President Donald Trump said on Friday there was "a very good chance" the United States would strike a deal with China to end their trade war and that he was inclined to extend his March 1 tariff deadline and meet soon with Chinese President Xi Jinping.
U.S. and Chinese negotiators had made progress and will extend this week's round of negotiations by two days through Sunday, Trump told reporters at the White House as he met with his top negotiators and their counterpart, Chinese Vice Premier Liu He.
"I think that we both feel there's a very good chance a deal will happen," Trump said.
Liu agreed there had been "great progress".
"From China, we believe that (it) is very likely that it will happen and we hope that ultimately we'll have a deal. And the Chinese side is ready to make our utmost effort," he said at the White House.
The Republican president said he probably would meet with Xi in March in Florida to decide on the most important terms of a trade deal.
Extending the deadline would put on hold Trump's threatened tariff increase to 25 percent from 10 percent on $200 billion (153 billion pounds) of Chinese imports into the United States. That would prevent a further escalation in a trade war that already has disrupted commerce in goods worth hundreds of billions of dollars, slowed global economic growth and roiled markets.
Optimism that the two sides will find a way to end the trade war lifted stocks, especially technology shares. The S&P 500 stock index reached its highest closing level since Nov. 8. Oil prices rose to their highest since mid-November, with Brent crude reaching a high of $67.73 a barrel.
Trump and Treasury Secretary Steven Mnuchin said the two sides had reached an agreement on currency. Trump declined to provide details, but U.S. officials long have expressed concerns that China's yuan is undervalued, giving China a trade advantage and partly offsetting U.S. tariffs.
Announcement of a pact aimed at limiting yuan depreciation was putting "the currency cart before the trade horse," but would likely be positive for Asian emerging market currencies, said Alan Ruskin, global head of currency strategy at Deutsche Bank in New York.
"How can you agree to avoid excessive Chinese yuan depreciation or volatility if you have not made an agreement on trade that could have huge FX implications?" Ruskin asked in a note to clients.
In a letter to Trump read aloud by an aide to Liu at the White House, Xi called on negotiators to work hard to strike a deal that benefits both country.
Trump said a deal with China may extend beyond trade to encompass Chinese telecommunications companies Huawei Technologies and ZTE Corp.
The Justice Department has accused Huawei of conspiring to violate U.S. sanctions on Iran and of stealing robotic technology from T-Mobile US Inc.
Chinese peer ZTE was last year prevented from buying essential components from U.S. firms after pleading guilty to similar charges, crippling its operations.
MEMORANDUMS NO MORE
Trump appeared at odds with his top negotiator, U.S. Trade Representative Robert Lighthizer, on the preliminary terms that his team is outlining in memorandums of understanding for a deal with China. Trump said he did not like MOUs because they are short term, and he wanted a long-term deal.
"I don't like MOUs because they don't mean anything," Trump said. "Either you are going to make a deal or you're not."
Lighthizer responded testily that MOUs were binding, but that he would never use the term again.
Reuters reported exclusively on Wednesday that the two sides were drafting the language for six MOUs covering the most difficult issues in the trade talks that would require structural economic change in China.
Negotiators have struggled this week to agree on specific language within those memorandums to address tough U.S. demands, according to sources familiar with the talks. The six memorandums include cyber theft, intellectual property rights, services, agriculture and non-tariff barriers to trade, including subsidies.
An industry source briefed on the talks said both sides have narrowed differences on intellectual property rights, market access and narrowing a nearly $400 billion U.S. trade deficit with China. But bigger differences remain on changes to China's treatment of state-owned enterprises, subsidies, forced technology transfers and cyber theft of U.S. trade secrets.
Lighthizer pushed back when questioned on forced technology transfers, saying the two sides made "a lot of progress" on the issue, but did not elaborate.
The United States has said foreign firms in China are often coerced to transfer their technology to Chinese firms if they want to operate there. China denies this.
The U.S. Chamber of Commerce on Friday urged the U.S. government to ensure the deal was comprehensive and addressed core issues, rather than one based on more Chinese short-term purchases of goods.
China has pledged to increase purchases of agricultural produce, energy, semiconductors and industrial goods to reduce its trade surplus with the United States.
China committed to buying an additional 10 million tonnes of U.S. soybeans on Friday, U.S. Agriculture Secretary Sonny Perdue said on Twitter. China bought about 32 million tonnes of U.S. soybeans in 2017. The commitments are a "show of good faith by the Chinese" and "indications of more good news to come," Perdue wrote.
China was the top buyer of U.S. soybeans before the trade war, but Beijing's retaliatory tariffs on U.S. soybeans slashed business that had been worth $12 billion annually.
A military court on Wednesday convicted Fang Fenghui, former Chief of Staff of China’s Central Military Commission Joint Staff Department, on three counts of crime.
