Chindia Alert: You’ll be Living in their World Very Soon
aims to alert you to the threats and opportunities that China and India present. China and India require serious attention; case of ‘hidden dragon and crouching tiger’.
Without this attention, governments, businesses and, indeed, individuals may find themselves at a great disadvantage sooner rather than later.
The POSTs (front webpages) are mainly 'cuttings' from reliable sources, updated continuously.
The PAGEs (see Tabs, above) attempt to make the information more meaningful by putting some structure to the information we have researched and assembled since 2006.
WASHINGTON (Reuters) – U.S. President Donald Trump has little choice but to stick with his Phase 1 China trade deal despite his anger at Beijing over the coronavirus pandemic, new Hong Kong security rules, and dwindling hopes China can meet U.S. goods purchase targets, people familiar with his administration’s deliberations say.
The U.S.-China trade negotiations took more than two years, heaped tariffs on $370 billion of Chinese products, whipsawed financial markets and dimmed global growth prospects well before the coronavirus outbreak crushed them.
In recent weeks, suggestions that Trump may cancel the deal have emanated from the White House almost daily, and businesses, investors, and China trade watchers are hanging on to every word and tweet.
But on Friday, when Trump said the United States would start dismantling trade and travel privileges for Hong Kong, he did not mention the deal. Stock markets heaved a sigh of relief, with the S&P 500 .SPX reversing losses.
Talking tough on China and criticizing the Obama administration’s more measured approach is a key part of Trump’s re-election strategy. Sticking with the pact may mean accepting that China is likely to fall short of purchase commitments for U.S. agricultural goods, manufactured products, energy and services – goals that many said were unrealistic here even before the pandemic.
Canceling the deal, though, would reignite the nearly two-year U.S.-China trade war at a time U.S. unemployment is at its worst since the 1930s Great Depression.
The next U.S. step would likely be reviving previously planned but canceled tariffs on some $165 billion worth of Chinese consumer goods, including Apple (AAPL.O) cellphones and computers, toys and clothing – all ultimately paid by U.S. companies and passed on to consumers. Beijing would retaliate with tariffs on U.S. goods, fueling more market turmoil and delaying recovery.
“He’s stuck with a lemon. He gets an empty agreement if he sticks with it, and he gets more actions that create an economic drag and more volatility if he abandons it,” said one person briefed on the administration’s trade deliberations.
U.S. goods exports here to China in the first quarter were down $4 billion from the trade war-damaged levels a year earlier, according to U.S. Census Bureau data.
The Peterson Institute of International Economics estimates here that during the first quarter, China made only about 40% of the purchases it needed to stay on target for a first-year increase of $77 billion over 2017 levels, implying an extremely steep climb in the second half.
Leaving the deal now would not buy a lasting political bounce for Trump in manufacturing-heavy swing states with five months to go before the presidential election, analysts say.
COMPLEX RELATIONSHIP
Trump blames China for failing to contain the coronavirus and has repeatedly said the deal, including its pledges to boost U.S. exports to China by $200 billion over two years, no longer means as much to him with U.S. coronavirus deaths now over 100,000 and job losses piling up.
Trump said on Friday that China was “absolutely smothering Hong Kong’s freedom,” but refrained from harsh sanctions that could put the trade deal in jeopardy, taking milder steps to revoke the territory’s separate travel and customs benefits from China.
Claire Reade, a former U.S. trade negotiator, said Trump’s “peripheral steps” would not deter Beijing from proceeding with the security law, as it regards Hong Kong as a core national security issue.
“Probably the most significant thing from the trade perspective is that the Phase 1 trade deal is – for now anyway – unaffected,” said Reade, senior counsel with Arnold and Porter law firm in Washington.
White House Economic Adviser Larry Kudlow criticized Beijing last week, but on trade told CNBC: “It’s a complex relationship. The China Phase 1 trade deal does continue to go on for the moment and we may be making progress there.”
U.S. Trade Representative Robert Lighthizer has recently cited here “continuing progress” in the deal, after China welcomed U.S. blueberries, barley, beef and dairy products. He has touted the deal’s dispute settlement mechanism, which provides for regular consultations on compliance with Beijing’s commitments on intellectual property protections, financial services, agriculture standards and purchases.
U.S.-China flashpoints on Hong Kong, Taiwan and other issues did not derail negotiations that resulted in new concessions from China, said Jamieson Greer, who served as Lighthizer’s chief of staff until April.
“Some of these security and human rights challenges have certainly complicated the atmosphere, but the trade agreement can still provide a set of rules governing important aspects of the trade relationship,” said Greer, now an international trade partner at the King and Spalding law firm.
Another person familiar with USTR thinking said the agency “needs to make Phase 1 look good. They want to show that progress is being made. The president looks at the China relationship much more broadly.”
Chinese groups calling for more ‘fighting spirit’ are getting the upper hand on those who favour calm and cooperation, government adviser says
From Hong Kong to Covid-19, trade to the South China Sea, Beijing and Washington are clashing on a growing number of fronts and in an increasingly aggressive way
Efforts to promote dialogue and cooperation between the US and China are failing, observers say. Photo: AFP
Moderates who favour dialogue and cooperation as a way to resolve China’s disputes with the United States are losing ground to hardline groups bent on taking the fight to Washington, according to political insiders and observers.
