On December 1 local time, the Chinese President Xi Jinping and the U.S. President Donald Trump held a two-and-a-half-hour dinner talk at the G20 summit in Buenos Aires. The biggest message from the talks is that the two countries have reached consensus on China-U.S. economic and trade issues.
As can be seen from the Chinese and foreign media reports, China and the U.S. have different ways of reporting the content of the meeting. According to Xinhua News Agency, President Xi and President Trump have reached a consensus on economic and trade issues after the discussion; both China and the U.S. decided to stop trade restrictions such as tariffs escalation, which includes raising existing tariffs on each other's goods, and not introducing new tariffs on other goods. Both parties also agreed to immediately address each other's concerns in the spirit of mutual respect, equality and mutual benefit. On the other hand, China will take further measures to deepen its reform and opening-up to the outside world. In such process, some economic and trade issues of concern to the U.S. will be resolved. At the same time, U.S. will actively resolve economic and trade issues of concern to China. The leaders of China and the U.S. instructed their respective economic and trade teams to step up consultation, strive to reach an agreement that cancel the tariffs imposed since this year, so as to bring bilateral economic and trade relations back to the normal track as soon as possible and achieve mutual winning results.
Different form the Xinhua News Agency's reports, the reports from U.S. media were contained more in details. According to a statement issued by the White House Press Secretary, U.S. President Donald Trump and Chinese President Xi Jinping have just concluded what both have said was a "highly successful meeting" between themselves and their most senior representatives in Buenos Aires, Argentina. More importantly, in an excellent humanitarian gesture, President Xi has agreed to designate Fentanyl as a controlled substance, meaning that people selling Fentanyl to the U.S. will be subjected to China's maximum penalty under the law.
On trade, President Trump has agreed to retain a 10% tariff rate on US$200 billion worth of goods starting January 1, 2019, rather than raise it to 25% tariff rate. China has agreed to start purchasing agricultural products from U.S. farmers immediately. Moreover, China will agree to purchase a not yet agreed upon, but very substantial, amount of agricultural, energy, industrial, and other products from the U.S. to reduce the trade imbalance between the two countries. President Trump and President Xi have agreed to immediately begin negotiations on structural changes regarding forced technology transfer, intellectual property protection, non-tariff barriers, cyber intrusions and cyber theft, services and agriculture. Both parties agree that they will work to have this transaction completed within the next 90 days. If at the end of this period of time, the parties are unable to reach an agreement, the 10% tariffs will be raised to 25%. President Xi also stated that he is open to approving the previously unapproved Qualcomm-NXP deal should it again be presented to him. President Trump stated: "This was an amazing and productive meeting with unlimited possibilities for both the United States and China. It is my great honor to be working with President Xi."
Other than the matter regarding Fentanyl, the outcome of the meeting was as generally expected. What is certain is that the consensus reached at the talks will provide a temporary relief in this tense world. So how does China view the significance of the talks? What will be the impact of the "concessions" made by both parties? Will this meeting be a new beginning for the long-term development of China and the U.S.?
As an independent think tank, Anbound's researchers believe that the meeting is multifaceted:
First, the consensus reached in the China-U.S. talk is only a round in the long-standing trade frictions between China and the U.S. While it does give global markets a temporary relief and the global capital markets as a whole are likely to react positively, this is only a temporary detente in a long-running dispute between China and the United States. Anbound's scholars have stressed in the past that the China-U.S. talks is just a round of trade war, far from ending it. In fact, after the United States adjusts its national security strategy, the strategic competition pattern that began to form in between China and the United States will not be reversed by just one meeting. Therefore, China needs to be prepared for the long-term nature of strategic competition between China and United States, as well as the possible changes.
Second, it does not matter how much "concessions" does China and United States make, what concerns the media and the public about the U.S.-China talks is what kind of concessions did the both parties make, and which party made the greater concession. In fact, such issues are not the focus of China-U.S. relations at all, they are just eye-catching news spots. As we have previously estimated, China needs to take advantage of the "Chinese market" and expand its imports from the United States, especially U.S. agricultural products. This is both a direct and positive response to the needs of the U.S. to balance its trade deficit and to meet the needs of China's own market. Trade between China and the United States is highly complementary, and China itself needs to increase imports. In particular, China's resumption of imports of agricultural products from the United States is actually a "self-rescue" move of the Chinese market.
Third, China must be prepared from the changing attitude of the U.S.. So far, details of the talk have not been available; as always the Chinese reports are lack of details, while the U.S. report contains more details. Based on the statement from the White House Press Secretary and Trump's reaction, the U.S. is relatively satisfied with the preliminary results of the talk, China should have met most of the conditions of the U.S., and the concerns of the U.S. has been included in the scope of negotiation within 90-day halt. If the negotiation fails to produce an agreement, the U.S. retains the right to raise more trade pressures on China. What China should look out is that it should be fully prepared for the changing attitude of Trump administration. Trump has been in office for nearly two years, and his capricious and unconventional behavior in his administration have been obvious to all. Therefore, although the leaders of China and the U.S. have reached consensus, U.S. may still overturn this achievement in the future.
Fourth, the real challenge for China is "structural adjustment" in other sectors. According to the statement from the White House, China will face the "structural change" in areas such as "forced technology transfer, intellectual property protection, non-tariff barriers, network invasion and network theft, open service industry", which means that China will confront the pressures from U.S. in these mentioned areas, meanwhile, the bilateral agreement has to be signed in 90 days halt. China's adjustment in these areas requires some degree of reform. It can be foreseen that the negotiation process will not be easy, and the process could even be arduous.
Fifth, China should rationally handle its domestic divergence and guide the public opinion, and these issues cannot be ignored. Domestic public opinion will certainly have different views on the U.S.-China talk and some concession measures. On the whole, the detente between China and the U.S. is good for China; it is an important part of China's development system. Historically, the short-term strategic concessions are somehow necessary for long-term development and it could be considered as the normal exchange of interests. In fact, in the history of China-Soviet relations in the past, China had experienced even more severe pressures. China-U.S. relations have never been that simple; its political, economic and diplomatic issues are closely intertwined. Domestically, China should avoid excessive politicization, or questioning the U.S.-China talk in a politicized and populist manner. Transparent interpretation and communication should be adopted to guide the domestic public opinion; this could create a stable decision-making support environment, which is conducive to development.
Sixth, the consensus reached at this U.S.-China talk reflects the change of the Chinese policy makers' understanding of China's strategic environment, their strategic judgment based on it, as well as their different approaches to coping with it. Under the framework of "greatest changes in a century for China", it is of vital importance for China to reach consensus with other countries as far as possible, reduce the uncertainty of China's development and continue to strive for a relatively stable space and time for China's transformation and development. As a major power with complex national conditions, China has its own bigger development goals and development tasks that are full of challenges, thus it should put more consideration on the medium and long-term plan.
Final analysis conclusion:
With China and the U.S. reaching a preliminary consensus at the talk, this will temporarily ease the tensions of global trade frictions. However, this is only a round in the long-term competition between the U.S. and China, and the trade war is still far from over. On the one hand, it is appropriate to take a long view of the situation. Based on the overall conditions of history and development, China should strive for the time and space needed for its stable transformation and development. On the other hand, the current relationship between China and the U.S. is turbulent and China needs to be prepared for the capricious attitude of the U.S., or even the possibility of the U.S. reversing the relevant outcome.
