the Arctic for military purposes.

Development of an economic corridor in the Arctic “requires extensive construction and reconstruction of the infrastructure along the entire route from Russian Chukotka in the east to Iceland and Greenland in the west”, Gao Tianming, Director at the Arctic Blue Economy Research Center of Harbin Engineering University said. That included deepwater ports with modern logistics and services, and refueling points for vessels on the entire route from China to Europe and back.” In such a situation, future development of the corridor and China’s position in the initiative depend on the willingness of Nordic countries and Russia to welcome China’s contribution,” Gao said, as reported by the South China Morning Post.

China’s foreign trade rose by 3.4% year-on-year to CNY31.54 trillion in 2019, according to China’s General Administration of Customs. Exports hit CNY17.23 trillion, an increase of 5% from a year earlier, while imports edged up by 1.6% to CNY14.31 trillion, making the overall trade surplus soar 25.3% to CNY2.92 trillion. For the first time private firms overtook foreign-funded enterprises as the biggest contributor to China’s foreign trade in 2019. The aggregate imports and exports generated by China’s private firms went up 11.4% year-on-year to CNY13.48 trillion, accounting for 42.7% of the country’s total, up 3.1 percentage points from 2018. Among them, exports totaled CNY8.9 trillion, up 13%, while imports grew 8.4% to CNY4.58 trillion.

Foreign-invested enterprises’ foreign trade amounted to CNY12.57 trillion, to make up 39.9% of the total, while imports and exports of state-owned enterprises (SOEs) added up to CNY5.32 trillion, contributing 16.9%. In December, China saw foreign trade increase by 12.7% year-on-year to CNY3.01 trillion, of which exports rose 9% to CNY1.67 trillion, while imports skyrocketed by 17.7% to CNY1.34 trillion. The three figures hit record highs for a single month. “The big rise in year-over-year export growth in December was mainly due to three factors: a low base in December 2018 as a result of front-loading; the recent de-escalation of the U.S.-China trade war; and a moderate recovery of the global economy,” said Lu Ting, Chief China Economist of Nomura.

The European Union remained China’s largest trading partner at CNY4.86 trillion in 2019, up 8%. Trade with the Association of Southeast Asian Nations (ASEAN) added up to CNY4.43 trillion, an increase of 14.1%, making ASEAN the second-largest trading partner of China last year. Trade with the United States, however, posted a decline, with the value down 10.7% to CNY3.73 trillion over the year. China Customs also highlighted that foreign trade with countries along the Belt and Road had soared to CNY9.27 trillion, an increase of 10.8%, which was 7.4 percentage points faster than the overall growth pace, the Shanghai Daily reports.