“There are two camps in China,” said a former state official who now serves as a government adviser and asked not to be named.
“One is stressing the combat spirit, the other is trying to relieve tensions. And the former has the upper hand.”
Relations between China and the US are under intense pressure. After Beijing moved to introduce a national security law for Hong Kong, US President Donald Trump said on Friday that Washington would begin eliminating the special policy exemptions it grants the city, as it no longer considers it autonomous from mainland China.
Beijing’s decision to enact a national security law for Hong Kong was met with anger from the US and other Western countries. Photo: Sam Tsang
The two nations have also clashed over trade, Xinjiang, Taiwan and the South China Sea, with the US passing several acts denouncing Beijing and sanctioning Chinese officials.
China has also experienced turbulence in its relations with other countries, including Australia and members of the European Union, mostly related to the Covid-19 pandemic
and Beijing’s efforts to position itself as a leader in the fight against the disease with its policy of “mask diplomacy”.
After Canberra appealed for an independent investigation to be carried out to determine the origins of the coronavirus, Beijing responded by imposing tariffs on imports of Australian barley, showing it is prepared to do more than just trade insults and accusations with its adversaries.
Pang Zhongying, a professor of international relations at Ocean University of China in Qingdao, said there was a worrying trend in China’s relations with other nations.
“We need political and diplomatic means to resolve the challenges we are facing, but … diplomatic methods have become undiplomatic,” he said.
“There are some who believe that problems can be solved through tough gestures, but this will never work. Without diplomacy, problems become confrontations.”
said during his annual press conference on the sidelines of the National People’s Congress last weekend that China and the United States must work together to prevent a new Cold War.
His words were echoed by Chinese Premier Li Keqiang, who said during a press conference after the closure of the legislative session on Thursday that the many challenges facing the China-US relations could only be resolved through cooperation.
However, the government adviser said there was often quite a chasm between what China’s leaders said and what happened in reality.
“Even though we say we do not want a Cold War, what is happening at the working level seems to be different.” he said. “The implementation of policies is not properly coordinated and often chaotic.”
Tensions between China and the US have been in a poor state since the start of a trade war almost two years ago. After multiple rounds of negotiations, the sides in January signed a phase one deal, but the positivity that created was short-lived.
In February, Beijing expelled three reporters from The Wall Street Journal over an article it deemed racist, while Washington has ramped up its military activity in the South China Sea and Taiwan Strait, and threatened to revoke the visas of Chinese students studying science and technology in the US over concerns they might be engaged in espionage.
Beijing has also used its state media and army of “Wolf Warrior” diplomats to promote its narrative, though many Chinese scholars and foreign policy advisers have said the latter’s nationalistic fervour has done more harm than good and appealed to Beijing to adopt a more conciliatory tone.
However, Hu Xijin, editor-in-chief of Chinese tabloid Global Times, said China had no option but to stare down the US, which regarded the world’s most populous nation as its main rival.
“Being contained by the US is too high a price for China to pay,” he said. “I think the best thing people can do is forget the old days of China-US ties”.
Jin Canrong, a professor of international relations at Renmin University in Beijing, wrote in a recent newspaper article that Beijing’s actions – notably enacting a national security law for Hong Kong – showed it was uncompromising and ready to stand its ground against the US.
Wu Xinbo, dean of international studies at Fudan University in Shanghai, agreed, saying relations between the two countries were likely to worsen in the run-up to the US presidential election in November and that Beijing should be prepared for a fight.
But Adam Ni, director of China Policy Centre, a think tank in Canberra, said the issue was not that the moderate camp had been sidelined, but rather Beijing’s perception of the US had changed.
“Beijing has woken up to the idea that America’s tough policy on China will continue and it is expecting an escalation of the tensions,” he said.
“The centre of gravity in terms of Beijing’s perception of the US has shifted, in the same way the US perception of China has shifted towards a more negative image”.
Beijing was simply responding in kind to the hardline, assertive manner of the US, he said.
WASHINGTON (Reuters) – President Donald Trump said on Wednesday he believes China’s handling of the coronavirus is proof that Beijing “will do anything they can” to make him lose his re-election bid in November.
In an interview with Reuters in the Oval Office, Trump talked tough on China and said he was looking at different options in terms of consequences for Beijing over the virus. “I can do a lot,” he said.
Trump has been heaping blame on China for a global pandemic that has killed at least 60,000 people in the United States according to a Reuters tally, and thrown the U.S. economy into a deep recession, putting in jeopardy his hopes for another four-year term.
The Republican president, often accused of not acting early enough to prepare the United States for the spread of the virus, said he believed China should have been more active in letting the world know about the coronavirus much sooner.
Asked whether he was considering the use of tariffs or even debt write-offs for China, Trump would not offer specifics. “There are many things I can do,” he said. “We’re looking for what happened.”
