US aims for low-hanging fruit in Chinese trade talks

15 April 2019

(Sharecast News) - The US watered down demands that China must cut industrial subsidies as a condition to reach a final trade deal after Beijing refused to do so.
According to sources from <em>Reuters</em>, the industrial subsidies were a complicated hurdle in the talks since they are intertwined with the Chinese government's industrial policy.

China currently grants financial aid and tax breaks to state-owned firms and to sectors seen as strategic for long-term development.

Any mention of subsidies in an eventual deal are "not going to be very detailed or specific," one source told Reuters.

Over the weekend, US Treasury Secretary Steve Mnuchin said he was hopeful talks between the two sides were "close to the final round" of negotiations and the deal would go "way beyond" previous agreements.

But another source close to the talks told Reuters that there was no prospect of a deal that changes the way China's economy operates or makes Xi "look weak", but said the likely deal was "going to be better than what we've had".

The US is said to be focusing on other areas with more achievable demands.

China is on the minds of investors for other reasons this week, with data releases that will be closely examined.

On Monday, further evidence emerged that China is aggressively stimulating its economy via the banking system, with broad credit growth shown to have accelerated again in March, with RMB 2.8trn in aggregate credit issued against a consensus forecast of RMB1.8trn.

Last month Beijing set a fiscal stimulus package of RMB 4trn, of which around half was tax and fee cuts, with the rest coming from local government infrastructure projects.

Chinese gross domestic product figures, along with industrial production and retail sales, are all due in the early hours of Wednesday.

Economists expect quarter-on-quarter GDP growth to ease to 1.4% for the first three months of the year from the 1.5% seen at the end of last year, or to 6.3% on a year-over-year basis from 6.4% in the fourth quarter. This is better than the 6.0% target that the government has set.