Thread: Beijing's economic 'red lines' may clash with Trump's 90-day plan, analysts say

Beijing's economic 'red lines' may clash with Trump's 90-day plan, analysts say

Washington has accused China of forcing technology transfers, and tacitly supporting intellectual property violations and cyber-crime.

But Chinese President Xi Jinping is likely to continue lending state support to targeted industries, particularly in technology under the "Made in China 2025" program, according to TS Lombard's Eleanor Olcott.

Huileng Tan
Published 2 Hours Ago CNBC.com

U.S. President Donald Trump and Chinese President Xi Jinping may have put their tit-for-tat tariff fight on hold, but differences between the two countries' views on technology and state-supported businesses will challenge negotiations between the two economic giants, analysts said.

"Staunchly committed to the Chinese economic model, Xi will continue to lend state support to targeted industries, particularly in technology under the Made in China 2025 programme," Eleanor Olcott, China policy analyst at research firm TS Lombard, wrote on Monday.

Washington has accused China of forcing technology transfers, and tacitly supporting intellectual property violations and cyber-crime, but those issues were downplayed in official descriptions of the weekend's agreement.

"Despite White House economic advisor (Larry) Kudlow suggesting that the two sides are 'pretty close' on an agreement on intellectual property theft, 90 days still looks like a short period for discussions on complicated issues such as non-tariff barriers," wrote Zhu Huani, an economist at Mizuho Bank in a note on Tuesday.

"Whilst reducing (the) trade gap could be the easier part to begin with, China is less likely to make concessions on its industrial policies such as 'Made in China 2025,' which might hinder discussion surrounding technology transfer," added Zhu.

The "Made in China 2025" plan is Beijing's industrial policy to invest heavily in high-end technologies such as artificial intelligence in a bid to catch up with rivals like the U.S. and Germany.

The analysts' comments follow Trump and Xi's agreement over the weekend at the G-20 meeting in Argentinato put their bilateral trade war on pause momentarily. They would, according to official statements, hold off on slapping additional tariffs on each other's goods after Jan. 1 as talks continue between both countries.

As part of the deal, China said it would purchase more American imports, particularly in energy and agriculture. Beijing will also exert more control over the flow of fentanyl — a synthetic opioid that is 50 times more addictive than heroin and has been linked to thousands of overdose deaths in the United States. China is one of the world's top producers of ingredients used to manufacture fentanyl, according to the U.S. Department of Justice.

But, "it is unclear how this [deal at the G-20] will resolve issues related to IP protection and forced technology transfers in China — it won't," economists from French trade credit insurer Coface wrote in a note on Monday.

After all, some are even jokingly questioning if Trump and Xi even attended the same meeting given the significant differences in statements from the two sides.

"There is reason to believe the two parties do not quite meet over the finer details of the deal: pointedly, no joint statement was released after the meeting. Furthermore, the statements that the U.S. and China issued separately showed material divergences, with the Chinese statement making no mention of the 90-day deadline on the threatened 25 percent tariff increase," economists from Pictet Wealth Management wrote Monday.

Neither side referred to the "Made in China 2025" industrial policy, Pictet noted.

"Given the differences in starting positions, with the Chinese side setting red lines around its state-led system, it is highly unlikely that the time-frame of 90 days will allow the U.S. to extract concessions Trump could present as a large-scale 'win' with any degree of conviction," said TS Lombard's Olcott.

—CNBC's Kevin Breuninger, Javier David and Saheli Roy Choudhury contributed to this report.

https://www.cnbc.com/2018/12/04/us-c...rump-plan.html

The news media has trouble deciphering what's going on. Trump is pushing, he's pushing deals that were discussed and affirmative positions taken if this and if that and subject to. He's boxing Xi into a corner to either publicly denounce their commitment to remove the auto tariffs or publicly confirm the commitment. Either way, Trump wins. Trump wants the tariffs to go into effect on January 1 at 25%, that's $50 billion in tax revenue on the $200 billion and another 25% on another $267 billion, that's over $115 billion in annual tax revenue for the US, plus higher prices on all these China imports that encourages our manufacturers to come home and manufacture here hiring US workers instead of importing those goods made by the same companies in China.

And of course the 90 days started 3 days ago, so there's already only 87 days left. Tick Tock.