China’s slowdown looms just as the world needs its growth the most

BEIJING — In the vast metropolis of Chongqing in western China, three huge Ford Motor assembly plants have slowed to a fraction of their earlier pace.

In the eastern province of Jiangsu, hundreds of chemical factories have closed.

In Guangdong province in the southeast, factories have idled workers in droves.

China’s huge economy, a major driver of global growth, is cooling just when the world needs its spark. On Monday, Chinese officials said that, during the last three months of 2018, the economy grew at its slowest pace since the global financial crisis.

It is happening at a difficult time. The broader world outlook is beginning to dim. The U.S. economy, which has powered ahead in recent years with strong growth and low unemployment, is showing some signs of a slowdown and is facing higher short-term interest rates that could act as a brake. Europe’s resurgence is beginning to show its age, too, with even Germany’s industrial engine starting to sputter.

In the past, China has helped the world out of such weak spots, most notably during the global financial crisis. But this time, its economy is showing pronounced weakness.

Car sales have plunged in China since last summer. Smartphone sales are falling. The real estate market has stagnated, with deeply indebted developers forced to pay steep interest rates to roll over their debts. And trade frictions with the West, coupled with tough policies from Beijing toward foreign investors, have made Chinese and foreign companies alike warier of further investment in China.

Factories are closing or slowing production.

“European investment in China is going down,” Cecilia Malmström, the European Union’s commissioner of trade, said during an interview in Washington. “That is more because it is becoming increasingly complicated to do business there, with the forced technology transfer, with the lack of transparency, discrimination as compared to Chinese companies, with the massive subsidies of state-owned companies.”

For the heads of state and corporate leaders gathering this week in Davos, Switzerland, for the World Economic Forum, the Chinese economy could be the most pressing issue, even among the trade fights and political uncertainty plaguing the rest of the world.

China on Monday said its economy grew 6.4 per cent during the last three months of 2018 compared with the same time in 2017. For all of 2018, China’s economy grew 6.6 per cent, the slowest pace since 1990, though many economists believe the country’s headline figures are unreliable.

Previous slowdowns in China, like the one in 2015 and 2016, unnerved investors and global business leaders alike, setting off worries that multinational companies would lose profits from their Chinese subsidiaries, or that Chinese companies would dump their surplus production on world markets at very low prices.

Apple surprised markets this month when it warned of weaker-than-expected demand for its iPhones in China. Ford Motor cut output at its Chongqing joint venture by 70 per cent in November, in what Ford says was a move to reduce inventories of unsold cars. Chemical industry experts said that mostly Chinese-owned chemical factories in Jiangsu had been shutting down because of weak demand and stricter environmental enforcement.

The question now is to what extent nervous business leaders elsewhere will postpone investment as China slows, and how many investors will dump their shareholdings.

“The global economy and financial markets are incredibly sensitive to China’s growth and currency outlook,” said Robin Brooks, chief economist at the Washington-based Institute of International Finance. “The immediate financial linkages are relatively modest, but they are swamped by sentiment channels.”

To be sure, further slowing in China is not the only risk the global economy faces. A disorderly British exit from the European Union or a financial crisis in debt-ridden Italy could also be unsettling. In the United States, the national debt is rising and the stimulus from large tax cuts may start to wear off by next year. The Federal Reserve could keep raising interest rates to keep inflation at bay, making it more expensive to borrow money, though it isn’t clear exactly what the American central bank will do.

Still, the big question now is, to paraphrase the line about Las Vegas: Will what happens in China stay in China, or will it become a global problem?

The World Bank aptly titled its review of this year’s outlook “Darkening Prospects.” It warned that China’s slowdown could affect countries that export a great deal to it.

China is the world’s second-largest importer, after the United States. But the composition of its imports is unusual.

It is the largest market for a long list of commodity exporters, from Australia to Uruguay, thanks to its voracious appetite for iron ore, food, energy and other raw materials it needs to keep its economy humming. China is also a large market for factory equipment made in countries like Germany and Japan.

But its imports of manufactured goods overall are few for an economy of its size. That has limited the dependence of workers elsewhere, particularly in the United States, on the Chinese economy.

The global impact of the Chinese slowdown underway could be limited if Beijing decides to borrow and spend its way into more growth. Already this month, China has issued a series of announcements approving six municipal subway construction projects and three new intercity rail lines, at a combined cost of $148 billion.

