China: The Switch to Shanghai

Published on July 25, 2019

As widely reported in the press, the US and Chinese trade negotiating teams have agreed to meet again next Tuesday and Wednesday, July 30-31, in Shanghai. Twice burned by tariff hikes, Chinese sources are quick to point out that the request for this meeting came from the US side.

But what has been less communicated or understood is the reason for the switch in venue for what will be the 12th round of negotiations, from Beijing to Shanghai.

** From what we understand, China’s President Xi Jinping instructed his team to conduct the next round of negotiations in Shanghai rather than Beijing to deliberately downplay the upcoming meeting.

** Furthermore, the venue was chosen as a pointed reminder to the US team of the benefits to a further opening and de-escalation in the trade war, and the potential costs to the US financial industry of being shut out of China’s markets.

Senior sources in Beijing point out that almost all major US companies, especially major financial institutions, are gathered in Shanghai. US negotiators, they say, should look closely at the city, and note the opportunities to enter the Chinese financial markets that will be lost if the US cannot reach a trade agreement with China.

And in an echo of the messaging from Washington, they also warn that expectations for the upcoming talks should not be high, as “a series of major controversies on both sides” still exists.

 

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