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After the G20 summit: Hoping for an end to the trade conflict

After G20 summit: Hoping for an end to trade conflict

The meeting between U.S. President Donald Trump and his Chinese counterpart, Xi Jinping, on the fringes of the G20 summit in Osaka, Japan, this weekend was eagerly awaited. If the hopes for a solution were high in the run-up, there was at least a ceasefire. At the meeting, both heads of government agreed to resume negotiations.

Trump also announced that the US would not impose new tariffs on Chinese exports for the time being. And Huawei can also hope: Trump said at a press conference that he would again allow American companies to supply the Chinese technology giants.

China continues to open market for foreign investment

Meanwhile, China is making further efforts to open up the Chinese market. Following the G20 summit, Beijing published a revised overview of access for foreign investment in China.

The so-called “negative list” lists sectors that remain completely or partially closed to foreign investment. This year there are 17% fewer sectors are on the list. It goes into effect on 30 July. Sectors removed from the list include mining, services, agriculture and manufacturing. Despite easing, foreign companies still have to apply for a permit to invest in China.

Tough negotiations expected

Even if the resumption of trade talks between the USA and China is cause for optimism, analysts urge caution. Morgan Stanley notes there is still no evidence of progress on important issues.

Andy Rothman, investment strategist at Matthews Asia, sees much more than just a trade truce between the two nations. “Trump downplayed the national security tensions between the U.S. and China while describing the bilateral relationship as one of “strategic partners.”. That is more than I expected. He is optimistic about prospects for a trade deal in the near future. Trump seems to recognize that a trade war with China would damage the U.S. economy and equity markets, and thus his re-election prospects.”

It is not yet known when negotiations will be resumed. Experts remain sceptical about the history. Seven months ago, Trump and Xi had already agreed on a ceasefire on the fringes of the G20 summit in Buenos Aires, Argentina, and then resumed negotiations. What followed was another stage of escalation.

Christine Lagarde, Managing Director of the International Monetary Fund, urges a quick agreement. The world economy is in a difficult phase. Unresolved trade problems between the U.S. and China pose serious risks for the future, Lagarde warns.

WTO reform to be accelerated

Another urgent topic of the G20 summit in Osaka was the reform of the World Trade Organization (WTO). Here the heads of state and governments of the 20 largest industrialised and emerging countries could not agree on a common formulation to condemn protectionism. They concluded the summit with a commitment to press ahead with efforts to reform the WTO.

Japanese Prime Minister Shinzo Abe reiterated that reforms were “inevitable” because of many fears of trade tensions. Moreover, the WTO is not in a position to keep pace with the rapid pace of globalisation and digitisation. He called for free, fair and non-discriminatory trade with open markets and a level playing field.