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“China will do anything they can to have me lose this race,” said Trump. He said he believes Beijing wants his Democratic opponent, Joe Biden, to win the race to ease the pressure Trump has placed on China over trade and other issues.
“They’re constantly using public relations to try to make it like they’re innocent parties,” he said of Chinese officials.
He said the trade deal that he concluded with Chinese President Xi Jinping aimed at reducing chronic U.S. trade deficits with China had been “upset very badly” by the economic fallout from the virus.
A senior Trump administration official, speaking on condition of anonymity, said on Wednesday that an informal “truce” in the war of words that Trump and Xi essentially agreed to in a phone call in late March now appeared to be over.
The two leaders had promised that their governments would do everything possible to cooperate to contain the coronavirus. In recent days, Washington and Beijing have traded increasingly bitter recriminations over the origin of the virus and the response to it.
However, Trump and his top aides, while stepping up their anti-China rhetoric, have stopped short of directly criticizing Xi, who the U.S. president has repeatedly called his “friend.”
Trump also said South Korea has agreed to pay the United States more money for a defense cooperation agreement but would not be drawn out on how much.
“We can make a deal. They want to make a deal,” Trump said. “They’ve agreed to pay a lot of money. They’re paying a lot more money than they did when I got here” in January 2017.
The United States stations roughly 28,500 troops in South Korea, a legacy of the 1950-53 Korean War that ended in an armistice, rather than a peace treaty.
Trump is leading a triage effort to try to keep the U.S. economy afloat through stimulus payments to individuals and companies while nudging state governors to carefully reopen their states as new infections decline.
Trump sounded wistful about the strong economy that he had enjoyed compared with now, when millions of people have lost their jobs and GDP is faltering.
“We were rocking before this happened. We had the greatest economy in history,” he said.
He said he is happy with the way many governors are operating under the strain of the virus but said some need to improve. He would not name names.
Trump’s handling of the virus has come under scrutiny. Forty-three percent of Americans approved of Trump’s handling of the coronavirus, according to the Reuters/Ipsos poll from April 27-28.
But there was some good coronavirus news, as Gilead Sciences Inc said its experimental antiviral drug remdesivir was showing progress in treating virus victims.
Trump has also seeking an accelerated timetable on development of a vaccine.
“I think things are moving along very nicely,” he said.
At the end of the half-hour interview, Trump offered lighthearted remarks about a newly released Navy video purportedly showing an unidentified flying object.
“I just wonder if it’s real,” he said. “That’s a hell of a video.”
AHMEDABAD, India (Reuters) – Donald Trump was cheered by more than 100,000 Indians at the opening of the world’s largest cricket stadium on Monday, promising “an incredible trade deal” and “the most feared military equipment on the planet” at his biggest rally abroad.
Indians wore cardboard Trump masks and “Namaste Trump” hats to welcome the U.S. president at the huge new Motera stadium in Prime Minister Narendra Modi’s own political homeland, the western city of Ahmedabad.
Modi, a nationalist who won re-election last year and has shifted his country firmly to the right with policies that his critics decry as authoritarian and ethnically divisive, touts his relationship with Trump as proof of his own global standing.
U.S. officials have described Trump’s visit as a way to counter China’s rise as a superpower.
“You have done a great honour to our country. We will remember you forever, from this day onwards India will always hold a special place in our hearts,” Trump said to thunderous applause.
India is one of the few big countries in world where Trump’s personal approval rating is above 50%. It has built up ties with the United States in recent years as Washington’s relationship has become strained with India’s foe Pakistan.
“As we continue to build our defence cooperation, the United States looks forward to providing India with some of the best and most feared military equipment on the planet,” Trump said.
Trump said the two countries will sign deals on Tuesday to sell military helicopters worth $3 billion and that the United States must become the premier defence partner of India, which relied on Russian equipment during the Cold War. Reuters reported earlier that India has cleared the purchase of 24 helicopters from Lockheed Martin (LMT.N) worth $2.6 billion.
But in a sign of the underlying political tensions in India, violent protests broke out in Delhi – where Trump is due on Tuesday – over a new citizenship law that critics say discriminates against Muslims and is a further attempt to undermine the secular foundations of India’s democracy.
Vehicles were set on fire in the eastern part of Delhi, metal barricades torn down, and thick smoke billowed through the air as thousands of those who are supporting the new law clashed with those opposing it.
In his speech Trump extolled India’s rise as a stable and prosperous democracy as one of the achievements of the century. “You have done it as a tolerant country. And you have done it as a great, free country,” he said.
Trump planned to raise the issue of religious freedoms in India with Modi, an administration official said last week.
VERY BIG DEALS
In Ahmedabad, Modi embraced Trump as he stepped off Air Force One, along with his wife, Melania.
Folk dancers carrying colourful umbrellas danced alongside the red carpet as drummers, trumpeters and other musicians performed at the airport to welcome Trump and the U.S. delegation. Crowds lined the route along his cavalcade, many taking pictures on their phones.
The two sides did not manage to hammer out a trade deal ahead of the visit, with differences remaining over agriculture, medical devices, digital trade and proposed new tariffs. Trump said he was going to discuss economic ties with Modi, describing him as a tough negotiator.