“The weaker the data gets, the more confident we get that they’ll tip a lot of stimulus into keeping the economy moving,” said Michael Blythe, chief economist at the Commonwealth Bank of Australia in Sydney.

Many of the biggest new construction projects are in China’s western regions, said Wang Min, chairman of Xuzhou Construction Machinery Group, a state-owned giant. The projects have been good for his company, China’s largest producer of huge earth-moving equipment, and its orders have soared in recent months.

But linking together towns in sparsely populated areas of mountains and deserts is expensive. It adds large sums to China’s already very high levels of debt. And the investment may produce scant new economic activity to pay off that extra debt.

Previously accumulated debt lies at the heart of a one-two punch that has laid China’s overall economy low in recent months.

Vice Premier Liu He promised at Davos a year ago that China would rein in the growth of credit within three years. Chinese officials were confident at the time that they could head off a trade war with the United States.

They set about putting stringent limits on the country’s extensive shadow banking networks. Those networks had been providing a gusher of loans to the country’s small and midsize enterprises, which China’s big, state-owned banks have long neglected in favor of lending to state-owned enterprises.

But by the end of April, as the economy started slowing, Chinese officials started to say that three years was not enough time. As credit dried up and many private sector businesses started running low on cash, top regulators expressed worry at a Shanghai financial conference in June that they might have already gone too far.

At the same time, momentum was building in Beijing to extend the influence of the Communist Party and state-owned enterprises, mainly at the expense of the private sector. The private sector is responsible for most job creation in China, and the rhetoric from Beijing further scared investors.

Less than a month after the Shanghai conference, the trade war began in earnest. President Donald Trump imposed the first of three tranches of tariffs on imports from China. Corporate executives say that by the time the third tranche hit in late September, consumer confidence was crumbling. Purchases of big-ticket goods, especially cars, fell fast.

Business confidence slumped as well. A survey of 270 importers in the United States conducted in late December and early January by Panjiva, a trade data service, found that 71 per cent planned to change how and where they bought their goods if tariffs stayed unchanged. And 87 per cent said they would do so if the Trump administration raised tariffs further.

As companies start moving their supply chains, the main beneficiaries seem to be Southeast Asian nations like Vietnam and Indonesia. But to the extent that those countries buy more factory equipment from places like Germany, some of the negative effects overseas from weaker sales in China could be offset.

Most economists are predicting that the first quarter of this year will be weak in China. Many are predicting that the second will be, too.

But quite a few say they still have confidence in China’s consistent, four-decade track record of pulling itself out of slumps quickly. Chinese officials have put new emphasis in recent weeks on rebuilding confidence. And they are at least trying to reassure private companies that the government will not favor state-owned enterprises over them.

“As long as we can create a level playing field,” said Ma Jiantang, a senior economic adviser to China’s Cabinet, “private companies will surely succeed.”

Gears of WTO about to come to a halt amid U.S. refusal to appoint new judges, Canada warns

The operation of the World Trade Organization may soon stall because of U.S. delays in appointing new judges, Canada’s trade minister said as he prepares to convene another round of reform talks in Davos.

Jim Carr, in an interview with Bloomberg’s Kathleen Hays in Tokyo, said the U.S. refusal to appoint judges to the appellate body of the 164-nation WTO means that in “the next number of months” the WTO’s dispute settlement system will effectively stall. That lends urgency to talks set to take place on the sidelines of the World Economic Forum in Davos this week.

“The most urgent problem is the dispute settlement mechanism. Without any new judges being appointed, the gears are going to come to a halt. They’re going to slow down, and it will not be good news,” Carr said.

This week’s talks will be missing representatives from the U.S. and China, the world’s two largest economies, as other nations try to navigate the giants’ trade fight. “You’re not going to have a durable and lasting reform of the WTO unless you have China and the United States involved. You can’t start there, though. But that’s where we’re going to have to end up,” Carr said.

The trade minister’s comments come amid rising trade tensions globally, which have trade-reliant Canada — the world’s 10th-largest economy, for which exports make up about a quarter of gross domestic product — caught in the middle.

Jim Carr, Canada’s international trade minister, speaks during the Ottawa Ministerial for World Trade Organization Reform in Ottawa, Ontario, Canada, on Thursday, Oct. 25, 2018.

