U.S.-China Talks Near Close With Positive Signs From Both Sides

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(Bloomberg) -- Chinese authorities planned to give a statement following the latest round of U.S. trade talks on Tuesday in Beijing, after both sides signaled progress toward resolving a conflict that has roiled markets.

“The talks are still underway and I believe we will release a detailed readout after they are concluded,” Chinese foreign ministry spokesman Lu Kang told reporters at a regular briefing Tuesday in Beijing. No timing was given and it wasn’t immediately clear if the U.S. would release a statement.

U.S. Commerce Secretary Wilbur Ross expressed optimism on Monday, telling CNBC that “there’s a very good chance that we’ll get a reasonable settlement.” Vice Premier Liu He made an appearance at the talks on Monday in a sign the Chinese were also pushing for a positive outcome.

Liu, the chief economic adviser to Chinese President Xi Jinping, made brief remarks at the negotiations, a person familiar with the meeting said. Asked about his presence on Tuesday, Lu from the foreign ministry said it wasn’t surprising for Liu to be there. Liu led a previous round of talks in Washington last year that ended in failure, and he’s expected to meet chief U.S. negotiator Robert Lighthizer later this month.

Since the two presidents met on Dec. 1, China has made a number of concessions to U.S. demands, including temporarily cutting punitive tariffs on U.S.-made cars, resuming soybean purchases, promising to open up its markets for more foreign investment, and drafting a law to prevent forced technology transfers.

How China will enforce those measures will be key to any deal. U.S. officials have repeatedly accused China of not fulfilling agreements, with Ross saying on Monday that "the real issue is what are the enforcement mechanisms, what are the punishments if people don’t do what they were supposed to do?"

The U.S. negotiators in Beijing are pushing the Chinese side to come up with a mechanism to ensure that Beijing keeps the promises it makes, the Wall Street Journal reported. That includes giving specific dates for making purchases, and making assurances that Beijing won’t hinder U.S. companies from gaining access to China’s market.

Economic Cost

Six months after President Donald Trump first slapped tariffs on Chinese goods, signs are growing that the trade war is exacting an economic and financial cost, increasing the incentive for both sides to end the conflict. Apple Inc (NASDAQ:AAPL). cut its revenue outlook last week as sales of the iPhone were slower than expected in China, while data on factory activity and retail sales in the Asian nation were also weak.

Liu’s appearance at the talks is a “symbol of Xi’s personal buy-in” in the effort to reach a deal, said Leland Miller, chief executive officer of China Beige Book, a data-analytics firm that surveys companies across the Chinese economy. “Beijing wants to show this is supported at the very highest level.”

But much work remains before the two economic powers climb down. Trump has given U.S. Trade Representative Lighthizer until March 1 to negotiate an accord with the Chinese on “structural changes” to Beijing’s state-driven economic model. The two sides have shown signs of common ground in the past year, only for progress to stall.

The discussions are the first face-to-face interactions between the U.S. and China since both presidents met in Argentina and agreed to a temporary truce in their tit-for-tat tariff war. More senior-level discussions could take place this month, with the South China Morning Post reporting that Trump and Chinese Vice President Wang Qishan may meet at the World Economic Forum in Davos, Switzerland.

China’s foreign ministry on Monday confirmed that Wang would deliver a keynote speech at Davos, though didn’t confirm any plans for him to meet Trump.

Deputy U.S. Trade Representative Jeffrey Gerrish is leading the American delegation in Beijing. Preliminary discussions were “a little more optimistic than usual,” White House economic adviser Larry Kudlow told Bloomberg TV Friday.