MNI: China Deal With U.S. Depends On Taiwan – China Advisors

China is likely to be prepared to sign a trade agreement and commit to new major purchases of U.S. goods at a leaders’ summit in Washington in September, but much will depend on Washington’s approach to Taiwan, policy advisors in Beijing told MNI.

A deal, which could include the establishment of a board of trade subject to WTO rules, would also need to reduce tariffs on Chinese goods, the advisors said, with Zhao Yongsheng, a researcher at the University of International Business and Economics’ Research Institute for Global Value Chains, saying that he considered 10-15% might be a satisfactory overall level.

Last week’s summit between presidents Xi Jinping and Donald Trump concluded without a joint communique, Zhao noted, adding that further time was needed for negotiations on specific amounts of Chinese purchases of U.S. products such as soybeans and aircraft. (MNI: China Advisors See Incremental Progress From Trump-Xi)

Beijing believes that stability across the Taiwan Strait underpins China‑U.S. political ties, and that this creates conditions for steady bilateral economic and trade relations, according to Wang Dong, director of the Institute for Global Cooperation and Understanding at Peking University and vice president of the Chinese Association of American Studies.

At the summit, China stressed that Taiwan was an issue of overriding importance, and in comments after leaving Beijing, Trump said he would soon take a decision on whether to authorise a USD14 billion U.S. arms sale to the island.

“The two countries should be able to reach a formal trade agreement to be delivered during President Xi Jinping’s state visit to the U.S. in September,” Zhao said.

IRAN WAR

The issue of the U.S.-Israeli war with Iran and passage through the Strait of Hormuz was a “relatively peripheral topic” in the summit, he said, with no direct implications for a trade agreement. 

“Neither side was willing to offer a high price. China might commit to halting the export of certain types of advanced weaponry, but this could not be made public. Regarding crude oil imports, China could increase its imports from the United States, but this would not necessarily mean reducing imports from Iran, given its partnership with Iran,” Zhao said.

He Weiwen, a former economic and commercial counsellor at the Chinese Consulate General in San Francisco and New York, agreed that a trade deal could be reached this year. While U.S. section 301 tariff investigations would require significant work to resolve, this could perhaps be achieved via reciprocal tariff exemptions granted via the new board of trade. An agreement could also include relaxation of U.S. export controls on high-end semiconductors, aircraft engines and chip manufacturing tools, he said.

In addition, the potential establishment of joint U.S.-China boards of trade and investment would provide both sides with a more regular and institutionalised way to consult, helping to build trust over time, according to Ding Yifan, senior fellow at the Institute of World Development under the State Council’s Development Research Center.

China will seek to ensure that any new bilateral mechanisms remain compatible with WTO rules and the broader multilateral trading system, Ding said, adding that trade between the two countries has continued to benefit both sides overall, despite the negative effect of tariffs on costs and efficiency, with some Chinese-origin goods now rerouted to the U.S. through third countries.

Ding said however that there is concern in Beijing that any understandings reached with Trump could become entangled in U.S. domestic politics, particularly if control of Congress changes after mid-term elections in November.

Both Zhao and He said that Xi’s announcement of a drive for "China-U.S. constructive strategic stability" could guide the next three-plus years of relations, with Zhao pointing to its potential for a “de-escalation” from the more confrontational postures of recent years.