Rarely has such a high-powered U.S. delegation arrived in Beijing with so little concrete purpose. The two-day meeting between China and the U.S. accordingly delivered no surprises.
According to a White House statement, “The delegation held frank discussions with Chinese officials on rebalancing the United States–China bilateral economic relationship, improving China’s protection of intellectual property, and identifying policies that unfairly enforce technology transfers.”
However, analysts observed little progress as a result of the talks. “The two sides reached some consensus on certain areas, but also recognized a significant divergence in views on some issues,” Wendy Chen, head of Asian equity research at Nomura International Hong Kong, wrote to clients.
The seven-man trade delegation led by Steven Mnuchin, U.S. Treasury Secretary, spent May 3 and 4 meeting with Vice Premier Liu He and his negotiators. One of the main obstacles to an agreement is President Donald Trump, who insists that the main goal should be a reduction in the bilateral trade deficit – with the figure ballooning in recent weeks to US$200 billion.
Trump, who has tweeted that trade wars can be good and are winnable, is attracting the ire of even conservative think tanks. “Hopefully, he’s rational enough to realize that his avoidable actions would trigger a massive global economic contraction,” Dan Ikenson, director of the Center for Trade Policy Studies at the Cato Institute wrote recently.
However, U.S. Trade Representative Robert Lighthizer might ensure calmer voices prevail. His objectives, according to Arthur Kroeber of GaveKal Dragonomics, are tackling China’s practices of forcing technology transfer as a condition of market access, whether through compulsory licensing, joint-venture deals or informal pressure.
If he succeeds, Kroeber argues, “Trump’s scattershot trade war against the entire world will give way to a narrower, and better-justified, campaign against China’s discriminatory trade and investment practices.”
Source: Office of the Federal Register
Rule [book] of law
One of Donald Trump’s landmark election pledges was to cut through Washington’s red tape, and promise fewer new regulations. Last October, The Washington Post said it could not verify Trump’s claim that his government had cut more regulation than any other in history.
But the Federal Register offers a reliable guide to overall flow: After averaging about 80,000 pages since 2008, and spiking to about 95,000 in 2016, the count fell to round 60,000 in 2017. The number of “economically significant regulations” halved during Trump’s first year in office, to the lowest rate since 1982, according to the Regulatory Studies Center at George Washington University.
Meanwhile, the Brookings Institution has installed a handy Trump administration dereg tracker on its website.
Running down risk
New rules will grant Chinese banks, trusts, fund management, securities and insurance companies extra time to rein in outstanding off-balance-sheet wealth management products.
According to the People's Bank of China, off-balance-sheet assets held by all types of Chinese financial institutions reached nearly 100 trillion renminbi, about 120 percent of the country's gross domestic product, by the end of 2017.
Compared with the draft regulation issued in December 2017, the final rules announced last month extend an 18-month transition period by another 18 months, to the end of 2020, to limit disruptions to liquidity and stability, according to Nicholas Zhu, senior financial institutions analyst at Moody's Investors Service.
The new rules converge the responsibilities for banks and non-bank financial institutions. “The new asset management rules will help unify industry regulatory standards for different types of financial institutions and minimize regulatory arbitrage,” said Leon Qi, an analyst with Daiwa Securities.
Under the new laws, unlicensed entities such as Internet platforms will be prohibited from originating and distributing asset-management products. “The regulation’s finalization reflects the government’s focus on de-risking the financial system,” Zhu said.