“We will be making very, very major, among the biggest ever made, trade deals. We are in the early stages of discussion for an incredible trade agreement to reduce barriers of investment between the United States and India,” he said.
“And I am optimistic that working together, the prime minister and I can reach a fantastic deal that’s good and even great for both of our countries – except that he is a very tough negotiator.”
Modi, who has built a personal rapport with Trump, is pulling out the stops for the president although prospects for even a limited trade deal during the visit are seen as slim.
“There is so much that we share, shared values and ideals … shared opportunities and challenges, shared hopes and aspirations,” said Modi at the rally.
Trump, who faces his own re-election campaign this year, has frequently praised Modi for his crowd-pulling power.
Last year, Trump held a “Howdy Modi” rally with Modi in Houston, drawing 50,000 people, mainly Indian Americans. At the time, Trump likened Modi to Elvis Presley as a draw for crowds.
Later, Trump and his entourage which includes daughter Ivanka and son-in-law Jared Kushner flew to Agra to see the Taj Mahal at sunset. Children lined the route cheering and waving flags as his convoy drove past.
Trump and Melania posed for pictures at the Taj, the 17th century monument to love. “It’s incredible,” he told reporters.
MUNICH (Reuters) – U.S. Secretary of State Mike Pompeo defended on Saturday his nation’s global role despite misgivings in Europe, vowing that Western values would prevail over China’s desire for “empire”.
Pompeo was seeking to reassure Europeans troubled by U.S. President Donald Trump’s “America first” rhetoric, ambivalence over the transatlantic NATO military alliance and tariffs on European goods.
“I’m happy to report that the death of the transatlantic alliance is grossly exaggerated. The West is winning, and we’re winning together,” he said in a speech at the Munich Security Conference, listing U.S. steps to protect liberal democracies.
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Pompeo was, in part, responding to German President Frank-Walter Steinmeier, who on Friday accused the United States, Russia and China of stoking global mistrust.
Trump’s decision to pull out of the 2015 Iran nuclear deal, as well as the Paris climate accord, have undermined European priorities, while moves such as recognition of Jerusalem as Israel’s capital have weakened European diplomacy, envoys say.
Pompeo defended the U.S. strategy, saying Europe, Japan and other American allies were united on China, Iran and Russia, despite “tactical differences.”
He reiterated Washington’s opposition to the Nord Stream 2 gas pipeline under construction between Russia and Germany under the Baltic Sea, a project backed by the government of German Chancellor Angela Merkel.
Citing Russia’s 2014 annexation of Crimea, cyber threats in Iran and economic coercion by China, Pompeo said those countries were still “desiring empires” and destabilising the rules-based international system.
U.S. Secretary of Defense Mark Esper, speaking immediately after Pompeo, focused his remarks solely on China, accusing Beijing of a “nefarious strategy” through telecommunications firm Huawei [HWT.UL].
“It is essential that we as an international community wake up to the challenges presented by Chinese manipulation of the long-standing international rules-based order,” Esper said.
He said it was not too late for Britain, which last month said it would allow Huawei a limited role in building its 5G networks, to take “two steps back,” but added he still needed to asses London’s decision.
“We could have a win-win strategy if we just abide by the international rules that have been set in place for decades … that respect human rights, that respect sovereignty,” he said.
Negotiations going ‘as planned’, foreign ministry says after cancellation of Apec summit at which presidents were set to meet to sign ‘phase-one’ agreement
With an election looming and possible impeachment inquiry, Trump in more of a hurry to reach a deal than Xi, observers say
Talks between China and the US are going well, according to the Chinese foreign ministry. Photo: AFP
Presidents Xi Jinping and Donald Trump have “maintained contact”, China’s foreign ministry said on Thursday after authorities in Chile announced the cancellation of the upcoming Apec summit at which the US and Chinese leaders were set to meet and possibly sign a trade deal.
Talks between the two nations were going well, ministry spokesman Geng Shuang told a daily press briefing.
“The negotiations are smooth and things are working out as planned,” he said.
“Regarding the meeting between the two state leaders, they have maintained contact through various means.”
Geng’s comments came after China’s commerce ministry said that top trade negotiators from the two countries would hold a telephone conversation on Friday.
Xi and Trump were due to meet on the sidelines of the Asia-Pacific Economic Cooperation summit in Santiago on November 16-17, but the event was cancelled due to the ongoing protests in the country. The leaders were also expected to sign an interim trade deal based on the ground made at the latest negotiations in Washington on October 11.
According to diplomatic observers, while Beijing wants a truce in the trade dispute it is in less of a hurry than Trump, who is facing the threat of impeachment and trying to prepare for an election campaign.
Shen Dingli, an expert in international relations based in Shanghai, said that China faced less domestic opposition to its handling of the trade talks than Washington.
“Trump is facing a lot of problems on both the diplomatic and domestic fronts,” he said. “[But] I think both sides still need an agreement. It is always better to have an agreement than not.”
