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China Giving Pakistan $3.5 Billion in Loans, Grants

China is promising about $3.5 billion to help bolster Pakistan’s dwindling foreign cash reserves and pay for socio-economic development plans undertaken by the country’s new government.

Beijing will soon deposit $2.5 billion in the State Bank of Pakistan (SBP), raising to $4.5 billion the total amount in commercial loans China has given Pakistan this fiscal year, officials and diplomatic sources confirmed.

Officials say the Chinese government has also promised a grant of $1 billion for education, health, vocational training, drinking water and poverty alleviation projects over the next three years.

Minister for Planning, Development and Reform Makhdum Khusro Bakhtyar said Chinese experts are due to arrive in Islamabad later this month to coordinate socio-economic development under the promised grant.

Pakistan’s foreign currency exchange remains under severe pressure, despite receiving around $2 billion from China and $4 billion from Saudi Arabia and the United Arab Emirates in commercial loan deposits.

SBP reserves stood at $8.2 billion last week, barely enough to cover two months’ worth of imports.

China’s CPEC

In the last six years, China has made significant financial contributions to direct investment, soft loans and commercial deposits to help its close ally, Pakistan, overcome severe economic challenges.

Under its Belt and Road Initiative, Beijing has invested $19 billion in Pakistan to build and improve road infrastructure and power plants and opened the strategic Arabian Sea port of Gwadar. Beijing has also given Islamabad concessional loans for some projects under what is known as the China-Pakistan Economic Corridor (CPEC).

The cooperation deal has created more than 70,000 jobs for Pakistanis and quickly resolved the country’s chronic energy crisis. But investments from China had stopped because all major projects under CPEC will be complete by the end of this year.

Chinese and Pakistani officials say preparations are under way to launch the next phase of CPEC in coming weeks to construct nine special economic zones across Pakistan.

Beijing plans to relocate some of its industries by transferring technology to the new industrial zones to help Islamabad increase its exports to overcome its massive trade deficit and shore up cash reserves.

CPEC has “changed the image of Pakistan” and encouraged other countries to invest in the country, notes veteran opposition Senator Mushahid Hussain, who chairs the foreign affairs committee of the upper house of parliament. He praised China for being the only country to bring unprecedented, massive investments to Pakistan five years ago when other nations were reluctant to do so due to terrorism-related security concerns and political considerations.

“Before CPEC, people were talking of a failing state, of problems of Pakistan. Today, Pakistan is part of the solution to key regional problems [including Afghanistan] and Pakistan’s image is that of an investor-friendly, tourism-friendly destination,” Mushahid said.

China believes a stable and strong Pakistan is in the interest of China, said Yao Jing, Chinese ambassador to Islamabad. “China would like to align the development strategies of both countries and support development of Pakistan,” he wrote in a recent article.

Khan’s reform agenda

Prime Minister Imran Khan’s nascent government has embarked on a major economic reform agenda to revive the country’s crisis-ridden economy and attract much-needed foreign direct investment.

Khan has defended what he admits are “painful reforms,” saying Pakistan’s financial woes could not be addressed without taking tough, long-overdue measures. He blames alleged mismanagement and corruption by his predecessors for the ailing state of the economy. The government has increased duties on luxury imports, significantly devalued the currency to encourage exports, and raised prices of utility services, particularly natural gas, to generate more revenue.

Officials defend their arrangement of emergency loans from Pakistan’s friendly countries, saying they are intended mainly to secure a breathing space for macroeconomic stabilization measures to take root and create a business-friendly environment.

Saudi Crown Prince to visit

In addition to lending urgent cash deposits of $3 billion each at an interest rate of about 3 percent, both Riyadh and Abu Dhabi have also allowed Islamabad to defer $6 billion in oil import payments for one year.

Pakistani officials say the Saudi government has already disbursed $3 billion and the process for $3 billion in deferred oil payments have been finalized. An agreement is expected to be signed when Saudi Crown Prince Mohammad bin Salman visits Islamabad Saturday.

The prince is expected to announce projects worth up to $20 billion during his first state visit, Pakistani investment minister Haroon Sharif told VOA this week. The projects include a massive oil refinery in Gwadar with an estimated investment of around $10 billion.

The UAE is working to establish an oil refinery in Pakistan and plans investments in other sectors. Malaysia, Qatar and South Korea are among other countries anxious to invest in Pakistan, officials said.

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Trump: Trade Negotiations with China ‘Going Extremely Well’

U.S. President Donald Trump is hailing progress in ongoing trade talks with China, with negotiators set to meet next week in Washington as the March 1 deadline approaches.

“It’s going extremely well, who knows what (that) means because it only matters if we get it done. But we’re very much working very closely with China and President Xi, who I respect a lot, very good relationship that we have, and we’re a lot closer than we ever were in this country with having a real trade deal,” Trump told reporters at the White House Friday.

