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First Steps Taken in U.S.-China Peace Talks on Trade

CapitalWatch Staff 2018-11-19 14:52 PM
First Steps Taken in U.S.-China Peace Talks on Trade

China said it welcomed plans by the United States to discuss resolving the trade issues between the two countries, after U.S. Treasury Secretary Steven Mnuchin said on Saturday that he may travel to Beijing.

Although the timing is yet to be announced, Mnuchin said at the International Monetary Fund and World Bank spring meetings that he considered traveling to China, in a move that could ease tensions between the world's two largest economies, as international policymakers acknowledged Beijing needs to change its trade practices.

Conflict escalated for weeks after the United States threatened to impose tariffs on $150 billion of Chinese imports to try to force changes in Beijing's industrial policies, which Washington said were aimed at acquiring American intellectual property.

Beijing's response was retaliation. Last week, China imposed a deposit of 179 percent on U.S. soybeans, the biggest U.S. export to the country. The row, which came as the world economy recorded its strongest growth in years, cast a cloud over the semi-annual gathering of the world's finance officials.

IMF Managing Christine Lagarde warned earlier that a U.S.-China trade war threatened to damage confidence, investment, and growth. On Saturday, she said there would be no winners from such a conflict.

"It is important that, as a global community, we keep trade open, we ensure that we work within the multilateral system, that we have to make sure, if there are disputes, these disputes are resolved," she said.

Mnuchin said he met China's new central bank governor, Gang Yi, during the IMF and World Bank meetings, and discussed the potential for China to open its markets to more foreign competition.

"The discussions were really more around the governor's actions at the PBOC (People's Bank of China) and certain actions they've announced in terms of opening some of their markets, which we very much encourage and appreciate."

In a statement to the committee, Yi said China would "vigorously" push forward the reform and opening of its financial sector, significantly relax market access restrictions, create a more attractive investment environment, strengthen the protection of intellectual properties, and actively expand imports.

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On Sunday, China's commerce ministry said it would welcome U.S. officials to discuss trade and economic issues.

"The Chinese side has received information that the U.S. side hopes to come to Beijing to discuss economic and trade issues. China welcomes this," the ministry said in a statement on its website.

Several officials expressed a desire for clarity on what the United States ultimately wants from China, and whether Trump would settle for lower Chinese auto tariffs, a short-term reduction in the U.S.-China trade deficit, or hold out for fundamental changes in industrial policy.

Mnuchin declined to say what he wants from a trade deal with China, adding, "If we have a deal, you'll know what it looks like when we have it."

China Announced Strong Economy and Cooperation

China's economy is strong, and the country has sufficient policy tools to guard against systemic risks, People's Bank of China Governor Gang Yi said on Saturday.

"In 2017, China's non-financial leverage ratio increased slightly, the corporate leverage ratio declined somewhat, and leverage in the financial sector was brought under control," Yi said during annual meetings of the IMF and World Bank meeting in Washington, according to Xinhua.

Beijing has prioritized containing financial risks, after years of debt-fueled growth put China's economy on what the IMF previously called a "dangerous and unsustainable" trend.

In statements carried on the PBOC website, Yi reiterated recently announced measures to open the financial sector, with measures to "be implemented either in the next few months, or by the end of this year."

In response to Mnuchin's statement that he may travel to Beijing to discuss trade tensions, Yi said: "China will continue to support multilateralism and an open and rules-based multilateral trade system, advocating cooperation and dialogue."

China Opposes Protectionism

China opposes all forms of protectionism and will firmly safeguard the world's multilateral trading system, its commerce minister wrote on Monday in the ruling Communist Party's official newspaper.

China will quicken the pace of reform and implement its pledge to opening up banks, securities, and insurance, besides easing foreign ownership limits on autos, ships, and aircraft, the minister, Shan Zhong, wrote in the People's Daily.

The comments reinforce President Jinping Xi's pledge this month to open up the economy to foreign investors and competition, amid growing trade friction with the United States.

China will also step up protection of intellectual property rights and backs a free trade zone in its southern province of Hainan, Zhong added.

(Reuters contributed to this article)