US Trade Representative Robert Lighthizer (left) and Chinese Vice-Premier Liu He met in Washington early this month. Photo: AFP
Yuan Zheng, an expert on China-US relations at the Chinese Academy of Social Sciences, said that while the Apec summit had offered a convenient way for the presidents to meet, the substance of the deal was more important than where it might be signed.
“It’s true that the deal can be signed by representatives instead of the presidents but this depends very much on how keen Trump is for the presidential meeting to happen,” he said.
“He is facing an election and huge domestic pressure, so he … needs to show his strong leadership more than Xi. But of course, if the deal is set and if the details of the meeting are practical, the Chinese side would like a presidential meeting too.”
Shen Dingli, an expert in international relations, says China faces less domestic opposition to its handling of the trade talks than Washington. Photo: AP
Speaking after the talks in Washington between Chinese Vice-Premier Liu He, US Trade Representative Robert Lighthizer and US Treasury Secretary Steven Mnuchin, Trump said the two sides had reached a “substantial phase one deal” and that after it had been put down on paper it would be signed at the Apec meeting.
Tai Hui, chief market strategist for Asia at JPMorgan Asset Management, said the cancellation of the Chile summit should not stop the US and China agreeing a truce.
“If the two sides are genuinely willing to reach an interim deal before mid-December, when the next increase in tariffs on Chinese goods is due to take place, they will find a venue to get it done,” he said.
BEIJING, June 28 (Xinhua) — Chinese President Xi Jinping is set to sit down with his U.S. counterpart, Donald Trump, on the sidelines of the Group of 20 (G20) summit in the Japanese city of Osaka, igniting a flicker of hope to bring the China-U.S. trade talks back on track.
The meeting arrives at a time when Washington’s trade offensive against China is not only poisoning one of the world’s most important bilateral relationships, but also risking throttling the already frail global economic recovery. Its significance is thus too great to miss.
When the two presidents met each other at last year’s G20 summit in Argentina’s capital city of Buenos Aires, they reached an important consensus to pause the trade confrontation and resume talks. Since then, negotiating teams on both sides have held seven rounds of consultations in search for an early settlement.
However, China’s utmost sincerity demonstrated over the months seems to have only prompted some trade hawks in Washington to press for their luck.
Following its failure to coerce Beijing into swallowing a deal with unequal terms, a disappointed and enraged Washington returned to its tactic of tariffs by raising additional levies on 200 billion U.S. dollars’ worth of Chinese goods from 10 percent to 25 percent, and threatening a new round of tariff hikes on another 300 billion dollars’ worth of goods.
Some ultra-conservative U.S. decision-makers, who have for many years seen in China a “threat” to Washington’s sole superpower status, have tried to extend the trade campaign into a broader operation to shut China out and contain its rise.
As a result, Washington is cracking down on Chinese high-tech companies including telecom equipment provider Huawei, while many Chinese students seeking to study in the United States are facing more restrictions like months-long visa delay.
Thanks to Washington’s relentless efforts, the two countries, which should have celebrated the 40th anniversary of their diplomatic ties this year, are seeing their relations slipping down the path to a possible all-out confrontation.
Despite Washington’s “in-your-face” style of maximum pressure strategy, China has been steadfastly consistent in its position. It has always been committed to settling trade frictions via dialogue and consultation and safeguarding its legitimate and sovereign rights at the same time.
Beijing, as it has on various occasions reaffirmed, does not want a trade war, but is not afraid of one, and will fight to the end if necessary.
Last week, Xi had a telephone conversation with Trump at the request of the U.S. leader, saying that he stands ready to meet Trump in Osaka to exchange views on fundamental issues concerning the development of China-U.S. relations.
Xi’s words reflect an alarming fact that the two countries are facing a challenge to the fundamentals of their relationship. The upcoming Xi-Trump meeting provides a unique opportunity for the two sides to find new common ground in easing trade tensions and bring the troubled ties back onto the right track.
If the two sides can reach an agreement to pick up the talks, the United States needs to place itself on an equal footing with China, and accommodate China’s legitimate concerns on the basis of mutual respect, equality and mutual benefit in order to seek win-win results in the future negotiations.
Just one day ahead of the Osaka G20 summit, some U.S. politician again threatened to slap punitive levies on imported Chinese goods. Such cheap tactics to bring China down to its knees with pressure will get nowhere.
For more than a year, Washington’s spoils in its tariff campaign have so far only seen rising daily costs for ordinary American consumers, growing rejections from U.S. farmers, industry workers and business leaders, roller-coaster rides in U.S. stock markets, as well as China’s increasingly stronger determination to defend its rights.
The trade fight between the world’s two largest economies has already hit hard the global market and dented investors’ confidence worldwide. The latest World Trade Outlook Indicator reading of 96.3 remains at the weakest level since 2010, signaling continued falling trade growth in the first half of 2019, according to the World Trade Organization.
Trade wars produce no winner. In his latest telephone talk with Xi, Trump said he believes the entire world hopes to see the United States and China reach an agreement. To get an agreement, Washington’s hardliners need to know that Beijing will neither surrender to their pressure, nor permit Washington to deprive Chinese people of their rights to pursue a better life.
