Jul 26, 2023

As Gina Raimondo wraps up Beijing leg of China trip with high

Premier Li Qiang has called on the United States to take sincere and concrete moves to improve economic relations after the two countries agreed to set up new groups to manage trade conflicts.

When meeting the visiting US Commerce Secretary Gina Raimondo on Tuesday, Li said that only through dialogue can both sides "learn about each other's concerns and find a middle ground".

"Sound economic relations and trade cooperation will not only be beneficial to our two countries, but to the whole world," he told Raimondo, according to Phoenix TV. And the premier reportedly described trade relations between the US and China as their "ballast stone and stabilising anchor".

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Raimondo also said that the US wants to work jointly with China on issues including climate change, artificial intelligence and curbing the fentanyl crisis, while the US does not intend to hold back China's economic growth, according to the Chinese state media.

On Monday, Washington and Beijing took a step toward managing bilateral tensions by setting up a joint economic working group for the first time in nearly three years of Joe Biden's presidency.

Raimondo also met Vice-Premier He Lifeng on Tuesday during her second full day of talks with senior officials in Beijing.

However, analysts remain sceptical about whether commercial, trade and investment problems can be substantially alleviated, and if mutual trust be rebuilt.

The joint decision to set up the senior-level working group involving representatives from the government and private sector, as well as an exchange mechanism on export controls, came after Raimondo had more than four hours of "rational, candid and constructive" talks with her Chinese counterpart, Wang Wentao.

The commercial, trade and investment group will meet twice a year at the vice-ministerial level, with the first session set to take place in Washington in early 2024.

Another group focused on export controls held at the assistant secretary level, referred to as an information exchange mechanism, started on Tuesday at the Ministry of Commerce in Beijing.

But the creation of working groups and mechanisms will not lead to overly optimistic conclusions, with the US "small yard, high fence" approach to China on critical technologies still causing damage, analysts said.

"The tone has changed, but it's still unsure [if they will lead to] practical changes," said Lu Xiang, a US-China relations expert at the Chinese Academy of Social Sciences.

He Weiwen, a senior fellow at the Centre for China and Globalisation, said that US export controls and plans announced earlier this month by Washington to curb American venture capital and private equity investments in certain Chinese companies have "seriously blocked" the normal development of the bilateral trade relationship.

"The American narrative is about de-risking. But the standards of de-risking and decoupling can clash with each other," he said. "If the de-risking area broadens, it will lead to the effect of decoupling, and this needs to be resolved."

More engagements are in the pipeline as both sides have agreed to hold a high-level summit on tourism in the first half of next year after Raimondo met Chinese tourism minister Hu Heping on Tuesday.

Raimondo, who is believed to be playing a bigger role in the Biden administration's China trade policy, will conclude her four-day trip in Shanghai, where she will attend a women's conference and is expected to visit Boeing's joint venture, New York University Shanghai and Disneyland before heading back to the US on Wednesday evening.

Her trip has also been widely expected to prepare for a possible meeting between President Xi Jinping and Biden later this year in the US.

"President Biden asked me to come here to convey the message that we do not seek to decouple," Raimondo told Li on Tuesday, according to an Associated Press video feed of remarks ahead of a mostly closed-door meeting.

However, she had also said in a statement on Monday that Washington would not compromise on national security.

Louise Loo, lead economist at Oxford Economics, said: "For China, this is really a step to cool tensions rather than to get anything out of it."

"When it comes more to broader decoupling, I think they'll try to avoid it," given the headwinds currently facing both economies, Loo added.

China, though, has already concluded that US export and investment restrictions are intended to block China's rise, said Stephen Olson, a senior fellow at the Hinrich Foundation.

"The export control enforcement information exchange could be helpful in clarifying some technical issues, but the real problem is not a lack of understanding ... and there is no information that the US could 'share' that would fundamentally alter China's beliefs," Olson said.

He added that "profoundly different economic systems" mean that "there is no basis to expect [the commercial, trade and investment issues working group] to find any magic bullet solutions that previous consultations and negotiations failed to find".

Last week, the Bureau of Industry and Security within the US Commerce Department lifted export control restrictions on 27 Chinese entities by removing the firms from its so-called unverified list.

But overall, the US has increased restrictions on China's access to advanced technologies in recent years, highlighted by Biden's executive order earlier this month that plans to restrict US investment in Chinese companies covering semiconductors and micro electronics, quantum information technologies and certain artificial intelligence systems.

"The best that could be hoped for would be the lifting of US restrictions on Huawei and other Chinese firms of strategic importance for the Chinese economy," said Alfredo Montufar-Helu, the head of the China Centre for Economics and Business at The Conference Board.

"But, in my view, the likelihood for this to happen remains low given the US political situation.

"In the run-up to next year's presidential elections, I don't think the Biden administration would like to undertake any moves that could be weaponised by their political opponents."

Shenzhen-based Huawei Technologies has been hit by US sanctions in the past few years as technology rivalry intensified amid concerns about the company's ties to the Chinese military. The Trump administration added Huawei to an export blacklist on national security grounds in 2019 before tightening trade restrictions in August 2020, covering access to semiconductors developed or produced using US technology.

The Biden administration has also maintained the Section 301 punitive tariffs on Chinese products implemented by the Trump administration in 2018 and 2019.

And removal of the tariffs on the thousands of imports from China valued at around US$370 billion would be "the simplest and easiest issue to be corrected by the American government", added Lu at the Chinese Academy of Social Sciences.

This would show a willingness for a substantial improvement in bilateral trade relations, he added.

"The litmus test will be whether Raimondo can deliver concrete outcomes by the end of her trip," Lu said.

The two countries have increased their communications this year, and in the last three months, US Secretary of State Antony Blinken, Treasury Secretary Janet Yellen and special climate envoy John Kerry have travelled to China for talks.

"If Raimondo's visit ends with nothing more than statements on both sides that they want a healthy trade relationship and announcements of new discussion formats, it will appear the Biden administration gained nothing substantial from the fee it paid to gain this meeting, which was to suddenly remove the export controls from 27 Chinese companies," said Denny Roy, a senior fellow at the East-West Centre in Hawaii.

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2023 South China Morning Post Publishers Ltd. All rights reserved.

Copyright (c) 2023. South China Morning Post Publishers Ltd. All rights reserved.