Canada, at the request of the U.S., arrested a Huawei Technologies Co. executive on Dec. 1, a move that has triggered a bitter, rising feud with Beijing. President Donald Trump has mused that he may abandon the case against the executive if he reaches a satisfactory trade deal with China, blurring the lines between trade posturing and law enforcement.

‘Unacceptable’ Sentence

China has since seized two Canadians — former diplomat Michael Kovrig, and tour operator Michael Spavor — and sentenced a third, Robert Schellenberg, to death in a drug case after initially sentencing him to a prison term. Canada is seeking the release of Kovrig and Spavor and a more lenient sentence for Schellenberg.

China and Canada are in a “tough patch” of a deep, longstanding relationship, Carr said. He called Schellenberg’s sentence “unacceptable” but said the countries will continue to work together.

“This is not a relationship that began yesterday. It goes back decades. It’s sophisticated, it’s multilayered,” he said, adding: “So we have to talk about the ongoing, continuing commercial relationship between these two countries, and a way through sorting out the current problem.”

‘Butchers Matter’

Carr spoke in Japan, the largest economy in the 11-nation Comprehensive and Progressive Agreement for Trans-Pacific Partnership, or CPTPP trade deal. Canada is the second biggest. Formerly the TPP, it was saved after Trump pulled the U.S. out of the deal shortly after he took office.

The first countries that ratified the CPTPP deal made their first two rounds of tariff cuts to start the year. Carr said there are “very positive reports already,” particularly among Canadian beef, pork and cereal producers, and that other countries are expressing interest “publicly and otherwise” in joining the pact.

“I was at a supermarket earlier in the day in Tokyo and talked to a butcher about selling Canadian beef in Tokyo. We have this great picture of a four year old with a Canadian flag eating a piece of Canadian beef, and a butcher holding up this big slab of Canadian tenderloin,” Carr said. “So, butchers matter.”

U.K. Trade Talks

Canada continues to watch Brexit proceedings — the U.K. is Canada’s biggest European trading partner, and thus the crown jewel of an EU-Canada trade deal that provisionally kicked-in in late 2017.

After Brexit, Canada and the U.K. aim to reach some kind of deal to, essentially, copy-and-paste the EU trade deal over with tweaks. There are “continuing discussions both at the official level and at the political level with the U.K. to make sure everybody understands where everybody else is coming from,” Carr said.

As soon as possible after the U.K. exit from the EU, “we would like to sign an agreement with the U.K. which would be like the EU agreement. But we have to see what the conditions are,” Carr said. He said the U.K., despite not being a Pacific Rim nation, would also be welcome to apply to join the CPTPP.

“If they want to apply, and are prepared to meet the standards, of course they would be considered,” he said.

–With assistance from Kathleen Hays.

Bloomberg.com

China reported to offer to ramp up U.S. imports for six years to eliminate trade imbalance

China has offered to go on a six-year buying spree to ramp up imports from the United States in order to reconfigure the relation between the two countries, Bloomberg reported on Friday, citing people familiar with the matter.

By raising annual goods imports from the U.S. by a combined value of more than $1 trillion, China would seek to reduce its trade surplus, which last year stood at $323 billion, to zero by 2024, one of the people told Bloomberg.

 

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Lawmakers seek harsh penalties against ZTE and Huawei

Huawei's corporate logo on a gray background.

Washington policymakers sought to ratchet up pressure on Chinese telecom giants Huawei and ZTE on Wednesday. A bipartisan group of lawmakers introduced new legislation that would ban exports to companies caught violating US sanctions laws.

It’s the latest signs of a growing technological cold war between the United States and China over telecommunications technology. Huawei has allegedly stolen trade secrets from T-Mobile and other US companies. The Wall Street Journal reported yesterday that Huawei could face criminal charges over the issue.

In a separate case, Canadian officials arrested Meng Wanzhou—Huawei’s chief financial officer and daughter of the company’s founder—at the behest of the US government over allegations that the company had violated US sanctions laws. ZTE also stands accused of violating those laws.

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Feud with Canada is damaging China’s reputation in the world, ambassador warns

Canada’s ambassador to China warned that the spiralling diplomatic feud between the nations was damaging Beijing’s reputation, as the U.S. joined countries criticizing a Canadian citizen’s death sentence as “politically motivated.”

Ambassador John McCallum told reporters Wednesday that China’s prosecutions of Canadian nationals risked undermining their own interests among the world’s business community. McCallum, a former lawmaker, said he believed that argument would prove more compelling to Chinese officials than seeking support from business and foreign governments to pressure Beijing.

