The two days of trade talks between China and the US have concluded with no progress. More importantly there has not been a second round scheduled to the two powers may be waiting until November to meet again. China was prepared for this, as they held back their first team, and sent lesser known officials to the meeting. While the political risks increase and the tensions between the two largest economic powers remains at a high level, China seems helpless to make changes as its economy is built to export, not to import. And the US and Trump administration know that China is far more reliant on the US than the US is on China. Although the US President continues to verbalize the US view of being treated unfairly, the White House said the countries “exchanged views on how to achieve fairness, balance, and reciprocity in the economic relationship, including by addressing structural issues in China.” The two nations called the talks “constructive” and “candid” and insisted that they would keep in touch.
China could deliver on some trade issues by forcing short-term quick delivery purchases of goods. The US has pushed for increased access by US credit card companies. China has made progress as it officially removed limits on foreign holdings in domestic banks and asset management companies. But in the area of industrial policy, the Chinese are less interested in making policy changes. What concerns the Chinese government is a protracted trade war that could, while the economy is weakening in terms of GDP expansion (6.7 percent in 2018, that could drop to 6.2 percent in 2020 and beyond), trigger a deeper recession. In the past, China, being a command economy could easily drive funds into selected parts of the economy to spark growth.
When talks restart, we will be updating on Classisarius….