China's Vice-Premier Liu He, right, with US Trade Representative Robert Lighthizer, second left, and Treasury Secretary Steve Mnuchin, left, before talks at the Xijiao Conference Center in Shanghai. Photo: AFP / Ng Han Guan

Different era, different world order. Back in 1972, the United States under then-president Richard Nixon signed the Shanghai Communiqué in the pulsating heart of China.

It was the first step in a move to normalize diplomatic relations between Washington and Beijing amid the permafrost of the Cold War.

Fast forward 47 years, and it became crystal clear that nothing would be signed after two days of trade talks between the world’s two economic superpowers against the backdrop of the glittering cathedrals of commerce in old Shanghai.

Xinhua, the official Chinese news agency, tried to put a positive spin on the proceedings. “The two sides conducted frank, highly efficient and constructive in-depth exchanges on major issues of common interest in the economic and trade field,” it said, adding that another round of talks would take place in September.

Yet before discussions resumed on Wednesday at the Xijiao Conference Center, the omens were ominous.

“What riles Chinese analysts is Washington’s new ideological fusillade against China with the Communist Party of China in the crosshairs,” Global Times, which is owned by the CCP’s official newspaper, the People’s Daily, said in an editorial.

“This will undermine the foundation of bilateral relations. Beijing has clearly recognized this change. But confrontation is never a sensible solution,” it added. “To avoid the two big powers eventually falling out, more talks are needed now. Keeping debates open can inject more resilience into policymaking. [But] it’s worrying that Washington now has been shrouded in a new red scare.”

Hardly a conducive atmosphere before the US team headed by Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin strolled out of the luxurious Hyatt on the Bund hotel.

Four hours of talks with Beijing’s top trade negotiator, Vice-Premier Liu He, and his delegation followed behind closed doors before American officials left for the airport without issuing a media briefing.

Social media

Earlier, a tweet by US President Donald Trump highlighted the challenges ahead.

“My team is negotiating with them now, but they always change the deal in the end to their benefit,” Trump tweeted on Tuesday.

“China is doing very badly, [the] worst year in 27 – was supposed to start buying our agricultural product now – no signs that they are doing so. That is the problem with China, they just don’t come through,” he added.

In a few keystrokes on his favorite social media site, Trump again ratcheted up the pressure.

So far, the conflict has revolved around a barrage of tit-for-tat tariffs after discussions stalled over crucial “issues” such as excessive state subsidies to China’s corporate juggernauts, intellectual property rights and cyberspying.

For President Xi Jinping’s administration, red lines include dropping tariffs and sanctions which have been imposed by Washington, as well as targeting its state-run capitalist model.

Last month, the fallout from the year-long dispute saw the US more than double duties to around 25% on Chinese imports worth US$200 billion.

In response, Beijing increased tariffs on American products worth $60 billion before a ceasefire was put in place after the tête-à-tête between Trump and Xi at the Group of 20 summit in Osaka in June.

“Realistically, this round of talks [was] about clarifying where the two sides stand after a significant lull in engagement,” Jake Parker, a senior vice-president at the US-China Business Council, told the AFP news agency.

“There also needs to be a focus on rebuilding the trust that was present in April but has since dissipated,” he added.

Behind the scenes, there are mixed assessments about the world’s second-largest economy.

Hours before the talks, the National Bureau of Statistics of China revealed that manufacturing activity contracted for the third straight month in July.

Major companies

The official Purchasing Managers’ Index, a gauge to the health of major companies, came in at 49.7 which was a slight rise from 49.4 in June. Since the 50-point mark separates expansion from contraction, confidence remains fragile in the industrial sectors.

Even the non-manufacturing PMI numbers for July dipped from 53.7 compared to 54.2 for the previous month. But at least they were in positive territory.

“The PMIs still appear consistent with a renewed slowdown in year-on-year growth in industrial output and broader economic activity,” Julian Evans-Pritchard, a senior China economist at Capital Economics, said in a note to the media.

“With the headwinds to growth from US tariffs, cooling global demand and tighter property controls likely to intensify, we continue to anticipate further monetary easing in the coming months,” he added.

Last week, China’s GDP growth of 6.2% hit a 27-year low in the second quarter, buffeted by a slowing economy and the trade war. Even so, it is not all doom and gloom. A report released by UBS painted a more subtle picture.

“For the second month in a row, [our] data suggests China’s economic growth is stable. Changes in most of our growth indicators are small compared with June, as well as for our overall activity index. July preliminary data suggests that Q3 growth is starting out at par with Q2,” the Swiss multinational investment bank stated this week.

“[Our] team expects the negative impact of higher tariffs will continue to come through in H2, property activities to face more headwinds, infrastructure investment to rebound on improved financing and policy supports, while consumption to remain resilient. Overall, they expect GDP growth to stabilize at 6.1% in H2 and 6.2% [for the] full year,” it added.

In the meantime, discussions in Shanghai wrapped up without a significant breakthrough. It appeared the only thing Lighthizer and Mnuchin signed off on after their whirlwind trip was the registry at the Hyatt on the Bund.

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