China: Two Critical Calls from Washington

Published on December 12, 2018

Early Monday evening (Beijing time), from what we understand, US Treasury Secretary Steve Mnuchin reached out to his Chinese negotiating counterpart Vice-Premier Liu He to schedule a three-way call on Tuesday morning with lead negotiator, US Trade Representative Robert Lighthizer.

** Monday’s call followed a call on Saturday where Mnuchin, according to senior sources in Beijing, invited Liu to Washington DC this week. In that Saturday call, Liu declined the meeting, citing China’s view of the arrest of Huawei CFO Meng Wanzhou as a hostile act, while noting diplomatically that he, personally, would have been delighted to come otherwise.

** On the subsequent call on Tuesday, however, Liu noted a softening in tone from Lighthizer, interpreting that as a sign of some anxiety from President Trump himself over keeping trade talks from derailing, especially in light of the enormous volatility in US markets after the Huawei arrest.

** Indeed, as further evidence of US eagerness to put out good news on trade, Chinese officials point to the numerous US media leaks that had detailed a potential December visit by Liu He, a visit that was not in fact ever confirmed or covered by the “official” Chinese press outlets like Xinhua and People’s Daily.

** Liu nevertheless still begged off on a pre-Christmas meeting on the Tuesday call, but this time cited an extremely busy schedule due to the Central Committee commemoration meeting celebrations next week to celebrate the 40th anniversary of Beijing’s reform push, followed by an important Central Economic Work Conference next week.

** The two sides then agreed to a trip by Liu He to Washington DC as soon as possible, tentatively now slated for as early as the first half of January of next year.

** Yesterday’s discussion also covered (one might suspect perhaps, better said, “coordinated”) details of the so-called “roadmap” that was agreed to at the summit in Buenos Aires between Trump and China’s President Xi Jinping. The biggest near term benefits the US will get, it was agreed, would be in the areas of agricultural, energy, and high-tech products.

** As to Trump’s claims that China would roll back the 40% tariffs on US car imports to the original 15%, Liu expressed a willingness to deliver as soon as on January 1. However, for that progress to continue Beijing would like to see a change in the “hostile attitude” they see embodied specifically by the Huawei arrest, and Liu noted that it would be impossible for him to travel to the US in January if a senior public figure like Meng was to be kept without bail in detention in Vancouver.

** Whether coincidence or not – we would suggest not – it is therefore especially noteworthy that over the last 12 hours not only was Meng granted bail, but Trump himself went as far as to assure Beijing (and US markets) that he might personally intercede in her case if he found it in the US national security interests, or in the interests of larger negotiations on trade

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