Washington Insider: China Promises Openness in Push for US Deal

There is a lot of activity between the U.S. and China these days as well and important promises are being offered. For example, the New York Times says that top Chinese economic policymakers “promised this weekend that Beijing was ready to open up the country’s economy to more market-based competition and international trade.” Clearly, contacts between the two countries have intensified, the Times says. Senior American officials are scheduled to go to Beijing in the coming days for trade talks, with Chinese officials then headed to Washington the following week in an attempt to wrap up a deal. The Times also says that Chinese officials have “an extra incentive in pledging to loosen their hold over the world’s No. 2 economy – and not just to the Trump administration.” In addition to a trade war that is hitting the country’s exporters, China’s economy has also been hurt by private sector business leaders who have become increasingly cautious in recent months about making new investments. Key developments in China include a slowing economy that creates “a self-reinforcing cycle of skepticism that further private investments will be profitable.” State-owned enterprises have claimed a growing share of the loans available in the economy, a sign that the government may be crowding out the private businesses that could drive future growth. The promises of economic opening may sound familiar. Chinese officials have said for years that they were ready to allow foreign competitors to enter their market on a more equal footing, with slow progress. The tone of remarks at this weekend’s session of the China Development Forum, the country’s premier annual economic policy conference, was nonetheless “striking” and coordinated, the Times says. It lists several examples. Han Zheng, one of the seven men who run the country as members of the Communist Party’s Politburo Standing Committee, said that China wanted to keep increasing imports. “We do not strive for a trade surplus,” he said. Yi Gang, the governor of the central bank, said that China wanted more foreign investment. He said the government was looking for ways to let foreign investors trade derivatives and other financial instruments so as to limit their exposure to risk. Such a move could mean loosening Beijing’s controls over the value of its currency — a politically sensitive subject, and one in which Beijing has a mixed record — and Yi offered no details. Han, Yi and other senior officials took turns extolling a new foreign investment law approved by China’s legislature on March 15, describing it as a carefully thought-out framework for making the country a more appealing place to invest. However, foreign lawyers have described the new law as vague, noting that a third of the provisions are no longer than one sentence each and that domestic companies are still covered by separate legislation. China has made similar offers ever since President Trump visited Beijing in November 2017, as part of an effort by Beijing to woo support from Wall Street during the trade war. At the same time, President Trump’s remark on Friday that the United States would keep its 25% tariff imposed last summer on $50 billion of Chinese goods drew irritation at the forum. For the United States to insist on keeping tariffs could “ruin the whole base of this negotiation,” said Zhu Min, an influential adviser on economic policy issues in Beijing and a former senior central banker in Beijing and former deputy managing director of the International Monetary Fund in Washington. The Trump administration had consistently taken a hard line on retaining the tariffs on the $50 billion a year in goods. The administration has been much more willing to discuss removing a 10 percent tariff imposed last autumn on another $200 billion a year in goods. But corporate lobbyists in Washington have mounted a strenuous campaign for the repeal of all tariffs, including on the $50 billion in goods. Chinese officials have been hoping that campaign would be successful. An extensive interagency effort by civil servants and political appointees produced the $50 billion list of products. They came up with product categories in which they did not want the United States to become more dependent on China. Some products were included for reasons of national security, like components for nuclear reactors and aircraft. At a separate gathering on Friday afternoon that was organized by the Center for China and Globalization, a Beijing research group, former senior American and Chinese officials also expressed worry about whether the broader relationship between China and the United States could be quickly fixed even if a trade deal were reached soon. In spite of widespread signs of interest in reaching a deal between China and the United States, there are still important hurdles to be surmounted, both in China and the US. However, the negotiations increasingly appear to be serious and highly focused and should be watched closely by producers as they proceed, Washington Insider believes.