Trade War with China

Stronger policy support is in the pipeline to shore up China's rural areas and agriculture as the central authorities aim at tackling the "tough tasks" in their development.

For 16 years in a row, the country's "No. 1 central document," the first policy statement released by the central authorities each year and seen as an indicator of policy priorities, focused on agriculture, rural areas and farmers' issues.

Coming at a time when the Chinese economy faces increased pressure, the document, made public Tuesday by the Communist Party of China Central Committee and the State Council, called agriculture, rural areas and rural people as "the ballast stone," stressing their role in the country's efforts to "win the upper hand in effectively handling risks and challenges."

"In a complicated situation with growing downward pressure on the economy and profound changes in the external environment, it is of special importance to do a good job in work related to agriculture, rural areas and farmers' issues," said the document, which noted, "quite a few tough tasks to fulfill."

Rural development is also key to the country's bid to complete the building of a moderately prosperous society in all respects by 2020. To eliminate poverty is part of this goal, and much of it rests on progress in rural areas.

"There are only two years left for us to finish building a moderately prosperous society, making rural work an urgent task," said Ye Xingqing, a researcher on rural economy at the Development Research Center of the State Council.

Eradicating poverty, improving the rural living environment and ensuring grain supply are all indispensable parts of the moderate prosperity blueprint, Ye said.

IMPROVE THE WEAK LINK

After decades of industrialization and urbanization, China still has about 560 million rural residents.

Despite drastic changes in the past years of economic growth, China's rural regions still lag demonstrably behind cities in terms of income level, living environment and public services. They also have a huge growth potential that is yet to be fully tapped.

Chen Wensheng, a researcher with the Hunan Academy of Social Sciences, believes this year's No.1 central document showed the Party's "consistent effort to attach great importance to the rural work and firm resolve to improve the weak link of rural development."

Work has been done to channel more funds to the countryside in recent years, with increasing fiscal input and a growing number of rural financial institutions. Rural areas, however, remain financially underserved.

Tuesday's document pledged to prioritize fiscal support and financial services for rural and agricultural development, noting that new loans at the county level should be primarily used for rural vitalization, a strategy proposed in 2017.

Total investment in rural vitalization is likely to exceed 7 trillion yuan (about 1.05 trillion US. dollars), said Yu Xinrong, vice minister of agriculture and rural affairs, at a forum last month.

"By prioritizing agricultural and rural development, the government will tilt towards the sector in financial input, industrial layout, employment, infrastructure and public services, and gradually solve the urban-rural imbalance," said Kong Xiangzhi, a professor with Renmin University's School of Agricultural Economics and Rural Development.

FIGHT POVERTY

The rural regions are the central battlefield in the country's fight against poverty.

China is making fast progress towards eliminating poverty, with the number of impoverished rural residents declining from nearly 100 million in late 2012 to 16.6 million by the end of 2018. It will only get harder to help those left get rid of poverty.

Yang Chang, an economist with Zhongtai Securities, anticipates the continued intensity of policy support for rural poverty reduction as the fight has entered a decisive stage.

The focus will be put on providing assistance to areas of extreme poverty, via favorable policies ranging from major projects, poor resident relocation, finance and nurturing of talent, according to the document.

Moreover, it demanded "strategic thinking on the post-2020 period after the goal of poverty reduction is accomplished."

"This means even if the current goal is fulfilled, the mission of fighting poverty will continue," Yang said.

ENSURE FOOD SECURITY

As in previous years, Tuesday's document again stressed sufficient supply of farm produce, which is critical for a nation with the world's largest population and upgrading food demand.

After years of increases, China's grain output edged down in 2018, when 657.9 million tonnes of grains were produced, down 0.6 percent from 2017, official data showed.

Efforts will be made to ensure that the country's grain planting area remains steady at 1.65 billion mu, or 110 million hectares, and the area of arable land is kept above 1.8 billion mu, as well as to develop 800 million mu of high-standard farmland by 2020, according to Tuesday's document.

The document also said the country would move to optimize agricultural structure, boost production of green agricultural products or those in short supply, and roll out plans to increase soybean planting and support the dairy industry.

