US, China Leaders Prepare to Talk Trade at Beijing Meet

2 November 2017

Trade is expected to be high on the agenda when US President Donald Trump and Chinese President Xi Jinping meet next week during the American leader’s high-profile trip to Asia, with officials from both sides confirming that economic issues will be raised in Beijing.

Trump will be meeting with his Chinese counterpart during a larger regional visit that also includes stops in Japan, the Philippines, South Korea, and Vietnam, along with a planned speech to business leaders on his Asia-Pacific engagement strategy. How much progress on agreed trade deliverables might emerge from the 8 November meeting between Trump and Xi is not yet clear, with White House officials downplaying the possibility.

At a previous meeting this year, the two leaders pledged to boost trade cooperation and reach agreed outcomes within a 100-day window, along with calling for further progress on issues such as addressing the trade deficit over the longer term. (See Bridges Weekly, 13 April 2017 and 27 July 2017)

The past few months have therefore seen the two trading giants discuss avenues for future cooperation in different forums, even as bilateral tensions have emerged over various topics. For example, US authorities are currently conducting a Section 301 investigation on alleged forced technology transfers and intellectual property rights infringements, which was launched just a few months ago. (See Bridges Weekly, 21 September 2017)

Meanwhile, just last week US Commerce Department officials published a memorandum maintaining China’s “non-market economy” status in anti-dumping probes – an issue that has become the subject of a WTO dispute and related debates within trade circles. US Trade Representative Robert Lighthizer previously told domestic lawmakers that a US loss in the WTO dispute would be “cataclysmic” for the global trade club, given the importance of the issue to Washington.

In a separate development, the Commerce Department issued on 27 October an affirmative preliminary determination regarding imported aluminium foil from China, deeming that Chinese exporters sold products at prices below normal value on the US market. The agency found dumping margins ranging between 96.81 percent to 162.24 percent, though the investigation must still undergo several more steps before completion.

China prepares for next chapter following Party Congress

The leaders’ meeting comes just weeks after a landmark event in Chinese politics – specifically, the 19th National Congress of the Communist Party of China, which took place earlier this month and brought in the spotlight the future objectives of the country’s leadership in the short and medium term.

The Party Congress, which occurs every five years, included selections of the General Secretary, in other words the Chinese President as head of the party, along with the Central Committee, Politburo, and the decision-making body known as the Politburo Standing Committee.

Notably, during the meeting Xi became the third Chinese leader to be recognised in an amendment to the party’s constitution, along with Mao Zedong and Deng Xiaoping. The Chinese leader, in outlining his “school of thought” on Chinese socialism going forward, called for “a new option for other countries and nations who want to speed up their development while preserving their independence.”

Given the change of leadership in the US this past January, the results of the Trump-Xi meeting and the recent elevation of the latter in the Chinese political system is expected to fuel continued debate over the two country’s respective approaches to international economic cooperation and geopolitics in the coming years.

Xi’s plan includes various goals for China’s development, with time-bound milestones through the middle of the century to “modernise” the economic giant. Going forward, Xi also focused on the role Beijing aims to play on the regional and global stage and stressed his country’s commitment to openness.

On trade, the Chinese leader suggested the possibility of establishing free trade port zones, along with speeding up short-term reforms to state-owned enterprises (SOEs), while pushing for a greater market role in interest and exchange rates. Other pledges included ramping up manufacturing and getting more involved in newer technologies, such as artificial intelligence, along with drawing greater foreign investment flows into China through additional investment protections and better market access.

“We will implement the system of pre-establishment of national treatment plus a negative list across the board,” he said with regards to market access, explaining that it would “sort through and do away with regulations and practices that impede the development of a unified market and fair competition, support the growth of private businesses, and stimulate the vitality of various market entities.”

International cooperation in areas ranging from trade to production overcapacity also featured in Xi’s remarks, as well as the importance of a coordinated regional development strategy, along with a rural revitalisation strategy domestically. China has already announced plans for hefty investments in regional infrastructure, with more planned together with other interested actors through the Belt and Road Initiative and the Asian Infrastructure Investment Bank. (See Bridges Weekly, 18 May 2017)

Among the other significant leadership developments was the reappointment of Liu He, a longstanding economic adviser, to the Central Committee, which analysts say suggests planned continuity in economic policy, as well as the fact that no one on the Standing Committee is under 60 years of age, opening questions over who could succeed Xi in five years’ time. Premier Li Keqiang, the party’s second topofficial, also retained his spot.

ICTSD reporting; “Trump trade tsar warns against China ‘market economy’ status,” FINANCIAL TIMES, 21 June 2017; “China Signals Steady Economic Policy as Liu Keeps Party Role,” BLOOMBERG, 24 October 2017; “Economic Watch: China SOE reform set to accelerate,” XINHUA, 26 October 2017; “Xi says China to introduce negative list for market access nationwide,” XINHUA, 18 October 2017; “'A huge deal' for China as the era of Xi Jinping Thought begins,” THE GUARDIAN, 19 October 2017; “CPC Constitution enshrines Xi's thought as part of action guide,” XINHUA, 24 October 2017; “Xi Jinping Lauds 'New Era' for Socialism in Modernizing China,” CAIXIN, 18 October 2017; “US sees China in ‘retrenchment’ on move towards market economy – US official,” REUTERS, 31 October 2017.

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