And for the agreement to be sustainable, Washington’s China policy should be rational. A rising China is not seeking to grab global hegemony. It will continue to work with nations around the world, including the United States, to boost common development and build a community with a shared future for mankind.
The past 40 years of China-U.S. relationship have proved that when the two countries work together, they both win and the world gains as well. But when they fight each other, all are poised to lose.
China and the United States, as two major economies in the international community, bear special responsibility for the wider world.
Therefore, the two sides, just as what Xi said during his meeting with The Elders delegation this April in Beijing, need to manage their differences, expand cooperation and jointly promote bilateral relations based on coordination, cooperation and stability so as to provide more stable and expectable factors to the world.
Leader will arrive on Thursday, ahead of G20 summit in Osaka, foreign ministry says
He is expected to hold talks with Donald Trump on sidelines of meeting
China has confirmed that President Xi Jinping will travel to japan this week. Photo: AFP
China on Sunday confirmed that President Xi Jinping will attend the G20 summit in Osaka this week.
Xi will spend three days in Japan – his first visit to the country since coming to power in 2013 – the foreign ministry said.
He will travel to Japan on Thursday and is expected to meet his US counterpart Donald Trump on the sidelines of the meeting of leading and emerging economies, which runs from Friday to Saturday, it said.
It is possible the pair will hold formal negotiations over dinner, as they did in Argentina in December at the last G20 summit.
Presidents Xi and Trump are expected to hold talks over dinner, as they did in Argentina in December. Photo: Kyodo
On Saturday, People’s Daily, the mouthpiece of China’s Communist Party said in a commentary that the trade war between China and the US could be resolved only through “equal conversation”.
“For the talks to resume … the key is to address the primary concern of the other side. The tariffs already in place must be revoked,” it said.
Trade deal ‘within reach if Xi and Trump show courage’
Meanwhile, state broadcaster CCTV on Friday criticised Washington’s decision to add five Chinese companies to its list of entities considered a threat to national security.
“The US made this move to put more pressure China ahead of the trade talks,” it said, adding that it might produce a result opposite to the one desired by Washington.
The report came after the US commerce department said it had added five Chinese firms that manufacture supercomputers and their components to the entity list, restricting their ability to do business with the US.
The blacklist effectively bars American firms from selling technology to the Chinese organisations without government approval. Last month, the commerce ministry added telecoms giant
Xi told Trump on Tuesday he was willing to meet in Japan. Photo: AP
In a telephone conversation on Tuesday, Xi told Trump he was willing to meet in Japan and said he “agreed that the two countries’ trade delegations should keep communications going to solve their differences”, CCTV reported.
Kong Xuanyou, China’s new envoy to Japan, said on Friday that he hoped Xi would make an official visit to the country soon, ideally during the cherry blossom season next spring. The foreign ministry statement made no mention of such a visit.
China’s housing market showing signs of bubble similar to that seen in Japan in 1980s, says Asian Development Bank Institute dean and CEO Naoyuki Yoshino
China’s loose policy following 2008 global financial crisis laid foundations for current housing bubble, with US-China trade war adding to concerns
The average price of a home in Beijing has soared from around 380 yuan (US$55) per square feet in the early 2000s to the current level of well above 5,610 yuan (US$813) per square foot, according to property data provider creprice.cn. Photo: Bloomberg
China must exercise extreme caution in handling its housing sector because it is showing signs similar to those witnessed during Japan’s bubble period of the 1980s that contributed to the collapse of Japanese asset prices and its subsequent “lost decades” of weak economic growth and deflation, a Japanese financial system expert warned.
The parallels between China’s current landscape and Japan’s three decades ago are readily apparent, stemming from a loose monetary policy that laid the foundation for the expansion of a housing bubble, said Naoyuki Yoshino, dean and CEO of the Asian Development Bank Institute.
China flooded its economy with credit in response to the 2008 global financial crisis, fuelling rapid growth in mortgages, real estate borrowings and investments over the past decade.
In the same vein, the Japanese government’s relaxed monetary policy in the 1980s triggered an economic bubble that eventually burst and sank the economy into a recession that
with the Bank of Japan continuing to still keep interest rates at or below zero per cent to this day in an attempt to spur inflation.
The Japanese government’s relaxed monetary policy in the 1980s triggered an economic bubble that eventually burst and sank the economy into a recession that lasted almost 25 years. Photo: Bloomberg
Japan’s experience could serve as a lesson on how to avoid a housing market collapse that would be especially detrimental to China’s financial sector and real economy, according to Yoshino.
“I’m very much concerned that if land prices keep on rising and if the population starts to shrink along with aggregate demand, then China will experience a similar situation to that of Japan,” Yoshino said.
There are already several strong signs of a housing bubble in China, according to Yoshino, firstly the astronomical surge in property prices in recent years.
