When it comes to trade-offs, this has been a big week for the mandarins in Beijing.
On Tuesday, China managed to hammer out a 24-point summit joint statement with the European Union in Brussels without giving too much away, apart from the usual promises.
With crucial industries still ring-fenced from foreign competition and a Great Firewall encompassing the country’s cyber world, Beijing has become a past master in smoke and mirrors diplomacy.
Indeed, that was evident in one of the key points from the joint statement:
“The EU and China commit to build their economic relationship on openness, non-discrimination, and fair competition, ensuring a level playing field, transparency, and based on mutual benefits.
“The two sides commit to achieve in the course of 2019 the decisive progress required, notably with regard to the liberalization commitments, for the conclusion of an ambitious EU-China Comprehensive Investment Agreement in 2020.
“The high level of ambition will be reflected in substantially improved market access, the elimination of discriminatory requirements and practices affecting foreign investors, the establishment of a balanced investment protection framework and the inclusion of provisions on investment and sustainable development.
“Both sides agree to establish a political mechanism to continuously monitor the progress in the negotiations and to report to leaders by the end of the year on the progress made.”
Detailed, yet suitably vague, the timeframe gives President Xi Jinping’s government plenty of wriggle room.
Twenty-four hours later, news filtered out of Washington suggesting that the United States and China were closing in on a trade deal after a marathon conflict, which at times has resembled an economic Cold War.
“Mechanism” was also the main buzz word when US Treasury Secretary Steven Mnuchin discussed the situation.
“We’ve pretty much agreed on an enforcement mechanism, we’ve agreed that both sides will establish enforcement offices that will deal with the ongoing matters,” he told CNBC television but refused to be drawn on when tariffs on Chinese imports worth US$250 billion would be lifted.
If, or when, the draft document is agreed, US President Donald Trump will sign it off with Xi at a planned mini-summit.
“As soon as we’re ready and we have this done, he’s ready and willing to meet with President Xi [Jinping] and it’s important for the two leaders to meet, and we’re hopeful we can do this quickly, but we’re not going to set an arbitrary deadline,” Mnuchin added.
A bruising battle between the world’s two largest economies has forced Beijing to speed up its reform timetable and draft a new foreign investment law, addressing US and EU concerns about forced technology transfer, intellectual property theft, and improved market access.
But issues still remain for the international business community.
Tim Stratford, the chairman of the American Chamber of Commerce in China, pointed out that the vague language in the legislation would allow local governments to expropriate investments that “harm the public interest.”
He also highlighted the inability of foreign firms to appeal against the outcome of national security reviews.
“[The changes] only address a small slice of the overall set of concerns our members have about the uneven playing field foreign companies encounter in China,” Stratford said.
For Beijing, easing tensions between the US and the EU have become priorities as it takes steps to warm up a cooling economy.
At least on that front, pessimism has been replaced by optimism.
Corporate tax cuts and rising manufacturing activity have fueled renewed hope.
Earlier this week, the International Monetary Fund raised its forecast for China growth by 0.1 point to 6.3% this year, despite downgrading its projection for the overall global outlook.
Elsewhere, HSBC economists Qu Hongbin and Julia Wang have estimated that tax reductions announced last month will be equivalent of more than 2% of projected gross domestic product, or GDP, in 2019.
“The shape of the stimulus package this time is very different from earlier rounds,” Qu and Wang said in a report. “We believe that it will not only work but will also trigger a self-sustained recovery in the coming quarters.”
Now, that would make Beijing’s bean-counters happy.