Trade war, day 193: ‘I think that we are going to…do a deal with China’

Today, Trump again reiterated his optimism about reaching a trade deal with China.

• “We’re doing very well with China… I think that we are going to be able to do a deal with China… China wants to negotiate.” These were Trump quotes relayed by Reuters, in a report titled “Trump predicts U.S. will reach trade deal with China.”
• Last week we observed that the outlook on the 90-day trade negotiations appears to be changing in a positive, if vague (and certainly unsatisfying for American hardliners, who still see little to no progress on their most important issues), direction.
• However, U.S. Trade Representative Robert Lighthizer and other hardliners are likely pressing for larger concessions.

Helping Lighthizer’s case to dampen Trump’s optimism is the still-unfulfilled promise of approvals for American credit card companies to take payments in Chinese currency. The Financial Times reports (paywall):

China’s central bank has refused to acknowledge applications submitted by Visa and Mastercard to process renminbi payments, despite rules in 2017 that removed formal obstacles to foreign participation in the $124tn market following a decade-long struggle…

In a typical Chinese permissions process, formal acceptance and acknowledgment — shouli [受理 shòulǐ] in Chinese — is the initial step towards approval. According to the application procedure published in 2017, the central bank must decide on applications within 90 days of acknowledgment.

FT reporter Gabriel Wildau, who broke the story, commented that this is “among the more flagrant examples of how regulatory slow-walking and informal barriers hurt foreign companies [in China].” Journalist and Lowy Institute senior fellow Richard McGregor asks if there are reasons for the delays besides simple protectionism, such as “access to Chinese data.”

At the same time, China made another goodwill gesture toward opening its financial markets, as the State Administration of Foreign Exchange announced that it would “raise the quota for the Qualified Foreign Institutional Investor (QFII) program to $300 billion from $150 billion effective immediately,” according to Caixin.

Other trade-war-related links:

• Confucius institutes in U.S., and the lack of American cultural centers in China
  Colleges move to close Chinese government-funded Confucius Institutes amid increasing scrutiny / Inside Higher Ed
  “At least 10 American universities have moved to close their Confucius Institutes in the past year as political pressures over the Chinese government-funded institutions for language and culture education have intensified.”
  At the beginning of January, we noted a New York Times report that all of the “more than 20” American cultural centers established at Chinese universities in the past decade are now closed, after interference by Chinese authorities.
• Trump speaks to farmers
  Trump defends tough trade policies to farmers, vows fair deal with China / Reuters
• Auto tariffs in second half of 2018
  German car exports to China from U.S. fell 37 percent in 2018: Auto Association / Reuters
  China announced that its tariffs on American-origin cars (of which the ones exported to China are mostly made by German companies) would return to pre-trade-war levels in December.
• Balance of trade
  China’s annual trade surplus with U.S. hits record despite Trump’s tariff offensive / WSJ (paywall)
  “China recorded $323.32 billion in surplus with the U.S. in 2018, representing a 17% jump from the figure in the previous year, according to Chinese government trade data released Monday.”
• EU-China ties
  Merkel planning EU-China summit for Germany’s 2020 presidency – sources / Reuters
  “Chancellor Angela Merkel has proposed a China-European Union summit during Germany’s 2020 EU presidency that would include national leaders of EU countries as well as officials from Brussels and Beijing, EU diplomats said.”
• Intellectual property in Taiwan
  Former IC firm employees charged with trade secret leaks to China / Focus Taiwan
  “Four former employees of Hsinchu-headquartered Novatek Microelectronics Corp. have been indicted for leaking trade secrets to a rival Chinese firm [a ‘Chinese IC company located in Shanghai’].”
• U.S.-China military ties
  US Navy commander hails ‘constructive and candid’ talks with Chinese counterparts / SCMP
  “Admiral John Richardson, the US Chief of Naval Operations, tweeted after the meeting with Vice Admiral Shen Jinlong, the head of the PLA Navy, that the two sides were both committed to continuing their dialogue.”
  “Chinese military analysts said this week’s talks were likely to focus on the brewing conflict over Taiwan — one of the key concerns of the Eastern Theatre Command.”
• Commentary
  You can’t contain China: Former US trade chief Robert Zoellick warns Donald Trump / SCMP
  China has a lot more to lose than the US in trade war, says Credit Suisse / SCMP

Previously in The China Project’s trade war coverage:

Trade war, day 189: Chinese commerce ministry mum on details of negotiations