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Analysts Hopeless Over the Trade Talks Between the U.S. and Chinese Government

“It depends on how big Washington’s expectations are and how big its demands for reform and opening up of the Chinese market,” Liao says. “China will make some concessions, but if Washington’s appetite is too big, that will be tough for Beijing to accept.”

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US billionaire investor Warren Buffett said on Saturday that the world depends on the US and China for progress, dismissing concerns that the two countries' trade tensions could potentially escalate into a trade war.
US-China Meeting, wikimedia commons

A high-level U.S. trade delegation has begun talks with Chinese officials in Beijing as Washington tries to address deep concerns about China’s economic policies. The meeting is seen by some as a positive step, as the two sides attempt to avoid the possible outbreak of a trade war. Analysts say it is unlikely their differences will be resolved during the meetings but a decision to keep talking would be welcome progress.

President Donald Trump said on Twitter U.S. officials are “trying to negotiate a level playing field on trade.”

Raymond Yeung, a senior economist for Greater China at the Australia and New Zealand Banking Group, says if the two sides can at least agree to keep talking with each other that would be big progress.

The policy clearly sets goals for domestic industries to dominate over foreign players in the Chinese market and globally.
Donald Trump, Wikimedia Commons

“I think it is too demanding to expect that both sides can come up with an agreement or an announcement or sign a deal,” Yeung said. “But if they are able to promise that they are willing to sit down and continue the dialogue and try and resolve their differences, at least that would signal that the relationship between the two governments is warming up.”

Differences over trade policy and market access have been a persistent concern for the United States and other foreign investors in China. In recent weeks, the debate has become even more heated with President Trump threatening to slap a long $50 billion list of tariffs on Chinese goods to punish Beijing for what his administration calls its unfair trade practices: forced technology transfer, intellectual property rights and state subsidies for technology development.

Beijing has denied Washington’s accusations and insists its market is opening. It recently pledged to do away with a 25 percent tariff on imported foreign cars, albeit by 2022. The Chinese government has also responded with threats of its own, saying that if the U.S. presses ahead with tariffs it will respond in kind.

The seven-member U.S. delegation is led by Treasury Secretary Steven Mnuchin and is meeting with a group of Chinese officials led by Chinese Vice Premier Liu He, a close aide to China’s president, Xi Jinping.

Although it is difficult to predict how the meetings will turn out, Liao Qun, chief economist at China CITIC Bank International, says it is a positive sign that both sides have a desire to sit down and negotiate. How much can be accomplished, depends on Washington, he says.

“It depends on how big Washington’s expectations are and how big its demands for reform and opening up of the Chinese market,” Liao says. “China will make some concessions, but if Washington’s appetite is too big, that will be tough for Beijing to accept.”

Beijing has characterized President Trump’s threats to tax exports and attack the government’s policies as an attempt to contain China and force the Chinese market to become more open, something that officials and state media have repeatedly stressed will never happen.
Xi Jinping, wikimedia commons

Since Xi Jinping rose to power in 2012, China has taken big steps to increase the central government and the communist party’s control over the economy and business, even as Beijing pledges to continue to further open its markets.

In 2015, the government unveiled a key policy plan called Made in China 2025, a plan that aims to make China dominant in 10 major next generation industries from robotics to electric cars, artificial intelligence, bio-tech and aerospace, among others. An investigation by the Trump administration into China’s unfair trade practices mentions the policy more than 100 times.

The policy clearly sets goals for domestic industries to dominate over foreign players in the Chinese market and globally. Beijing has characterized President Trump’s threats to tax exports and attack the government’s policies as an attempt to contain China and force the Chinese market to become more open, something that officials and state media have repeatedly stressed will never happen.

Bridging such a huge gap during two days of talks will be difficult, says Christopher Balding, a professor at Peking University’s HSBC Business School.

“I would be somewhat surprised if there was any real change in the negotiating stance of either party. Specifically China, they don’t want to open their markets, that’s the fundamental point,” Balding says.

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He says the best that could be hoped for is that the two can find enough room to compromise to not go forward with the trade war. But these disputes are unlike any other in recent history, he adds.