“We have to engage the senior Chinese leaders and persuade them that what they are doing is not good for China’s place in the world,” McCallum said, attending a meeting with Prime Minister Justin Trudeau’s cabinet in Sherbrooke, Quebec. “It’s not good for the image of corporate China in the world.”

Canada is navigating what Foreign Minister Chrystia Freeland described Wednesday as a “difficult moment” with China, six weeks after the Vancouver arrest of Huawei Technologies Co. Chief Financial Officer Meng Wanzhou. China has since detained two Canadians over alleged national security threats, moved to execute another for drug-smuggling and mocked Trudeau in daily news briefings.

Trudeau’s government has warned Canadians to exercise caution in the country “due to the risk of arbitrary enforcement of local laws” and sought support from leaders of nations including Argentina, Germany and New Zealand. Following a phone call between Freeland and U.S. Secretary of State Michael Pompeo, the State Department issued a statement criticizing the “politically motivated sentencing of Canadian nationals.”

Freeland said Canada was arguing that China represents a “way of behaving which is a threat to all countries.” Chinese President Xi Jinping has come under increasing criticism in the West over a human rights record that includes crackdowns on human rights lawyers and the mass detention of Uighur Muslims.

Chinese foreign ministry spokeswoman Hua Chunying on Thursday said Freeland “doesn’t know what she’s talking about.” “If the Canadian side made such remarks, the Canadian side’s reputation and image will be damaged,” Hua said.

The feud between Beijing and Ottawa stems from the Dec. 1 arrest of Meng as part of a U.S.-led effort to extradite her over alleged sanctions violations. The U.S. and its allies have taken a series of steps in recent weeks to bar the Chinese telecommunications giant from sensitive networks over spying fears, including a probe into suspected trade-secrets theft by federal prosecutors in Seattle.

China has denounced the effort as unjustified and demanded Meng’s immediate release. Days after her arrest, China’s spy agency detained Canadians Michael Kovrig and Michael Spavor on suspicion of “activities endangering national security,” although authorities have provided no evidence and deflected questions about whether the actions were taken in retaliation for Meng.

Hua, the Chinese foreign ministry spokeswoman, shrugged off a question about Canada’s efforts to muster international pressure during a briefing Wednesday.

“Actually, you can count by the fingers of your hand the few allies of Canada that chose to side with it on this issue,” Hua said. “These several countries can by no means represent the entire international community.”

Still Held

Meng is free on bail pending her next court hearing. But Kovrig, who was on leave from his foreign service posting in Hong Kong, and Spavor, an entrepreneur who ran tours into North Korea, remain in custody. A third Canadian, Robert Schellenberg, had his earlier 15-year sentence for drug smuggling increased to execution during a retrial Monday in the northeastern Chinese city of Dalian.

“My first priority by far is to do everything in my capacity to secure the release of the two Michaels as quickly as possible, and to help to save the life of Mr. Schellenberg,” McCallum said earlier Wednesday.

McCallum said Kovrig and Spavor are each being questioned up to four hours per day and that he has visited both, along with Schellenberg. He cautioned that efforts to build international pressure for their release were unlikely to be effective unless Beijing believed it would benefit from doing so.

“There are many fronts we are working on, but one of the main ones is to persuade China, not necessarily through Canadians, but through corporate and government leaders around their world, that this behavior is not in their interest,” McCallum said. “We have a lot of work yet to do.”

With assistance from Dandan Li, Stephen Wicary, Kasia Klimasinska and Kevin Hamlin

Bloomberg.com

Brexit vote ups pressure on U.K., Canada to strike bilateral trade deal

The U.K. and Canada are on track to forge a bilateral agreement that would immediately take effect should Britain be forced to leave the European Union without a deal on March 29, the U.K.’s high commissioner to Canada says.

“We’ve made a huge amount of progress talking about what that agreement might look like and those informal discussions have been conducted on the basis that we both know this is incredibly important to us,” High Commissioner Susan le Jeune d’Allegeershecque, the U.K.’s top diplomat in Ottawa, said in an interview. “The U.K. is the biggest trading partner Canada has within the EU and we need to preserve those benefits for businesses on both sides of the Atlantic.”

The landslide vote against Prime Minister Theresa May’s Brexit plan has upped the chances of a “no deal” Brexit that would see the U.K. abruptly cut out of the EU and, by extension, Canada’s newly minted trade deal with Europe, the Comprehensive Economic and Trade Agreement (CETA).