I’m very much concerned that if land prices keep on rising and if the population starts to shrink along with aggregate demand, then China will experience a similar situation to that of Japan Naoyuki Yoshino
Home ownership is one of the few ways for Chinese families to generate wealth because of limited investment opportunities. The average price of a home in Beijing has soared from around 4,000 yuan (US$578) per square metre, or 380 yuan (US$55) per square feet, in the early 2000s to the current level of well above 60,000 yuan (US$8,677) per square metre, or 5,610 yuan (US$813) per square foot, according to property data provider creprice.cn.
The increase has also lifted the housing price to income ratio sharply from 5.6 in 1996 to 7.6 in 2013, well above the Japanese rate of 3.0 at its peak in 1988. The price to income ratio is the basic affordability measure for housing.
According to the Global Times, a reasonable home price should be three to six times the median household income. That means a family with an average income can buy a house with three to six years’ annual income. The house price to income ratio in China is above 50 in the first-tier cities and 30 to 40 in the third- and fourth-tier cities, the newspaper said in October. There are four levels of cities in China, defined by a number of factors including gross domestic product (GDP) and population, with Beijing, Shanghai and Shenzhen considered tier-one cities.
Another worrying sign, according to Yoshino, is that China’s financial sector has lent more heavily to the real estate sector than did Japanese banks during their bubble period.
Thirdly, the ratio of Chinese housing loans to the nation’s GDP has consistently been higher than Japan’s by about three times more.
Ever since US President Donald Trump started imposing tariffs on Chinese imports in July, worries have been mounting that China’s property bubble and its record debt level would make the economy vulnerable to the impact of rising trade tensions, leading to a sharper-than-expected economic slowdown.
Despite a government crackdown on debt and risky lending over the last several years, housing prices and bank lending to the sector have continued to rise, pushing homes beyond what the vast majority of people can afford, as well as putting many property developers deeply into debt.
The Chinese Academy of Social Sciences, a top government think tank, said in a report last week that the growth in housing prices in China’s bigger cities, caused by a relatively short supply of new homes, is likely to push up costs across the country.
“The government should closely monitor these cities to avoid overheating,” said Wang Yeqiang, a researcher at the Chinese Academy of Social Sciences who co-authored the report.
Property developers have begun a debt-fuelled land-buying spree just as urban housing demand is entering a long-running structural decline, said Julian Evans-Pritchard, senior China economist at Capital Economics. The potential supply of property that could be built on developers’ land reserves jumped last year to a record high, meaning the risk of a glut of new housing is real, Evans-Pritchard added, if developers were to convert all their land reserves into housing tracts.
“Since real estate drives around a fifth of GDP, a sharp downturn in this sector would be contagious, resulting in a jump in defaults across a wide swathe of the economy that could quickly erode bank capital buffers,” he warned.
China’s corporate debt stood at 155 per cent of GDP in the second quarter of 2018, much higher than other major economies, according to data from the Organisation for Economic Cooperation and Development. In comparison, Japan’s corporate debt level is 100 per cent of GDP and is 74 per cent in the US. China’s corporate debt includes issuances by its
vehicles which by extension is mostly credit with an implicit guarantee from the central government.
Since real estate drives around a fifth of GDP, a sharp downturn in this sector would be contagious, resulting in a jump in defaults across a wide swathe of the economy that could quickly erode bank capital buffersJulian Evans-Pritchard
China’s imbalance between housing supply and demand may worsen because it faces a similar economic transition that is already well underway in Japan – a
that led to Japan’s long-term deflation problem, said Yoshino, who is also the chief adviser to the Japan Financial Services Agency’s Financial Research Centre.
Even if rising housing demand due to urbanisation were to push China’s housing prices higher over the near term, the country faces risks from an oversupply of housing in the longer term due to its increasingly unbalanced demographic structure, he said.
The government has proposed that China’s retirement ages of 45 to 50 years for females and 55 to 60 years for males introduced in the 1980s be gradually increased to 65 years for both by 2045 due to a rapidly ageing population.
The rising population of retirees will consume fewer goods and services compared to younger families with children, and in turn, could dampen business investment given lower expected rates of return.
At the same time, more retirees means a bigger burden on the younger generation of taxpayers, which would reduce their wealth and change patterns of consumption. This is especially worrying on the back of China’s high debt level and pension funding gap, similar to the situation in Japan, Yoshino said.
In Japan, benefits from government pension schemes account for an increasing share of the country’s accumulated debt as spending on social protection programmes now represents more than a third of the government’s total budget.
China’s national pension fund is forecast to peak at 6.99 trillion yuan (US$1 trillion) in 2027 before it gradually runs out by 2035, according to the Chinese Academy of Social Sciences. Photo: AFP
forecast to peak at 6.99 trillion yuan (US$1 trillion) in 2027 before it gradually runs out by 2035, according to the Chinese Academy of Social Sciences, forcing the government to start to transfer assets from state-owned companies to fill the funding gap.
Against the broader economic slowdown, compounded by the trade war with the US, policymakers are also expected to carve out a highly expansionary fiscal budget for this year, with the broad deficit surging to 6.6 per cent of China’s GDP, up from 4.7 per cent last year, according to Larry Hu, head of China economics at Macquarie Capital.
