Resilient economy gives China psychological upper hand in upcoming trade talks with US

By Wen Sheng Source:Global Times Published: 2019/6/30 21:35:29

Resilient economy gives Beijing psychological upper hand in upcoming trade talks with Washington


Illustration: Xia Qing/GT

The truce in a raging China-US trade war, following a meeting in Osaka between the heads of the world's two largest economies on Saturday, is a piece of news eagerly anticipated by many. 

The detente will soothe global market jitters, by reassuring the world that the two superpowers can still regain their coolness, try to work together and avoid a collision course. 

Hopes are high that the two governments, agreeing to come back to the negotiating table, could re-engage with each other, agree on their terms, strike bargains, make due compromises, and reach a wide-ranging deal at the earliest date. 

The year-long tit-for-tat trade tussle, triggered by the Trump administration, has seen tariffs substantively hiked on a gross $360 billion worth of each other's goods. It has proved costly for both countries, and at the same time, many other economies have been hurt in the crossfire because of the twisted and damaged industrial supply chains which the smaller economies rely on. 

There are several factors causing the Trump administration to come back on track and to return to the negotiating table. Dire economic numbers have played a major swaying role. 

But the defining issue pushing the White House toward resuming trade talks with China is Trump's trade policies of imposing tariffs - which incurred retaliatory higher duties on US exports - are broadly unpopular with American voters. 

A vast number of US farmers, backbone supporters of Trump during the last US presidential election in 2016, have seen massive and generous Chinese orders for their produce evaporate. 

And, placing China's telecom behemoth Huawei and other high-tech supercomputing companies on the entity list of the US Department of Commerce, is in practice stifling the US semiconductor firms - because of a bleeding loss of China's market share. 

Everyone knows that China is the world's largest and dominating electronic devices and telecoms equipment maker and shutting the door on the China market is equal to committing financial suicide. 

Pressured by US companies including Intel, Google and Micron, Trump told a press conference in Osaka on Saturday that he will allow American high-tech firms to resume supplying chips and software to Huawei. Hopefully, the US government will also reverse its previous order of embargoing five Chinese supercomputing ventures, and other high-tech Chinese firms. 

As to the coming trade talks, Beijing has obviously gained a psychological upper hand - built on the hard ground that China's economy remained steadfast and continued in the fast lane. The annual growth target of 6.0-6.5 percent in 2019 looks almost certain to be within reach. 

The resilience of China's economy, despite the bruising US tariffs assault, is particularly noticeable in the eyes of the global audience. Beijing has abundant resources to tap into in order to foster brisk consumption among the 400-million-strong middle-class. It could also reach into its deep pockets to finance tens of thousands of new infrastructure projects - led by massive rollouts of express railroads, and high-speed 5G wireless networks. 

One more factor shoring up Beijing's confidence is its set policy of continuous opening-up. Chinese policymakers know fairly well that China's market is huge and growing. If the US government stubbornly blocks US companies from the market, other countries have no reason to follow suit. 

Also, the lingering China-US trade war is already having ramifications for broader bilateral relations. A recent survey by London-based advisory firm Brunswick Group found 56 percent of Chinese respondents indicated that they had avoided buying US products, and 68 percent said their opinion of American companies had become more negative. 

If the poll reflects a trend, the US government's endless escalation of tariffs, its intentional strangling of Huawei and other Chinese high-tech companies, and its discrimination against Chinese students, are producing significant risks to the reputation of the US corporate brand.

As President Trump has kicked off his second bid for the White House, we strongly suggest his team confer with the Chinese team as equal trade partners and with mutual respect, and try to strike a win-win trade deal that benefits both economies. 

Any further escalation of the trade war will squeeze US  commodities supply, fire up prices and force the central bank to raise interest rates, causing an economic slowdown. A recession is the last thing a sitting president wants, including Trump. 

The author is an editor with the Global Times.
Newspaper headline: Resilient economy gives Beijing psychological upper hand in upcoming trade talks with Washington


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