Though a hard Brexit is still not a done deal, the increasing possibility of that outcome ups the pressure on Canada to make alternative arrangements that would maintain trade flows with its most important European trading partner, analysts say. The U.K. receives 40 per cent of Canada’s exports to Europe and is its third-largest export market overall. It is also Canada’s second largest destination for foreign direct investment after the United States.

Informal talks between Canada and the U.K. have been ongoing “for some time now” and are focused on transposing the terms of the current CETA into an alternative arrangement that would maintain preferential market access, d’Allegeershecque said.

People’s Vote supporters watch the Parliamentary debate live in Parliament Square ahead of Theresa May’s Brexit withdrawal plan.

In the fall of 2017, Prime Minister Justin Trudeau and May told reporters they had agreed to a “seamless” transition from CETA after the U.K. leaves the EU.

“We see huge opportunities here and we think CETA opened up a lot of doors,” said d’Allegeershecque. Canada is currently the U.K.’s 17th-largest trading partner.

A bilateral agreement would require legislation to be passed in both Canada and the U.K. by March 29, a process that “I think will be very difficult,” said Armand de Mestral, a senior fellow at the Centre for International Governance Innovation and professor emeritus of international law at McGill University in Montreal.

“Has a bill been drafted?” he said. “Is the agreement fully negotiated? Trudeau has said he wants a seamless transition but that’s easier said than done and the closer you get to that March 29 deadline, the harder it is to put together.”

The U.K.’s high commissioner said she is “as confident as I can be,” that the deal will be ready in time.

“On both sides of the Atlantic we know what we need to do to make sure this is in place,” she said, adding it would only come into play in the case of a hard Brexit in March.

If Britain manages to negotiate a deal that includes an orderly transition period, trade would continue under the terms of CETA until Britain has formally left the bloc. At this point the U.K. would be free to negotiate a new free trade agreement with Canada that would include elements “we both might like,” she said.

In a statement, a spokesperson for Global Affairs Canada said Canada and the U.K. are having “technical discussions on ways to maintain preferential market access in the case of a ‘no-deal’ Brexit, while recognizing the U.K.’s lack of jurisdiction to negotiate an FTA while it remains a member of the EU.”

The overwhelming rejection of May’s deal has thrown the Brexit process into disarray, with little certainty as to whether it will push the U.K. into a hard break with the EU, trigger an election or lead to a repeat referendum that could overturn the leave mandate.

May has indicated that she will appeal to the European Union in Brussels for more concessions — though the bloc has so far refused further negotiations. Lawmakers will vote Wednesday on a no-confidence motion in her government.

“When we talk about trade diversification, the U.K. (is) very important to us, so this whole process is quite consequential,” said Mark Agnew, director of international trade policy for the Canadian Chamber of Commerce.

The main concerns he has heard from the business community have come from goods-exporting firms worried about how tariffs might change and from Canadian companies using the U.K. as a base for their European operations, he said.

While he expects Trudeau’s majority government to be able to push through any legislation on a deal, passage in the U.K. could present more challenges, he added.

“I don’t think we should underestimate the time this is going to take,” he said. “March 29 is moving quickly toward us on the calendar.”

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No talks planned on U.S. metals tariffs after Trudeau, Trump chat discussing ‘next steps’

OTTAWA — The leaders of Canada and the United States discussed U.S. tariffs on Canadian steel and aluminum on Monday but no talks on lifting the sanctions are planned, a Canadian source familiar with the matter said.

After the conversation between Prime Minister Justin Trudeau and U.S. President Donald Trump, Trudeau’s office released a statement saying the two men had “discussed next steps in addressing steel and aluminum tariffs.” It gave no details.

A White House statement said the two leaders discussed “bilateral trade issues,” but did not elaborate.

The Canadian source, who requested anonymity given the sensitivity of the situation, said the phrase “next steps” was more of a general expression.

“There are no specific negotiations taking place, nor are there any specific negotiations scheduled,” said the source.

“The prime minister raises it with the president every time he talks about it.”

The offices of Trudeau and Canadian Foreign Minister Chrystia Freeland declined to give more details.

Trudeau’s government strongly opposes the sanctions, which Trump said in late May he was imposing for reasons of national security. Ottawa unveiled a series of counter measures against U.S. goods as a retaliatory measure.

