Presidents Xi Jinping and Donald Trump met on the sidelines of the G20 summit in Osaka last Saturday (Jun. 29). The US trade delegation said no further tariff hikes on Chinese imports were envisioned in the near future as the negotiations continue. China committed to buying more US farm products.
The current punitive and retaliatory tariffs imposed by the two countries on each other will remain in force, but after declaring a continuation in the talks, the US has abandoned its plans to impose further tariff hikes that would have applied to nearly all Chinese imports yet to be subject to higher tariffs. Trump also softened his position on Chinese telecom giant Huawei, announcing at a press conference that American companies could continue to sell to Huawei as long it poses no threat to national security.
There is no information yet on the length of the truce in talks. Large issues underlie the US-China dispute, including China’s policies that discriminate against foreign firms, compel technology transfers and fail to protect intellectual property rights. It is unlikely that any of these problem areas will be permanently sorted out soon.
On Sunday (Jun. 30), China’s National Development and Reform Commission (NDRC) issued a press release that said the list of branches off-limits to foreign firms (the negative list) will be cut from 48 branches to 40. Foreign ownership will be allowed in branches such as oil & gas exploration, gas and heat pipelines in larger cities, movie theatres, as well as broader access to the agricultural sector and mining of certain metals. The shortened list enters into force on July 30. The negative list was last trimmed a year ago (BOFIT Weekly 27/2018).
In his speech to the G20 summit participants, Xi proposed a number of measures to open up China’s markets to the rest of the world, including reduced tariffs and lowering of other trade barriers, creation of new free-trade zones, and progress in an EU-China investment protection agreement as well as the free-trade agreement between China, Japan and South Korea. On Tuesday (Jul. 2), premier Li Keqiang told participants at the World Economic Forum in Dalian that China would open its markets to foreign investors and accelerate the planned phase-out to end restrictions on foreign ownership in the financial sector from 2021 to next year.