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Expect a Deal With China, Just Don’t Expect Much From It

Summary:
Beijing’s effort so far adds up “to a modest adjustment of Chinese foreign economic policy,” said Scott Kennedy, a scholar at the Center for Strategic and International Studies in Washington, “but nowhere close to the great leap in liberalization that the U.S. and others are seeking.” Still, China has begun to budge. Last month, it dropped retaliatory measures on American-made cars and resumed purchases of American soybeans. It has also reduced tariffs on more than 700 categories of goods from around the world. On cars and soybeans, American negotiators can claim some measure of victory. Soybean purchases have yet to reach earlier volumes, however, while Chinese imports of American-made cars are quite small since many are already made in China. Chinese lawmakers last month released a

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Beijing’s effort so far adds up “to a modest adjustment of Chinese foreign economic policy,” said Scott Kennedy, a scholar at the Center for Strategic and International Studies in Washington, “but nowhere close to the great leap in liberalization that the U.S. and others are seeking.”

Still, China has begun to budge. Last month, it dropped retaliatory measures on American-made cars and resumed purchases of American soybeans. It has also reduced tariffs on more than 700 categories of goods from around the world.

On cars and soybeans, American negotiators can claim some measure of victory. Soybean purchases have yet to reach earlier volumes, however, while Chinese imports of American-made cars are quite small since many are already made in China.

Chinese lawmakers last month released a draft of a proposed law that would stop local officials from forcing foreign companies to transfer their technology as a cost of doing business. The Trump Administration says that Chinese industries like cars and aviation have benefited from American technology.

The law may not change things meaningfully, said Donald Clarke, a specialist in Chinese law at George Washington University. The draft is vaguely worded, he said, and doesn’t acknowledge that the pressure American companies face to share their know-how often comes from behind-the-scenes maneuvering rather than strict government requirements.

The biggest sticking point in China’s package of concessions to the White House may be Made in China 2025, a government plan for developing high-tech industries. The Trump administration has repeatedly criticized the plan, saying that it is evidence that China unfairly supports its own companies over foreign competitors in the Chinese market.

Mike Shedlock
Mike Shedlock (Mish) is a registered investment advisor representative for SitkaPacific Capital Management (http://www.sitkapacific.com/). Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction.

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