China, US Set For Key Talks Amid Rising Tensions

Negotiators from the United States and China will on Saturday discuss the "phase one" trade deal signed earlier this year – before the coronavirus slammed the world economy and relations between the two economic powers took a turn for the worse.

Washington and Beijing's January deal represented a partial truce in their months-long trade war, and obligated Beijing to import an additional US$200 billion in American products over two years, ranging from cars to machinery to oil to farm products.

"The outcome of the trade talk will signal if both sides are willing to continue to keep the deal, which will signal whether the relationship will deteriorate further," said Iris Pang, chief economist for greater China at financial services giant ING. 

Neither the US nor the Chinese government has confirmed the talks but the deal mandates meetings every six months after it takes effect, which would be Saturday.

Even with tensions high and both countries reeling from the shock of Covid-19 – which has caused a historic contraction in global growth and trade – analysts don't expect the talks to produce major changes in the agreement.

"Until now, China has been relatively passive and the United States has been relatively proactive," said Raymond Yeung, chief economist for greater China at ANZ bank. "In my opinion, there shouldn't be much change coming from China in terms of trade, cooperation or opening up the market, the key still lies in the US side."

The US-based Peterson Institute for International Economics said Chinese agricultural purchases at the end of June were far from where they should be at that point in the year.

They had reached only 39 percent of their semi-annual target, according to US figures, or 48 percent based on Chinese figures.

Beijing "is lagging but it looks like China still wants to commit, despite the escalation of the US-China tensions", said Tommy Xie, head of research on China at OCBC Bank.

Bert Hofman, director of the East Asian Institute in Singapore, said Chinese agricultural purchases may improve later in the year but it will struggle to hit targets for energy products, given low global prices. (AFP)