"To tackle pressure in the global trade of farm produce, it is necessary for us to increase the output of agricultural products, improve their quality and lower their costs," said Zhu Xinkai, an agricultural economist and vice president of Renmin University.

Calling agriculture "a weak industry" in China, Minister of Agriculture and Rural Affairs Han Changfu urged to improve supportive system for agriculture in an interview with the People's Daily.

Policy support should be "in line with the World Trade Organization rules and the requirements of the supply-side structural reform" and "steer the agricultural sector towards high-quality, green development," Han stressed.

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• Beijing is expected to announce a large purchase of US agricultural and energy products, which will be incorporated into the overall agreement
• Key structural issues yet to be resolved include forced technology transfers, cybertheft and market access

China and the United States began a fresh round of high-level talks in Washington on Thursday, amid reports of progress in their bid to nail down a meaningful deal ahead of the deadline for an agreement to end their trade war.

Time is running short toward March 1 when the US has threatened to raise tariffs on US$200 billion of Chinese products from 10 per cent to 25 per cent.

On Tuesday, however, US President Donald Trump suggested that he might extend the March 1 deadline, saying the talks were going “very well” and “the date is not a magical date”.

Working-level negotiations began on Tuesday, with cabinet and ministry officials joining the talks for two days beginning on Thursday. The previous round of negotiations took place last week in Beijing.

In Washington, the two sides are expected to outline a memorandum of understanding on challenging structural issues including forced technology transfers, cybertheft, market access and currency. China is also expected to announce a large purchase of US agricultural and energy products, which will be incorporated into the memorandum.

Beijing will propose buying an additional US$30 billion annually of American farm products such as soybeans, corn and wheat, Bloomberg reported on Thursday. The US will also demand that China maintain a stable value of its currency, the yuan, Bloomberg said.

US Secretary of State Mike Pompeo said in an interview with Fox Business on Thursday that the US was pushing hard on thorny issues in addition to reducing the bilateral trade imbalance.

The real progress is “not just on the trade issues, but on intellectual property protection, forced technology transfer and, more importantly, enforcement around those”, he said.

“It’s one thing to write something on a piece of paper; it’s another thing to have enforcement mechanisms,” Pompeo added.

US Trade Representative Robert Lighthizer, who leads the American negotiating team, has been asked to appear before the House Ways and Means Committee on Wednesday to testify on China-US trade issues. The committee is now controlled by Democrats, who became the majority party in the US House of Representatives last month and have promised more stringent oversight of the Republican administration.

A memorandum of understanding would be the most significant movement yet in the trade war that the US started in July. It is expected to lay the groundwork for a final resolution to the deep-rooted disputes and culminate in a face-to-face meeting between Trump and Chinese President Xi Jinping.

“We’ve heard good news coming out in terms of progress being made,” Elizabeth Economy, director of Asia studies at the Council on Foreign Relations, said on Tuesday.

“There’s going to be two baskets of issues. The ones that are easy, like trying to make progress on the bilateral trade deficit, maybe some market opening and coerced technology transfer, where they’ve already taken some steps. And then there’s the tougher issues like ‘Made in China 2025’ and their subsidies and enforcement issues.

“My hope would be that we end up with some actual substantive agreement on the first basket and some kind of road map to continued discussions and progress moving forward on the second basket.”

Other observers also are expecting the talks to continue after this week’s meetings in Washington.

“We think this round of talks is unlikely to be the last round, given the scepticism, and with both sides miles apart – an extension of the truce appears to be the most likely outcome,” Prakash Sakpal, Asia economist at ING in Singapore, said in a research note.

“For now, markets should take comfort in the fact that both sides are aiming for a deal, have started to outline it, and are working out agreements on the stickier issues,” he said. “Nothing concrete yet, and we may not see anything until the next Trump-Xi meeting later in March.”

The Chinese delegation is led by Vice-Premier Liu He and includes Yi Gang, governor of the People’s Bank of China; Wang Shouwen, vice-minister of commerce; and Liao Min, vice-minister of finance.

