https://www.scmp.com/economy/china-...reakthrough-us-and-china-reach-phase-one-deal
Trade war breakthrough: US and China reach phase-one deal, Beijing confirms
Vice Commerce Minister Wang Shouwen announced on Friday that China and the US have made a breakthrough in trade negotiations, with a consensus agreement reached for a phase-one deal.
Speaking in a late night press conference in Beijing, Wang said the agreement covered a wide range of issues, including intellectual property protection, technology transfer, purchase of agricultural products and expanding trade.
The US has also agreed to reduce its tariffs on Chinese imports in stages, Wang said.
Both countries will proceed to legal review of the text and discuss arrangements for signing the deal.
“The deal can help expanding economic and trade cooperation between the two nations and effectively manage the trade disputes,” he said.
Liao Min, deputy director of the office of the Central Commission for Financial and Economic Affairs said as the US agreed to reduce parts of tariffs imposed on Chinese products, China will consider not introducing tariffs on US products scheduled on December 15.
“China hopes the US will fulfil its commitment,” he said. “Removing tariffs is the core concern of China”.
Ning Jizhe, Vice Chairman of National Development and Reform Commission, did not specify the value of US agricultural products China would purchase, saying that the text of the agreement was still being examined and that concrete details would be released later.
A new 15 per cent tariff on around US$160 billion of Chinese goods that was scheduled to come into effect on Sunday will be cancelled. The tariffs targeted Chinese goods, which have until now avoided duties, including many popular consumer products such as smartphones and gaming consoles.
There will also be a significant rolling back of tariffs that the two countries have placed on each other’s goods since July 2018.
China has in return agreed to a large-scale purchase of US agricultural goods.
There also are commitments from China to reform its intellectual property protection regime, further opening its services sector, and will take steps to mitigate charges of currency manipulation and tackle forced technology transfer from foreign companies.
To put the commitment in context, China imported US$137 billion in agricultural goods in 2018, but it has never bought more than US$25.9 billion from the United States, which it did in 2012. That figure shrank to US$9.2 billion last year, as tariffs weighed heavily on the bilateral farm trade.
It is understood that the size and natureof the agricultural purchases had been a major sticking point in the negotiations, with China keen to purchase according to its domestic demand. This was complicated by an African swine fever outbreak that has threatened to wipe out half of the country’s pig population, therefore reducing demand for soybeans that are used mainly in pig feed.
It had been expected that a deal would be announced on Friday after US President Donald Trump tweeted on Thursday that the US was “Getting VERY close to a BIG DEAL with China. They want it, and so do we!” Trump had previously been reluctant to admit that Washington was just as keen for a deal as Beijing.
Markets responded in kind. On Friday, the Shanghai Composite Index recorded its best daily performance since August 19, while the Hang Seng Index – Hong Kong’s stock exchange – posted its best intraday gain since October 11, in response to the tweet and the subsequent
media reports that a deal was close.
Despite this, at a press conference in Beijing on Friday, China’s Foreign Ministry spokeswoman Hua Chunying stopped short of saying the two sides had reached a deal.
“As soon as reports suggesting the phase one deal was reached emerged, the major stock markets in the US and Europe jumped. This illustrates that a deal through negotiation is beneficial to both nations and their peoples, and it is what the international community wants,” Hua said, before repeating the common Chinese government refrain that a deal must be “mutually beneficial”.
Analysts, meanwhile, were not getting carried away by the deal’s potential impact on either economy.
“The reported agreement is noteworthy both for its modesty and for how long it took to achieve,” said Stephen Olson, a former US trade negotiator, now a senior fellow at the Hong Kong-based Hinrich Foundation.
“These represent some of the lowest hanging fruits in the negotiation, and some of which would have been discussed earlier in the year,” added Tai Hui, chief Asia market strategist at JP Morgan Asset Management. “The future stages of negotiation is going to be much more challenging when it starts to involve China’s industrial policy and technological development.”
John Gong, a professor of economics at the University of International Business and Economics in Beijing, said that a deal would “relieve pressure on China's economic slowdown”.
Analysis of a phase one deal, conducted before all the details had been confirmed, suggested that it could lift US economic growth in 2020 by 0.1 per cent, as well as lowering inflation.
“The positive impact on China’s economy is likely to be a little more than the US, but the largest positive impacts will be on the smaller and more open Asian economies of South Korea, Taiwan and Singapore,” wrote Nomura analysts in a note.