The court sentenced him to life imprisonment according to the law.
Fang was found guilty of accepting and offering bribe as well as holding a huge amount of property from unidentified sources.
“He was also deprived of his political rights for life and had his personal properties confiscated,’’ the judgment stated.
Report says the illicit money and properties confiscated will be turned over to the state coffers.
China firmly opposes mercenary activities in Africa, and will always support African nations' pursuit of peace and prosperity, said Chinese Permanent Representative to the United Nations Ma Zhaoxu.
Mercenary activities are a threat to peace and stability in African countries, and China calls for greater international efforts to address the problem, said Ma, as Chinese President Xi Jinping's special representative at a UN Security Council meeting on mercenary activities in Africa.
He said these activities interfere with the internal affairs of the developing countries, and infringe on their sovereignty, independence and territorial integrity, adding that China stands firmly against such activities.
The Chinese representative urged the international community to support African countries in accelerating their development, reducing poverty, eliminating the root causes for conflict and turmoil, and stepping up socio-economic development in African countries.
Ma also pledged China's continued support for Africa to achieve peace, stability and development, and expressed the hope for China and Africa to jointly build a closer community with a shared future.
Monday's meeting was called by Equatorial Guinea, which holds the rotating presidency of the Security Council in February.
Shortly before the meeting, Teodoro Obiang Nguema Mbasogo, president of Equatorial Guinea, spoke highly of the bilateral relations between his country and China during his meeting with Ma.
Obiang also said he attached importance to Equatorial Guinea's relations with China, adding that he was willing to further promote cooperation between the two countries in various fields.
The complex relationship between Africa and China has become even more complicated this year. Initially, 2018 was set to reaffirm the bond through the latest Forum on China-Africa Cooperation summit held in Beijing in September.
The summit delivered its usual pageant of African leaders, side deals, and the announcement of a USD$60 billion financing package. The year also saw the recurrence of misgivings about the relationship.
The most explicit theme of this conversation was debt. Donald Trump’s US administration added fuel to smouldering anxiety, and China found itself having to defend its lending to Africa – at home and globally. At the same time, African governments are battling rumours that they are about to hand over state assets to the Chinese.
The debt debate is flawed – not least for underestimating Western contributions to African debt. Nevertheless, it is revealing. In particular, the debate reflects an anxiety that has haunted relations between China and the continent since the beginning of this century: the massive power gap between China and individual African countries.
The constant rhetoric of win-win cooperation between China and Africa has never adequately answered the simple structural question at the heart of the relationship. That is: how is an economy the size of Benin’s or Togo’s, for example, supposed to meaningfully engage with the Chinese behemoth? It’s a bit like trying to speed up your bicycle by grabbing on to a passing jumbo jet. It can take you to the next level, or it can simply rip off your arms.
The fundamental economic and power imbalance between China and African countries has led to the relationship being criticised as neocolonial. The truth, however, is that African governments exercise more agency than they are given credit for. This includes frequently playing China and traditional Western development partners off against one another.
The word “agency” is key here: to what extent is Africa able to freely make its own decisions and drive the best deals with China?
Our new research focused on this issue. We looked at two emerging areas shaping African agency in relation to China. These are reforms to the African Union (AU) and the Belt and Road Initiative (BRI). The initiative involves a massive infrastructure rollout aimed at linking China to Europe and beyond. The aim is to set up a zone of shared development that encompasses Central and Western Asia and Africa.
The AU and the Belt and Road initiative
The AU has proposed a set of reforms to streamline African negotiations at events like the FOCAC under the auspices of the continental body. This could be seen as a step towards the frequently repeated goal of Africa negotiating collectively with China. But, in fact, we show that it faces significant resistance from within the continent. This comes both from powerful states worried about losing control of their bilateral relationships with China, and from smaller states worried about being excluded.
China’s BRI reveals other aspects of African agency. It’s structured by numerous bilateral agreements, but is also subject to regional as well as local pressures. The way the initiative’s projects have been pulled into national debates involving opposition politics shows that the range of actors constituting African agency is potentially much wider than national governments.
We argue that before African agency can be maximised, this aspect of relations between China and particular African governments needs to be taken into account. Thinking about the issue has so far fixated on the role of national governments, to the exclusion of other actors. The biggest include regional economic communities such as Nepad and the AU. The smaller ones comprise opposition parties, civil society, local businesses and communities. All contribute to and constitute African agency.
What is this agency, how does it work and how can it be strengthened?
Understanding African agency
We identified three key areas where African agency can be located.
Firstly, African agency is expressed in the frameworks and documents that govern bodies like the forum. For example, in the early days arrangements paid relatively little attention to the issue of industrialisation. That changed after the formal adoption in 2015 of the AU’s Agenda 2063 – its blueprint for Africa’s sustainable development. The forum held that year saw an uptick in how many times the issue was mentioned.