Liu carries an additional title: special envoy for Xi. It marks the second time he has come to the US as special envoy for trade talks. The last he carried the special envoy title was in May 2018.

On the US side, the talks are chaired by Lighthizer and Treasury Secretary Steven Mnuchin.

Unlike the meeting two weeks ago in Washington, there was no small talk between the two sides before the start of negotiations on Thursday morning.

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localizer said:

From a western perspective, Trump has screwed the Chinese people in that he killed off any chance of liberal social/economic reforms for a while. Nice job rallying people behind Xi/CCP and undoing decades of hard work by previous administrations.

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"I want the United States to win [in 5G technology] through competition, not by blocking out currently more advanced technologies," U.S. President Donald Trump tweeted on Thursday.

Although Trump did not name Huawei, the company, which is standing at the forefront of 5G technology, is widely believed to be what the president was referencing. Since the outbreak of the trade war, Washington has been actively lobbying its allies not to use Huawei and reportedly preparing an executive order to ban the firm from operating in the United States.

Is Trump backing away from aggressive Huawei policy and offering an olive branch to China? Many observers believe yes. The president is extending goodwill to Beijing as Chinese leader's special envoy Liu He is in Washington for the seventh round of trade talks, Cheng Dawei, a professor at the School of Economics of China's Renmin University, told CGTN.

"Negotiators are drawing up memorandums of understanding (MoU) in Washington. Although no details have been released so far, the United States may be able to reach its strategic aims via some of the items in the MoUs," Cheng said, adding that "this may be why Trump let off Huawei this time."

From Meng Wanzhou's detention to the reported executive order, Trump has been using the Chinese telecommunication giant as a bargaining chip at the negotiation table. While Trump's primary purpose was to seek maximum interests from China in the first few rounds of talks, the president is now desperate to end the trade fight as the March 1 deadline looms.

This explains why the "master of the art of the deal" was relentlessly pushing allies to exclude Huawei from their markets at the very beginning of the negotiations, but softened his stance in less than 10 days before the deadline.

Labeling itself as the bastion of free trade, Washington is ironically holding innocent companies as a hostage for more political gains. When asked by CNN “what's behind the U.S. campaign against Huawei,” 61 percent of the respondents believed it is politically motivated.

Washington has repeatedly accused Huawei of spying. Such allegations do not hold water at all. In its recent review, the UK concludes that there was no need to ban Huawei from its market. Germany, as well, is not convinced of Huawei's alleged security threat.

Huawei's unrivaled technology is another reason for Trump's switched attitude. Only China offers the soup-to-nuts kit and "there is no American alternative," the Business Insider quoted John Hemmings, the director of the Asia Studies Center at the Henry Jackson Society, as saying, adding "5G by the U.S., it's like a jungle out there… It's like a Frankenstein."

China is regarded as the only country able to give Western countries the biggest “bang for the buck.” In comparison with Huawei, U.S. carrier Verizon and AT&T are still activating fledgling 5G networks in selected cities, and most experts believe “it will take until at least 2020 for 5G to become widespread,” CNBC reported.

Apart from Germany and the UK, many European countries are casting doubt on the Huawei ban. Earlier, Hungary and Slovakia publicly dismissed allegations against Huawei during U.S. Secretary of State Mike Pompeo's Central European tour. In this context, Washington is shooting itself in the foot if it insists on the strong Huawei policy.

Despite Trump's softened stance, Cheng warned that “the United States cannot accept Huawei's setting up standards in 5G technology” and Beijing is still Washington's primary target of containment, of which the world's second-largest economy must stay on high alert.

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gelgoog said:

I am not a fan of the current Chinese leadership's idea of relocating farmers to mid sized cities. The Soviets tried this in their late period. It was an abject failure of a policy.

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gelgoog said:

If the Chinese wanted the rural population to decrease all they had to do was to allow the rural population to more easily resettle in their existing cities.

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gelgoog said:

If workers are moved into a shiny apartment building with little prospects of either getting a job or educating their children the policy will be a failure. They would be better off letting them stay in the rural communities.

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gelgoog said:

China needs to find ways to make their agricultural sector become more productive.

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