US Concedes Some Ground To Deliver China Trade Deal

Hopes of a US/China trade deal have grown even stronger over the weekend. This comes in response to reports that the US has moderated some of its more stringent demands.

The US had been demanding that China cap its industrial subsidies as a requisite for agreeing on a deal. However, following strong opposition from Beijing, the Trump administration has since watered down these demands.

Industrial Subsidies In Focus

The issue of industrial subsidies is a complex one. And it’s highly important to Beijing, as it involves China’s official industrial policy. Beijing awards subsidies and tax breaks to state-owned corporates, as well as sectors, which are seen as integral to long-term development.

Over his term as premier, Xi Jinping has strengthened the government’s role in certain sections of the economy. China gave assurances earlier in the year that it would cease its market-distorting subsidies for domestic industries. However, it gave no details on how it would do so.

US Makes Concessions

As both sides are pushing to secure a deal in the next month or so, US negotiators have apparently backed down over this issue. This marks a major retreat on one of the core issues of the US negotiations perspective.

Moving focus away from capping industrial subsidies, the US is reportedly focusing more on areas where it believes it can deliver results. This includes ending forced technology transfers, building better protection for intellectual property as well as broadening market access in China.

US Tariffs Removal

The other big obstacle which remains in negotiations is that of the removal of the US tariffs currently worth $250 billion. The US has signaled that it wants to keep some of these tariffs in place as a means of ensuring that China fully co-operates with the terms of any deal. The US also wants China to increase its purchase level of “big-ticket” items to over $1 trillion in the next six years.

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