The background noise factor could play a role in the China-US trade talks. Photo: iStock

There is a danger that the trade talks between China and the United States this week will be drowned out by the incessant noise of background music.

On Monday, low-level discussions took place to pave the way for the main event, which is scheduled for February 14 and 15, with US Treasury Secretary Steven Mnuchin and Trade Representative Robert Lighthizer spearheading the American delegation in Beijing.

After the initial round in Washington last month, both sides will have slightly less than two weeks to resolve their differences with the March 1 deadline looming.

On the horizon is the threat of a 25% hike on Chinese imports to the US worth US$200 billion coming into force.

“The reality is that olive branches, rather than rose stalks, are the best that anyone [anchored to reality] may be looking for,” a note released by Japan’s Mizuho Bank stated. “First, as of late last week, President [Donald] Trump had declared that he would not be meeting with President Xi [Jinping] before the [March 1] deadline.

“However, Trump has also categorically stated that there will be no US-China trade deal until he and Xi have met. Therefore, that is as good as guaranteeing that there will be no deal before the truce expires.”

Yet, there are other factors at play here such as the Huawei saga.

Countries such as Australia, New Zealand, Japan, the US and the United Kingdom have restricted market access, while last week Germany announced it was considering a similar move.

In January, the US Justice Department came out with sweeping charges against China’s telecom giant, including bank fraud, obstruction of justice and technology theft.

US sanctions

Key accusations revolve around violations of US sanctions on Iran, an allegation which has been leveled against Chief Financial Officer Meng Wanzhou, the daughter of billionaire founder Ren Zhengfei.

She was arrested in Canada on December 1 and could now face extradition to the US. Meng and the company have categorically denied the charges after being dragged into the broader dispute between the world’s two largest economies.

Before the row broke out, Washington had accused Beijing of intellectual property violations, forced technology transfer and the country’s state-subsidies model, which has underpinned the economy.

The White House also singled out the “Made in China 2025” plan, which encompasses an array of industries, including the Internet of Things and interconnected smart technology linked through artificial intelligence, or AI.

YouTube video

All of this will be powered by super-fast 5G networks, with Huawei the beating heart of these high-speed strands.

Global Times opinion writer Hu Weijia underscored the challenges ahead on Monday:

“China doesn’t want to engage in a technological Cold War with anyone, not to mention the US, which is the global leader in science and technology. But if Washington pulls the world into a technological Cold War, China will have no choice but to firmly fight back.

“It is impossible for the US to completely pull Chinese enterprises out of the global 5G network. Huawei has become one of the world’s leading telecom equipment suppliers, capturing a large share of the market in many countries and regions.

“If the US bans those countries from buying telecom components from Huawei to repair and upgrade their equipment, their telecom networks can hardly run smoothly.”

Apart from the Huawei controversy, Beijing also has problems on the domestic front with a rapidly cooling economy. A further hike in US tariffs would hit waning business confidence and only add to the general economic malaise.

Downward trend

At the end of last year, a raft of data showed a distinct downward trend.

Last month, the National Bureau of Statistics announced that GDP growth for 2018 slowed to 6.6%, a level not seen since 1990, as manufacturing stalled and consumer spending dipped.

Smartphone shipments have also dropped while car sales plunged 5.8% last year to 22.35 million vehicles. This was the first annual decline since 1990.

“The old foundations of the US-China commercial relationship have cracked, and a new basis for the two is still unsettled,” Daniel H. Rosen, a senior associate in China Studies at the Center for Strategic and International Studies, and Scott Kennedy, a senior adviser in China Studies, wrote in commentary, entitled Building a Better Deal with China, for the Washington-based think tank.

As the clock ticks down to March 1, the background static will only increase.

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