Trade talks to resume in October
September 10, 2019 Category Foreign trade, Weekly
Negotiators for China and the U.S. agreed to hold face-to-face talks in early October in Washington, following a phone conversation on September 4, their first since August 13. China’s Ministry of Commerce (MOFCOM) said both sides had agreed to make concrete efforts to create positive conditions for continued dialogue in the 13th round of talks. The two sides will meet in Washington in early October. During the phone call, China offered to buy a modest amount of U.S. agricultural goods, contingent on the U.S. easing export restrictions and delaying implementation on October 1 of tariffs on USD250 billion in goods.
A separate announcement by the Office of the U.S. Trade Representative (USTR) said a deputy-level meeting would be held in mid-September to “lay the groundwork for meaningful progress”. Chinese researchers were playing down hopes for a significant breakthrough in the short term, as it was unclear to what degree the U.S. trade team could speak for President Trump’s intentions.
But China also filed a complaint with the World Trade Organization (WTO) against the United States over tariffs Washington has imposed on part of USD300 billion worth of Chinese goods. The latest tariffs actions violated the consensus reached by the Presidents of China and the U.S. in a meeting in Osaka, MOFCOM said in the statement. China has strictly followed the WTO’s rules on investment, said Qi Tong, Professor with Wuhan University’s Institute of International Law. The Foreign Investment Law, which will take effect on January 1, 2020, will further improve China’s legal environment for foreign investment to a globally advanced level, Qi added. U.S. Section 301 measures against China are based on its domestic law, said Xiao Yongping, Dean of the institution, adding they violated both WTO rules and international law in general, the Shanghai Daily reports.
China will have go a step further in easing monetary policy and increasing fiscal spending to help support domestic growth given that Beijing sees no near-term resolution to its trade war with the United States, the Financial Stability and Development Commission, headed by Vice Premier Liu He announced, but it added that it would not go for all-out stimulus measures. China will “enhance countercyclical measures in macro-economic policies to ensure sufficient liquidity and reasonable growth in credit,” according to a Commission statement. The wording marked a subtle change from previous policy statements that called only for “appropriate” fine-tuning of monetary policy. The People’s Bank of China (PBOC) cut the reserve requirement ratio (RRR) for all commercial banks by 0.50 percentage point effective from September 16, freeing up long-term funding of around CNY900 billion. It also cut reserve requirements for certain urban banks by another full percentage point, with half effective on October 15 and the rest a month later.
Despite efforts to boost government infrastructure investment this year, China’s fixed asset investment (FAI) growth slowed to 5.7% in the first seven months of 2019, near an all-time low. There is still room to loosen monetary policy, including a targeted cut of the amount of financial reserves that banks are required to keep at the central bank, as well as a further reduction in interest rates, the South China Morning Post reports.
Chinese state media and government advisers have said Beijing is in no rush for a trade deal, instead warning that any concessions made to the United States would be a grave error. A commentary in the People’s Daily said Beijing needed to stand up to the U.S. and not give in to pressure. “Facing extreme pressure and bullying behavior, being weak and taking a step back will not get sympathy. We can only protect the core interest of the nation and the people by upholding rational and favorable struggle at the right pace,” according to the commentary.
International semiconductor companies urged China and the U.S. to resume trade negotiations so that the semiconductor industry could further develop. “This is now a global industry, with everyone dependent on everyone else with these amazing, sophisticated supply chains,” said John Neuffer, President and Chief Executive of the Semiconductor Industry Association (SIA), at the IC China conference in Shanghai. “It’s very clear that no one country – no one company – can do it all,” he added. His view echoed those of other senior industry executives at the conference amid concerns that a prolonged U.S.-China trade dispute could seriously disrupt the sector’s complex, geographically widespread and intertwined value chain and ecosystem that has evolved over decades. Neuffer has called on governments around the world to resist decoupling supply chains and disentangling economic cooperation.
The 2019 list of the top 500 Chinese enterprises, jointly published by the China Enterprise Confederation and China Enterprise Directors Association for the 18th consecutive year, showed the combined net profit of the firms went up 10.3% year-on-year in 2018. China Petrochemical Corp, China National Petroleum Corp and the State Grid Corp of China topped the list. The proportion of R&D expenditure to sales revenue of the top 500 firms rose 0.04 percentage points to 1.6%, while the number of patents held by them rose 16%. The number of firms with revenue surpassing CNY100 billion reached 194, up from 172 last year.
As the repercussions of the trade war are being felt, the Chinese government called for enhanced efforts and targeted measures to keep the country’s major economic indicators within an appropriate range. Further steps will be taken to ensure the stability of employment, the financial sector, foreign trade, foreign investment, domestic investment and expectations. Facing an increasingly complicated and challenging external environment, China is coming under rising downward economic pressure, a government statement said.
China’s exports dropped 1% in August, despite analysts forecasting further growth after 3.3% rise in July, while imports fell 5.6% in August in dollar terms, leaving a trade surplus of USD34.84 billion, according to China’s General Administration of Customs. In yuan terms, exports of goods rose 2.6% year-on-year in August, while imports fell 2.6%, and the trade surplus stood at CNY239.6 billion last month, expanding 41.8% from a year earlier. China’s exports to the United States in August totaled USD37.3 billion and imports USD10.35 billion, for a trade surplus of USD26.95 billion.
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