What can be expected from upcoming China-U.S. talks

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Editor's note: The article is translated from an editorial piece originally published in the Wechat official account of Bullpiano.

There is no doubt that this is a historic meeting between the heads of state of China and the United States, and this is the most widely watched dinner in the world in 2018.

The two sides have agreed to cease new tariffs and continue trade talks.

The upcoming negotiations between the two teams on greater details will undoubtedly be very critical because what we have is not only a trade war but also a war of words and a psychological warfare.

Five predictions ought to be heeded:

Chinese President Xi Jinping speaks during a working dinner with his U.S. counterpart Donald Trump in Buenos Aires, Argentina, December 1, 2018. /Xinhua News Agency

Prediction No.1: There may be positive progress, but it will not be plain sailing.

With a big push from the top, the trade teams on both sides will undoubtedly speed up consultations and strive for an early agreement. However, judging from the game of chicken over the past six months, if there is no good faith, there will be new twists and turns.

After all, according to the information disclosed, if the two sides cannot reach an agreement within 90 days, the U.S. side is likely to repeat its stock tricks and raise the tariff from 10 percent to 25 percent. This will mean a resumption of the trade war.

For China, we must work for the best results, but we also need to prepare for the worst. Of course, as long as there is sincerity, there is no problem that China and the United States cannot solve.

Prediction No.2: There will definitely be contradictions and struggles, but cooperation is the inner desire of both sides.

The dinner meeting has also created much buzz around a word: fentanyl. As a powerful analgesic, it has been abused in the United States and has become a serious social problem.

The first CIIE is held in the National Exhibition and Convention Center in Shanghai, November 5, 2018./ VCG Photo‍

Therefore, after the meeting, according to the Chinese Foreign Ministry, both sides agreed to take proactive actions to strengthen cooperation in law enforcement and drug control, including stricter control of substances like fentanyl.

The most fundamental thing is that China and the United States need to collaborate more. Without collaboration, many problems cannot be solved and will ultimately affect the well-being of Americans.

Prediction No.3: China will buy more from the U.S., but the U.S. must also make concessions.

The United States has launched a trade war against more than one country. Why is it that the one between China and the United States is the most watched, the most intense and the most difficult to tell who will win?

Size does matter. After all, as the world's second largest economy, China has an irreplaceably huge market, complete industrial chain, enabling infrastructures and a business climate that no country can afford to lose.

The most direct purpose of the Americans waging the trade war is to sell more things to China. It is indisputable that China has a huge trade surplus with the United States.

In a market economy, price and quality are very important factors. Good price-quality dynamics will not only help balance bilateral trade but also help to meet the growing needs of the Chinese people for a better life, promote high-quality economic development and help to form a competitive domestic market.

The Reform and Opening-up Exhibition Center in Shenzhen, south China's Guangdong Province, October 24, 2018. /VCG Photo

Of course, the U.S. also needs to make some concessions. It cannot refuse to sell advanced high-tech products or set up various obstacles for Chinese enterprises. If only one party keeps making compromises, no real binding agreement can be reached. Even if there is any, they would be unsustainable.

Prediction No.4: China has pressure; so does America.

Frankly speaking, there must be pressure on China in this unprecedented trade war. After all, in a trade war, there are only losers and no winners. It does have a negative impact on some Chinese enterprises and industries.

However, it should also be noted that the U.S. is facing equally strong pressure.

Recently, the U.S. stock market has fluctuated violently, and most U.S. economists believe that the intensifying China-U.S. trade war is seriously affecting the confidence of U.S. investors. If it goes on like this, the U.S. economy will certainly be hit hard.

Traders work on the floor of the New York Stock Exchange (NYSE) in New York, U.S., June 15, 2018. /VCG Photo‍

So it is rational for both sides to take a step back this time to reach an important consensus. For the United States, the strong internal pressure is an important reason for it to back down. After all, the White House often regards the stock market rally as a key indicator of its performance.

Prediction No.5: As an important driver of progress, pressure may not be a bad thing for China.

In the upcoming negotiations, there are still possibilities of ill feeling, even setbacks, and crises. However, crises can often be opportunities in disguise.

In fact, while the trade war escalates, China has been pushing for greater openness in an orderly manner. This is evidenced by the fact that tariffs were lowered four times a year and thousands of businesses gathered at the First China International Import Expo. In the World Bank's latest Doing Business Report, China's ranking has risen by 32 places from the previous year. All the progress shows that China is not boastful of something it hasn't achieved.

Without pressure, there can be no drive for success. China is letting the market play a decisive role in the allocation of resources, and let reform and opening up bring more real benefits to the people. United up and down the nation, why should China be afraid?

It's a fight that requires wisdom. Both sides have been trying to kick balls to each other's court. As a major power, China should keep cool-headed about positive results and remain calm in the face of potential twists and turns.

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