China is preparing for a war of attrition with the United States – ElSol.com.ar – Diario de Mendoza, Argentina

The eleventh round of trade talks between China and the United States ended in Washington without any apparent agreement among delegations that breakfast: donuts, worn by bodyguards in large bags. The United States has already announced the increase of 200 billion dollars on Chinese products on Chinese products, and there is no scheduled date for the resumption of negotiations. While leaving Washington, the head of the Chinese delegation, Deputy Prime Minister Liu He, said he was "cautiously optimistic", He also pointed out that positions are separated by huge differences in substance.

Chains are still open, both sides insisteds. "Negotiations have not been broken" and will be resumed in Beijing in the futureLiu stressed, the trustworthy man of Chinese President Xi Jinping for economic affairs, at a press conference with the Chinese media. But he also admitted that there were "disagreements on matters of principle". Three issues in which, he said, China "will not yield under any circumstances".

In order to reach an agreement, he explained, his The government believes that it is imperative that the US increase their additional tariffs; that the increase in the volume of purchases of US goods that Washington asks China is realistic and remains in line with Chinese domestic demand; and, above all, that the final agreement document be "balanced" to ensure "equality and dignity" of both countries.

In this third condition, "dignity" is the key. The current impbade was released, as Reuters reported, when Beijing eliminated the draft agreement, referring to a change in its legislation to accept the requirements of the EA. UU on the protection of intellectual property, access to markets for financial services and the forced transfer of technology, among others. For Washington, these conditions were the guarantee to enforce what had been agreed, in his opinion. For Beijing, they represented an intolerable interference in their sovereignty. And a change in business model that Xi Jinping does not intend to accept. Come what can.

"China is willing to pay a check, but not to transform its economic model of state into a market economy," wrote this week Alicia García-Herrero, chief economist for the Asia-Pacific region of the bank Natixis investment. "The abrupt change of address [de el presidente estadounidense, Donald Trump] in the trading strategy reveals the despair, rather than the force "by imposing the new tariffs, which range from 10 to 25%, and threaten to impose the same way the rest of the Chinese imported products.

And China came to the conclusion that it had enough leeway to deal with what it saw as a prolonged war of attrition. Beijing's mistrust is great and it dominates the perception that ultimately the goal of the US UU is to prevent this country from becoming a great power. That did not help that this week the US authorities refused a license to operate at the main Chinese phone company, China Mobile, and stepped up their speech against tech giant Huawei.

During the months of negotiations, Beijing has taken steps to protect its economy in the absence of an agreement. "Chinese policymakers have focused on effectively stimulating the economy, and in a long-term perspective, China has been striving to expand friendly ties with as many countries as possible," said Garcia-Herrero. For the first, recalls an economist, incentives for the private sector are put in place via credit. For the second, China officially added 130 countries to its "New Silk Roads" initiative.

The latest economic data, in Beijing's eyes, approve this strategy. GDP growth in the first quarter of the year was 6.4%, more than expected. Exports also rose 4.3% from one year to the next during the first four months of the year, as Chinese official media reported this week. Ma Jun, the chief economist of China's central bank, calculated the impact of the trade war on the loss of three-tenths of GDP growth point, "Something that is in the controllable".

"The economy hit the ground at the end of last year, it is now starting to recover," said Liu. "Despite the economic pressures ahead, I believe that the Chinese economy will maintain its momentum and its healthy and stable development."

The appointment of the G20

In the short term, with delegations coming sooner or later, the next big event will be in Osaka, Japan, at the end of June, the annual G20 summit. There will be the faces of Trump and Xi Jinping, the only ones – as was made clear this week – who have the final say in reaching an agreement.

An agreement that will not come, as Liu has come to say, at any cost. "More Xi needs to mobilize his political system and his people to (…) fight a war of wearit will be more difficult to change market and accept a gesture from the United States; if that happens, "says consultant Eurasia Group in a note.

Although both are interested in understanding each other. A trade war between the two major economies of the world would be detrimental to all. Trump needs electoral income, and a pact with China that could offer benefits would be a good letter. Xi will commemorate the 70th anniversary of the founding of the People's Republic of China in October and do not want problems that distract the preparations. For Mr. Beijing, García-Herrero recalls, the pursuit of growth policy through stimulus measures can lead to an increase in debt.

But even if both bosses smoke the pipe of peace in the short term – and today, it remains to be seen – it is not so clear that they manage to squaring the circle: solve their differences of principle, including "dignity" by Liu He. And an agreement that does not solve them may end up resembling the breakfast donuts of its delegations: sweet on the outside; inside, empty.