Alicia Garcia Herrero, Asia-Pacific chief economist at Natixis, noted that the US criticisms of China’s unfair trade practises and currency manipulation were reminiscent of the US-Japan disputes in the 1980s and 1990s.
Because Japan was politically and economically dependent on the US at that time, it inevitably implemented economic policies to reduce its current account surplus. Subsequently, Japan suffered from the bursting of its asset price bubble, which led to deflation and the lost decades.
However, Herrero said that the modern China is less dependent on the US and so is in a better position to resist pressure to adjust its economic policies to create demand for American products.
Wang Yang, one of the seven members of China’s elite Politburo Standing Committee, said the US-China trade war could slash one percentage point off Beijing’s economic growth this year. Last year, growth expanded at its slowest pace since 1990, while corporate bond defaults hit a record high and banks’ non-performing loan ratio hit a 10-year high.
The US has more than doubled tariffs on $200bn (£153.7bn) worth of Chinese products, in a sharp escalation of the countries’ damaging trade war.
Tariffs on affected Chinese goods have risen to 25% from 10%, and Beijing has vowed to retaliate.
China says it “deeply regrets” the move and will have to take “necessary counter-measures.”
It comes as high-level officials from both sides are attempting to salvage a trade deal in Washington.
Only recently, the US and China appeared to be close to ending months of trade tensions.
China’s Commerce Ministry confirmed the latest US tariff increase on its website.
“It is hoped that the US and the Chinese sides will work together… to resolve existing problems through co-operation and consultation,” it said in a statement.
Tariffs are taxes paid by importers on foreign goods, so the 25% tariff will be paid by American companies who bring Chinese goods into the country.
Even though Mr Trump has downplayed the impact of tariffs on the US economy, the rise is likely to affect some American companies and consumers as firms may pass on some of the cost, analysts said.
Deborah Elms, executive director at the Asian Trade Centre, said: “It’s going to be a big shock to the economy.
“Those are all US companies who are suddenly facing a 25% increase in cost, and then you have to remember that the Chinese are going to retaliate.”
Image copyright GETTY IMAGESImage caption US and Chinese officials have held several round of talks in an attempt to strike a deal to end the trade war.
In a statement, the American Chamber of Commerce in China said it was committed to helping both sides find a “sustainable” solution.
“While we are disappointed that the stakes have been raised, we nevertheless support the ongoing effort by both sides to reach agreement on a strong, enforceable deal that resolves the fundamental, structural issues our members have long faced in China.”
French Finance Minister Bruno Le Maire warned that the trade dispute escalation threatened jobs across Europe.
“There is no greater threat to world growth,” Mr Le Maire told CNews. “It would mean that trade tariffs go up, fewer goods would circulate around the world… and jobs in France and in Europe would be destroyed.”
‘Serious escalation’ of the trade war
No breakthrough, and no deal – just, more tariffs.
With this move, US President Donald Trump has effectively dealt a fresh blow to not just the Chinese economy – as he had presumably hoped – but also to US’s.
The previous set of tariffs of 10% on $200bn of Chinese goods have to some extent been absorbed by American importers, but economists say a 25% tariff will be much harder for them to stomach.
They will almost certainly have to pass on that cost to American consumers – and that means higher prices.
Make no mistake, this is a serious escalation – and the trade war between the world’s two largest economies is back on.
This means the rest of us should be prepared for more pain ahead.
How will the tariff increase affect negotiations?
Despite this week’s escalation in tensions, talks were held between Chinese Vice-Premier Liu He, US Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin on Thursday.
A White House spokesman said US officials had agreed with the vice-premier to resume talks on Friday morning, according to media reports.
Even though there had been growing optimism about progress in trade talks recently, sticking points have persisted throughout.
These have included issues around intellectual property protection, how fast to roll back tariffs and how to enforce a deal.
Analysts say the Chinese are still willing to negotiate to retain the moral high ground and because they recognise the importance of solving the trade war.
“A trade war will be bad for China, both the real economy and the financial markets. It will also be bad for the world economy,” said Gary Hufbauer of the Peterson Institute for International Economics.
“Better for China to play the role of conciliatory statesman than angry retaliator.”
Why are the US and China at odds?
China has been a frequent target of Donald Trump’s anger, with the US president criticising trade imbalances between the two countries and Chinese intellectual property rules, which he says hobble US companies.
Some in China see the trade war as part of an attempt by the US to curb its rise, with Western governments increasingly nervous about China’s growing influence in the world.
Both sides have already imposed tariffs on billions of dollars worth of one another’s goods. The situation could become worse still, as Mr Trump has also warned he could “shortly” introduce 25% duties on $325bn of Chinese goods.
What exactly sparked the US president’s latest actions, which apparently took China by surprise, is unclear.
Ahead of the discussions, Mr Trump told a rally China “broke the deal” and would pay for it.
The International Monetary Fund said the row poses a “threat to the global economy”.
“As we have said before, everybody loses in a protracted trade conflict,” the body which aims to ensure global financial stability said in a statement, calling for a “speedy resolution”.
CHINDIA ALERT: You'll be living in their world, very soon 