“This is about how disputes are settled: About how one country views the international system as compared to the other. This is about how one country views how a country should be run and how they have conflicting views of those two things,” Balding says. (VOA)

Next Story

Performance of Chinese Economy ‘Noteworthy’ in Last Four Decades and Holds Key Lessons for India

Over the nineteenth century, the two countries had been following the opposite trajectory

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Chinese, Economy, India
In fact, China was at a disadvantage on some aspects of development. Pixabay

China celebrated the 70th anniversary of becoming a communist republic with much fanfare. Back in October 1949, when China was adopting the communist model of societal organisation, India was framing its constitution. Less than four months later, India was a democratic republic. The two nations in their current identities were, thus, born out of the ashes of the colonial world around the same time but adopted a contrasting system of economic and social development. After seventy years, the two nations stand at very different levels of development in terms of their economic, military and technological progress. China’s prowess on these fronts is incomparable to that of India.

China’s rise is quite extraordinary from the Indian viewpoint as the two nations were at par with each other in 1950. In fact, China was at a disadvantage on some aspects of development. Over the nineteenth century, the two countries had been following the opposite trajectory. As per Maddison estimates, India’s per capita income grew from $533 in 1820 to $673 in 1913 (in 1990 dollars). During the same period, China’s per capita income declined from $600 to $552. In the first half of the twentieth century, the per capita incomes of both nations declined. Between 1913 and 1950, India’s per capita income declined from $673 to $619 while China’s per capita income declined from $552 to $439. Thus, in 1950 when India became a republic, it was ahead of China in economic terms.

Even as recently as 1978, the per capita GDP of China was $979, and India was $966. The excesses of Mao’s rule that culminated in the disastrous programmes of the Great Leap Forward and the Cultural Revolution kept economic progress of China subdued in the first three decades. However, all that changed with the coming of Deng Xiaoping in 1978. As a result, China’s per capita income today is about 4.6 times than that of India. Despite all the demerits of the authoritarian rule in China, the performance of the Chinese economy in just the last four decades is noteworthy and holds key lessons for India as well.

The first, and probably the most important thing that China did well right from the start was its focus on human development. Even under Mao, China’s emphasis on education for all and the healthcare facilities provided by its communes helped the country perform well on human development. While the human development index (HDI) was introduced in 1990, its long run calculations have been provided by Nicholas Crafts. The HDI numbers for China and India are, thus, available for 1950 and 1973. While both the countries had almost similar HDI scores in 1950 (0.163 and 0.160 respectively), Chinaa¿s score was markedly higher in 1973 (0.407 against India’s 0.289).

Chinese, Economy, India
China’s rise is quite extraordinary from the Indian viewpoint as the two nations were at par with each other in 1950. Pixabay

So, the improvement in human development poised the society perfectly for the reforms that would be imposed under Deng’s China. The development of a vast pool of human capital primed the economy for economic reforms and, therefore, allowed the country to maximise its gains form it. On the other hand, education and health have always been an area for concern for India. By the time India began undertaking economic reforms in the early 1980s, India’s health and education levels were still poor. An average Indian died at the age of 54 in 1980 while merely 43.6 percent of its population was literate. By comparison, life expectancy in China was 64 years and its literacy rate was 66 percent around the same time.

The second key difference was the focus on the type of industries by the two countries. China focussed on industries that were more labour-intensive leveraging on its pool of cheap labour. Industries like textile, light engineering and electronics received higher investment. China also introduced special economic zones (SEZs) as early as 1980, which pushed manufacturing growth and setting up of export-oriented industries. India, on the other hand, focused more on heavy industries that were capital-intensive and employed less labour. Moreover, the policy focus on attracting foreign investment through instruments like SEZ came much later. As a result, by 1998 China had FDI investments of $183 per capita as per Maddison estimates and India was merely at $14.

As India hardly pushed for labour-intensive manufacturing growth, the sector never picked up and the country became a services-led economy. China, on the other hand, became the manufacturing powerhouse of the world. A similar edge is being created by Bangladesh in recent times. The export-industries that are moving out of China due to rise in labour costs and the trade war with the United States are being effectively captured by countries like Bangladesh. The country has eclipsed India’s growth rate since 2017 and has become the fastest-growing country in South Asia. Most of its growth is being led by its manufacturing sector, which implies that the country will be able to create high employment for its citizens and improve their standard of living at a higher and more equitable rate than India; exactly what China has achieved over the last four decades.

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Thus, India has a lot to learn from the development trajectories of its neighbours. The focus on health and education parameters for long-term growth and market-oriented policies in the short term has been an effective strategy for Asian countries. Perhaps it is time that India does the same. (IANS)