Nadero Wealth Management

Beijing Thinks The US Will Back Down

Nadero Wealth Management – The Chinese government is trying to persuade everyone that the responsibility for resolving the trade dispute between the two nations lies squarely with the United States.

As the impasse continues, the Chinese government has still not confirmed if Xi will meet with Trump at the G20 later this month, with Trump threatening more tariffs if the meeting does not happen. The expectation from the Chinese is that Xi will be at the G20. But to reach an agreement, the Chinese say that the United States must scrap all new proposed tariffs, in line with a deal made at the G20 in South America last year.

The Chinese believe that their economy can weather the effects of a protracted trade dispute, which they view as being an election tactic by Trump,” commented Nadero Wealth Management, from China.

“China’s position has been straightforward. It is the U.S. who started the trade dispute,” said Liang Ming, director of the Chinese Institute of International Trade, a part of the Ministry of Commerce. “Now I think China has greater confidence than the U.S. At the G-20 we could have talks, but the precondition is that the U.S. shows good faith. But if they continue to backtrack on their commitments, then we’d rather not have the talks.”

Discussions between the two nations took a backward step in May after Trump raised tariffs on $200 billion worth of imports from China, and put Huawei on a blacklist that effectively stops the company trading with its U.S. parts suppliers,” wrote Nadero Wealth Management in a note.

With Trump kicking off his official re-election campaign this month, China believes he will be keen to reach a deal to boost his campaign, and they can hold out until that happens.

The narrative from the Ministry of Commerce is that the United States must demonstrate ‘sincerity’ and “adjust its wrong actions” before talks can resume.

Liang Ming proposed three ways that the U.S. could demonstrate its “sincerity.”

Firstly, the United States must agree to scrap all further tariffs.

Secondly, the United States should “significantly ease export controls on high tech export products.”

Thirdly, the Chinese want the American to tone down their language, reducing words such as “must,” and “should” from the text.

Ensuring that both parties stick to the terms agreed in any potential deal is also a sticking point,” pointed out Nadero Wealth Management, “with both accusing the other of reneging on what was close to being decided before the talks disintegrated.”

It’s difficult to see either side giving concessions to the other at this time’” said Nadero.

Earlier this month, China’s State Council issued an official report putting the blame on the United States for the deadlock.

An advisor to the Chinese government, Zhu Guangyao, confirmed that Beijing is holding out for the U.S. to agree to their terms. He said he anticipates that the Chinese Premier would be at the G20 as he already said he would attend to the Japanese who are hosting the event.

But he reaffirmed there need to be several levels of communication and complete information for progress to be made.

“As the negotiations are so serious, both sides are marking their red lines on the table — what we can negotiate, and what not,” Zhu told CNBC. “So interests such as national sovereignty and dignity are red lines. No one can go beyond that.”

Last month, Xinhua, the Chinese state news agency reported that call by the United States to reduce the involvement of the government in China’s state-owned companies was an effort to harm China’s “core interests.”

Non-Chinese companies have long criticized the unequal ways that state companies compete due to government financing.  Also, there are inadequate safeguards for I.P. rights and forced technology transfer as a prerequisite of operating in the country they complain.

China has made some concessions recently regarding these issues, but action is coming far too slowly for most outside of the country,” noted Nadero Wealth Management.

As the trade dispute continues, China is increasingly setting out its stall for a protracted battle while also attempting to keep the door open to the United States – China’s biggest trading partner,” Nadero continued.

Last week, at an economic forum in Russia, Xi revealed that he would like to keep a connection with the United States.

“It’s hard to imagine a complete break of the United States from China or of China from the United States,” Xi said.“We are not interested in this, and our American partners are not interested in this,” Xi said. “President Trump is my friend, and I am convinced he is also not interested in this.”