By 2016, African industrialisation had become a key initiative of China’s presidency of the G20. Beijing directed an unprecedented level of G20 attention to the continent.
By 2018, the Beijing summit ended with fewer declarations of intent relating to industrialisation. Instead, it had become integrated into the continental and bilateral planning processes. In particular, it features regularly in discussions on development financing. Likewise the word “training” was mentioned over 40 times and in virtually every section of the Beijing Action Plan.
This suggests there is a shift from declarations of intent to more specific engagement towards industrialisation. This doesn’t necessarily guarantee the success of Africa’s industrialisation. But it shows that China responds to African agenda-setting.
Secondly, African agency is diffused across various levels and among various actors. Any analysis of African agency has to consider the complex interactions between continental bodies like the AU, regional economic blocs, national governments, civil society, business, and local communities. Each plays a role in shaping African decision making in relation to China. Partnerships that cut across the state-business-civil society divide are as important as state led initiatives in articulating policy initiatives in relation to China.
Thirdly, it’s important to think of the changing terms of agency as African governments face growing debt burdens via such initiatives as the BRI. For instance, rumours that the Zambian government offered its national electricity supplier as collateral in exchange for a new tranche of Chinese loans have reportedly caused political division at home.
Critics have focused on debt as diminishing African agency. What they’ve ignored are the significant financial and reputational risks to China.
Maximising African agency
As Africa becomes more involved in global initiatives, and as it moves towards greater continental integration via AU reforms and the Continental Free Trade Agreement, the need increases to think harder and more creatively about what African agency means. It isn’t enough to simply reiterate the call for Africa to negotiate collectively with China – not least because this disregards the complex interactions between African governments.
Rather, it’s time for more comprehensive thinking about how African agency manifests across actors and geographic scales. Only once we have a firmer handle on this can we move towards maximising it.
Yu-Shan Wu, Foreign policy researcher and doctoral candidate, University of the Witwatersrand; Chris Alden, Professor of International Relations, London School of Economics and Political Science, and Cobus van Staden, Senior Researcher: China Africa, South African Institute of International Affairs
Asian shares crept back from four-month highs on Friday as a dismal survey on Chinese factory activity dulled optimism about the prospects for a Sino-U.S. deal on tariffs.
The Australian dollar, a liquid barometer of investor sentiment toward China, skidded 0.5 per cent after the Caixin/Markit index of manufacturing fell to its lowest since February 2016.
That was more downbeat than the official version of the index and inflamed fears for the economy.
Investor caution is also mounting ahead of U.S. jobs data later in the session with analysts unsure what impact the government shutdown might have had employment.
MSCI’s broadest index of Asia-Pacific shares outside Japan slipped 0.2 per cent, though that followed a stellar 7.2 percent gain in January.
Japan’s Nikkei went flat, while Shanghai blue chips held onto a 0.7 per cent gain. E-Mini futures for the S&P 500 eased 0.1 per cent and spread betters pointed to a marginally mixed start for European bourses.
Stocks had taken heart after U.S. President Donald Trump said he would meet with Chinese President Xi Jinping soon to try to seal a comprehensive trade deal as the top U.S. negotiator reported “substantial progress” in the talks.
Beijing’s trade delegation said the talks made “important progress” for the current stage, China’s official Xinhua news agency reported on Friday.
The previously upbeat mood was also chilled somewhat by White House insistence that March 1 was a hard deadline for a deal, a failure of which would lead to an increase in U.S. tariffs on Chinese goods.
“Analysts mostly remain deeply skeptical that a genuine trade deal can be done on this time frame,” economists from Commonwealth Bank of Australia said in a note.
“We are less pessimistic since these negotiations are being conducted by senior politicians, not by trade bureaucrats,” they added.
“Both sides also have an incentive, and arguably a growing incentive, to get a meaningful deal done.”
The optimism supported Wall Street with the S&P 500 ending Thursday with a gain of 0.86 per cent.
The Nasdaq jumped 1.37 per cent on the back of a near 11 per cent rise in Facebook Inc. The Dow slipped 0.06 per cent.
Over January, the S&P 500 rose 7.9 per cent, its best monthly performance since late 2015 and its strongest start to a year since 1987.
The Nasdaq gained 9.7 per cent in the month and the Dow rose 7.2 per cent.
Equity markets have also been relieved by a change of heart at the U.S. Federal Reserve, which this week surprised many by all but abandoning plans for further rate hikes.
Investors responded by pricing in a one-in-three chance that interest rates could actually be cut this year.
Yields on two-year Treasuries were down almost 15 basis points on the week so far, which if sustained would be the largest weekly decline since mid-2010.
U.S. crude futures edged up 5 cents to $53.87 per barrel, while Brent rose 13 cents to $60.97.