(Bloomberg) -- China will dispatch Vice Commerce Minister Wang Shouwen to the U.S. for low-level trade talks in late August, the first official exchanges since earlier negotiations broke down two months ago.
The Chinese delegation led by Wang will meet with an American group led by David Malpass, under secretary for international affairs at the Department of the Treasury, at the invitation of the U.S., China’s Ministry of Commerce said in a statement on its website on Thursday.
The news buoyed risk sentiment in Asian trading, with futures on the S&P 500 Index rallying as much as 0.4 percent. The offshore yuan gained against the dollar for the first time in seven days.
“This will be ‘talks about trade talks,’” said Gai Xinzhe, an analyst at the Bank of China’s Institute of International Finance in Beijing. “Lower-level officials will meet and haggle and see if there is a possibility for higher-level talks.”
While the talks are at a relatively low level for now, the market reaction clearly shows that people and investors in Asia are hopeful for successful negotiations. Before the deal collapsed in May, China agreed to "significantly" increase purchases of U.S. goods and services, and that may provide a guide for the next round of discussions.
Necessary Concessions
To restart trade negotiations with the U.S., China must offer a package of measures, according to Jacob Parker, the vice president for China operations for the U.S.-China Business Council in Beijing. China needs to make an offer that slashes the bilateral trade surplus, lowers import tariffs, provides better protection for intellectual property and stops forced technology transfers, Parker said earlier this month.
Caution is warranted, according to Gai. "Even if the senior officials reach a deal, things could still change, as President Trump can easily flip-flop. We have been there."
China’s equity market has suffered declines and the yuan has been on a losing streak for more than a month. Chinese authorities, bracing for economic fallout, have introduced measures to support growth ranging from shifting toward a more accommodative monetary policy to boosting fiscal spending.
The two nations had appeared to have reached a deal in May after Chinese Vice Premier Liu He -- President Xi Jinping’s top economic adviser -- led a group of officials to Washington. But Trump backed away from the agreement soon afterward, and ever since the two sides have been locked in a trade standoff as they slapped tariffs on billions of dollars of each other’s goods.
The commerce ministry reiterated in the statement that China is against trade protectionism and won’t accept any unilateral trade restrictions. “China welcomes communications and dialogue on the basis of reciprocity, equality and integrity,” it said.
The Trump administration imposed duties on $34 billion of Chinese goods last month, a move that also prompted immediate retaliation from Beijing. Another $16 billion in levies will be effective later in August. Earlier this month, China announced a list of $60 billion worth of U.S. imports it plans to apply tariffs on, after Trump ordered officials to consider imposing a 25 percent tax on $200 billion worth of Chinese goods, up from an initial 10 percent rate.
Wang, who is the key official leading China’s trade talks worldwide, led an advance team to Washington in May. In a July interview, he told Bloomberg that he didn’t understand why the U.S. quickly reversed its course.
“Good faith negotiation is required,” Wang said then. “For any talk to be successful, no party should point a gun at the other party.”
Economists weren’t expecting much from the planned talks.
“Malpass has no trade authority,” said Derek Scissors, chief economist at the China Beige Book. “But nice for Chinese stocks.”
(Updates with details of previous talks from fifth paragraph.)