Trade war breakthrough: US and China reach phase-one deal, Beijing confirms
- As an immediate result, a new 15 per cent tariff on around US$160 billion of Chinese goods, due to come into effect on Sunday, will be cancelled
- Other elements of a deal include significant agricultural purchases by China
Vice Commerce Minister Wang Shouwen announced on Friday that China and the US have made a breakthrough in trade negotiations, with a consensus agreement reached for a phase-one deal.
Speaking in a late night press conference in Beijing, Wang said the agreement covered a wide range of issues, including intellectual property protection, technology transfer, purchase of agricultural products and expanding trade.
The US has also agreed to reduce its tariffs on Chinese imports in stages, Wang said.
Both countries will proceed to legal review of the text and discuss arrangements for signing the deal.
“The deal can help expanding economic and trade cooperation between the two nations and effectively manage the trade disputes,” he said.
Liao Min, deputy director of the office of the Central Commission for Financial and Economic Affairs said as the US agreed to reduce parts of tariffs imposed on Chinese products, China will consider not introducing tariffs on US products scheduled on December 15.
“China hopes the US will fulfil its commitment,” he said. “Removing tariffs is the core concern of China”.
Ning Jizhe, Vice Chairman of National Development and Reform Commission, did not specify the value of US agricultural products China would purchase, saying that the text of the agreement was still being examined and that concrete details would be released later.
A new 15 per cent tariff on around US$160 billion of Chinese goods that was scheduled to come into effect on Sunday will be cancelled. The tariffs targeted Chinese goods, which have until now avoided duties, including many popular consumer products such as smartphones and gaming consoles.
There will also be a significant rolling back of tariffs that the two countries have placed on each other’s goods since July 2018.
China has in return agreed to a large-scale purchase of US agricultural goods.
There also are commitments from China to reform its intellectual property protection regime, further opening its services sector, and will take steps to mitigate charges of currency manipulation and tackle forced technology transfer from foreign companies.
To put the commitment in context, China imported US$137 billion in agricultural goods in 2018, but it has never bought more than US$25.9 billion from the United States, which it did in 2012. That figure shrank to US$9.2 billion last year, as tariffs weighed heavily on the bilateral farm trade.
It is understood that the size and natureof the agricultural purchases had been a major sticking point in the negotiations, with China keen to purchase according to its domestic demand. This was complicated by an African swine fever outbreak that has threatened to wipe out half of the country’s pig population, therefore reducing demand for soybeans that are used mainly in pig feed.
It had been expected that a deal would be announced on Friday after US President Donald Trump tweeted on Thursday that the US was “Getting VERY close to a BIG DEAL with China. They want it, and so do we!” Trump had previously been reluctant to admit that Washington was just as keen for a deal as Beijing.
Markets responded in kind. On Friday, the Shanghai Composite Index recorded its best daily performance since August 19, while the Hang Seng Index – Hong Kong’s stock exchange – posted its best intraday gain since October 11, in response to the tweet and the subsequent
media reports that a deal was close.
Despite this, at a press conference in Beijing on Friday, China’s Foreign Ministry spokeswoman Hua Chunying stopped short of saying the two sides had reached a deal.
“As soon as reports suggesting the phase one deal was reached emerged, the major stock markets in the US and Europe jumped. This illustrates that a deal through negotiation is beneficial to both nations and their peoples, and it is what the international community wants,” Hua said, before repeating the common Chinese government refrain that a deal must be “mutually beneficial”.
Analysts, meanwhile, were not getting carried away by the deal’s potential impact on either economy.
“The reported agreement is noteworthy both for its modesty and for how long it took to achieve,” said Stephen Olson, a former US trade negotiator, now a senior fellow at the Hong Kong-based Hinrich Foundation.
“These represent some of the lowest hanging fruits in the negotiation, and some of which would have been discussed earlier in the year,” added Tai Hui, chief Asia market strategist at JP Morgan Asset Management. “The future stages of negotiation is going to be much more challenging when it starts to involve China’s industrial policy and technological development.”
John Gong, a professor of economics at the University of International Business and Economics in Beijing, said that a deal would “relieve pressure on China's economic slowdown”.
Analysis of a phase one deal, conducted before all the details had been confirmed, suggested that it could lift US economic growth in 2020 by 0.1 per cent, as well as lowering inflation.
“The positive impact on China’s economy is likely to be a little more than the US, but the largest positive impacts will be on the smaller and more open Asian economies of South Korea, Taiwan and Singapore,” wrote Nomura analysts in a note.
