U.S.-China trade fight making investors more defensive: Market strategist
China’s state media signaled a lack of interest in resuming trade talks with the U.S. under the current threat to escalate tariffs, while the government said stimulus will be stepped up to buttress the domestic economy.
Without new moves that show the U.S. is sincere, it is meaningless for its officials to come to China and have trade talks, according to a commentary by the blog Taoran Notes, which was carried by state-run Xinhua News Agency and the People’s Daily, the Communist Party’s mouthpiece. The Ministry of Commerce spokesman said Thursday he had no information about any U.S. officials coming to Beijing for further talks.
The indications that negotiations are paused will focus attention on the next opportunity for Presidents Xi Jinping and Donald Trump to meet -- at the Group of Twenty meeting in Japan next month. Their meeting in Argentina in December last year put negotiations back on track, only for them to fall apart again this month in Washington.
"If the U.S. doesn’t make concessions in key issues, there is little point for China to resume talks," said Zhou Xiaoming, a former commerce ministry official and diplomat. "China’s stance has become more hard-line and it’s in no rush for a deal" because the U.S. approach is extremely repellent and China has no illusions about U.S. sincerity, he said.
No Rush for a Deal
According to Zhou, the commerce ministry spokesman on Thursday effectively ruled out talks in the near term. In comments to the media, ministry spokesman Gao Feng said that China’s three major concerns need to be addressed before any deal can be reached, adding that the unilateral escalation of tensions in Washington recently had “seriously hurt" talks.
U.S. Treasury Secretary Steven Mnuchin said this week that American officials “ most likely will go to Beijing at some point” in the near future to continue trade talks, before later saying he has “no plans yet to go to China.”
On Friday, China’s government said that it will work to counteract the effects of more U.S. tariffs and keep the economy in a "reasonable range." The National Development and Reform Commission is studying the impact of U.S. tariffs and will roll out "responsive measures when necessary," spokeswoman Meng Wei said at briefing in Beijing.
A sharper and more aggressive tone in state media doesn’t rule out short-term progress in trade talks, as rhetoric can be dialed back just as quickly. However, after months of downplaying the dispute with the U.S. and banning the phrase "trade war," the new strident tone of coverage is striking.
The U.S. has been talking about wanting to continue the negotiations, but in the meantime it has been playing “little tricks to disrupt the atmosphere,” according to the Taoran commentary on Thursday night, citing Trump’s steps this week to curb Chinese telecom giant Huawei Technologies Co.
“We can’t see the U.S. has any substantial sincerity in pushing forward the talks. Rather, it is expanding extreme pressure,” the blog wrote. “If the U.S. ignores the will of the Chinese people, then it probably won’t get an effective response from the Chinese side,” it added.
The Shanghai Composite Index was 1.7 per cent lower at 1:38 p.m. in Shanghai, putting it on course for a fourth week of losses, the worst streak in 10 months. The offshore yuan had weakened more than 0.4 per cent to 6.9395 per dollar.
The blog reiterated China’s three main concerns for a deal are tariff removal, achievable purchase plans and a balanced agreement text, as first revealed by Vice Premier Liu He. They mark the official stance as much as the will of the Chinese public, it wrote.
“If anyone thinks the Chinese side is just bluffing, that will be the most significant misjudgment” since the Korean War, it said.
In addition to putting the Taoran commentary on WeChat, the People’s Daily newspaper had three defiant articles on the trade war in the physical newspaper Friday.
A front page commentary from the Communist Party’s propaganda department headlined ‘No Power Can Stop the Chinese People from Achieving Their Dream’ said “the trade war will not cripple China, it will only strengthen us as we endure it,” citing the hardships China has overcome from the Opium War to floods to the SARS epidemic in 2002-2003.
There were two editorials on page three, with one saying “China doesn’t intend to change or replace the U.S., and the U.S. can’t dictate to China or hold back our development.” The other said claims from some officials in the U.S. that they have “rebuilt” China over the past 25 years are “outrageous” and shows their vanity, ignorance and distorted mentalities.