Product at a steel mill in Hamilton, Ont.

The dispute threatened to overshadow the signature of a new continental trade pact with the United States and Mexico last November. Although Canadian officials initially suggested Ottawa might not take part if the sanctions were still in place, Trudeau ended up signing.

The new United States-Mexico-Canada Agreement (USMCA) is designed to replace the 1994 North American Free Trade Agreement (NAFTA), which Trump had threatened to abandon unless major changes were made.

Such a move could have crippled the economies of Canada and Mexico, which both send more than 75 per cent of their goods exports to the United States every month.

The statement from Trudeau’s office said the two men had discussed the importance of trade and jobs in the wake of the talks to renegotiate NAFTA.

Although Trump said on Dec. 1 he would soon give formal notice of his intention to terminate NAFTA, giving six months for lawmakers to approve the USMCA, he has so far not acted.

Industry officials say U.S. Senate Republicans asked Trump to delay immediate termination to give Congress additional time in 2019 to take up the issue.

A person close to Republican Senator Chuck Grassley, the new chair of the finance committee that oversees trade issues, said he was uneasy about terminating NAFTA given “the uncertainty it would cause for U.S. businesses and farmers and the damage that uncertainty could do.”

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Beijing heads to trade talks with ‘good faith’ as Trump says China’s weak economy incentive for deal

BEIJING — China has the “good faith” to work with the United States to resolve trade frictions, the Foreign Ministry said on Monday, as the world’s two largest economies resumed talks in a bid to end their trade dispute.

U.S. officials are meeting their counterparts in Beijing this week for the first face-to-face talks since U.S. President Donald Trump and China’s President Xi Jinping agreed in December to a 90-day truce in a trade war that has roiled global markets.

Trump said on Sunday that trade talks with China were going very well and that weakness in the Chinese economy gave Beijing a reason to work toward a deal.

“I think China wants to get it resolved. Their economy’s not doing well,” Trump told reporters at the White House before boarding the Marine One presidential helicopter. “I think that gives them a great incentive to negotiate.”

The two sides agreed to hold “positive and constructive” dialog to resolve economic and trade disputes in accordance with the consensus reached by the countries’ leaders, Foreign Ministry spokesman Lu Kang told reporters at a regular news briefing.

“From the beginning we have believed that China-U.S. trade friction is not a positive situation for either country or the world economy. China has the good faith, on the basis of mutual respect and equality, to resolve the bilateral trade frictions,” Lu said.

Trump imposed import tariffs on hundreds of billions of dollars of Chinese goods last year and has threatened more to pressure Beijing to change its practices on issues ranging from industrial subsidies to intellectual property to hacking. China has retaliated with tariffs of its own.

“As for whether the Chinese economy is good or not, I have already explained this. China’s development has ample tenacity and huge potential,” Lu said. “We have firm confidence in the strong long-term fundamentals of the Chinese economy.”

Lu also said that Vice President Wang Qishan would attend the World Economic Forum in Davos, Switzerland in late January, but added that he had not yet heard of any arrangements for a meeting with Trump there.

By Monday afternoon, few details had emerged of the talks, which were scheduled to run through Tuesday.

The U.S. delegation, led by Deputy U.S. Trade Representative Jeffrey Gerrish, includes under secretaries from the U.S. Departments of Agriculture, Commerce, Energy and Treasury, as well as senior officials from the White House.

Tu Xinquan, a Chinese trade expert at Beijing’s University of International Business and Economics, told Reuters before talks began that the meetings would likely focus on technical issues and leave major disagreements to more senior officials.

“China’s economy is significantly slowing down, and the U.S. stock market is declining quickly. I think the two sides need some kind of agreement for now,” Tu said.

Data last week showed manufacturing has slowed in both China and the United States, though the U.S. Labor Department on Friday reported a surge in new jobs in December along with higher wages.

Officials have given scant details on concessions that China might be willing to make to meet U.S. demands, some of which would require structural reforms unpalatable for Chinese leaders.

Even if a trade agreement is reached soon, analysts say it would be no panacea for China’s economy, which is expected to continue decelerating in coming months.

China’s stridently nationalist Global Times tabloid said in an editorial late on Sunday that statements from both sides that they hoped to reach a deal were cause for optimism, but that Beijing would not cave in to U.S. demands.

“If China was going to raise the white flag, it would have done it already,” the paper said.

© Thomson Reuters 2019