Earlier in the day, China’s President Xi Jinping met with U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin in Beijing. The official Xinhua news agency reported Xi said that he hopes the two sides can reach a mutually beneficial deal in their next round of negotiations. 

A U.S. Treasury Department statement said the U.S. delegation focused on issues such as forced technology transfers, intellectual property rights, cyber theft, agriculture, services and currency. 

“Detailed and intensive discussions led to progress between the two parties. Much work remains, however,” the Treasury statement said. 

China’s state media report said the talks over the past two days made some progress on difficult and important issues. The statement said although much work remains to be done, the American officials said they were hopeful and willing to work with China to reach a deal in line with the interests of both sides.

This week’s high-level discussions were aimed at reaching a deal ahead of the March deadline for an escalation in tariffs on $200 billion of Chinese imports.

In a tweet on Friday, before meeting with Xi, Secretary Mnuchin said that he and Lighthizer had “productive meetings” with China’s top negotiator, Vice Premier Liu He.

Hu Xijin, the editor in chief of China’s nationalistic tabloid the Global Times was optimistic, noting that there is a “great possibility for China and the U.S. reaching (a) final agreement.”

In a tweet, he said, “From what I know, during the just-concluded round of China-U.S. trade talks, the two sides have discussed how to draft a document on comprehensively solving China-U.S. trade disputes, namely a MoU,” adding that “After nearly one year of tough talks, I think the finishing line is nearly in sight.”

Despite, Hu’s optimism, few analysts see anything truly final being hammered out in the 90-day period that ends March 2. At best, most express a hope that the two sides will be able to create a framework that charts the way forward.

Last July, President Trump began raising tariffs that were aimed at “confronting China’s unfair trade practices,” such as a lack of reciprocal market access and complaints that Beijing steals or forces the handover of technology from companies. The trade tussle also seeks to address China’s multi-billion-dollar trade surplus with the United States and generous subsidies for state industries.

China has responded by offering to narrow the trade surplus by purchasing more American soybeans, natural gas and other exports, but its willingness to press forward with key structural reforms remains a key sticking point.

VOA Mandarin Service reporter Jinxun Li contributed to this report.

 

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Hanoi Summit Sparks Optimism, But Called Moment of Truth

The second summit between U.S. President Donald Trump and North Korean leader Kim Jong Un in roughly two weeks is being seen by some as cause for optimism, but also as a moment of truth.

Park In-hook, the president of the Chey Institute for Advanced Studies, said during the organization’s inaugural trilateral conference on China, U.S., and South Korean issues, there’s a lot of emphasis on the February 27-28 talks in Hanoi “because there is some phobia that this might be the last chance.”

Real results expected in Hanoi

Former U.S. Special Representative for North Korea Joseph Yun said the international community had the right to expect results from the Hanoi summit.

“The first meeting (Singapore summit) succeeded in breaking a barrier, [the] second meeting must show results… [there] are two underlying issues. One is denuclearization and a second is building a peace process,” said Yun.

He added there is a fear in the United States that getting into a peace track might lead to the acceptance of nuclear weapons in North Korea.

“Many people in Washington are worried about this concept of denuclearization through peace, because that seems to most Americans… backwards. It should be denuclearization first, then peace,” said Yun.

Recently, U.S. Special Representative for North Korea Stephen Biegun spent nearly three days engaged in talks with his North Korean counterpart, Kim Hyok Chol, in Pyongyang. While Biegun called the discussions “productive,” he also noted that much work still needed to be done.

“President Trump has made clear, both to North Korea as well as to our team, that he expects significant and verifiable progress on denuclearization — actions that are bold, and real to emerge from that next summit,” said Biegun.

Robert Einhorn, Senior Fellow at the Brookings Institution, said the Trump administration is “getting a lot more realistic” about what’s needed for serious negotiations to take place in Hanoi.

“We are unlikely to learn whether Kim Jong Un is really willing to give up his nuclear weapons,” Einhorn said. He added that he “strongly doubts” the Trump administration can secure a commitment from North Korea to completely denuclearize.  

But he added there is an alternative course of action than returning to a “strategy of squeezing the North Koreans economically, deterring North Korea’s aggressive behavior, and eventually bring about its fundamental transformation or collapse.”

“Negotiate an interim agreement that would cap, and perhaps reduce, North Korea’s nuclear and missile capabilities,” he said.

It’s something Einhorn believes would allow North Korea and the United States to continue negotiations toward the goal of complete denuclearization, but without a deadline.

Such a deal would have some disadvantages, he said, but it could also limit Pyongyang’s weapons development progress and open channels of communication that could be used to pursue confidence-building measures to reduce tensions and avoid dangerous miscalculations.

Can the process move forward?

Despite a general sense of optimism surrounding the upcoming summit, there is still the possibility of continued “stagnation,” or the status quo, said Zhang Fangming, chairman of the Academic Committee of the Center for Foreign Policy Studies at the China Foundation for International Strategic Studies.

He said this may happen if “[North Korea] refuses to make a nuclear declaration in any form at the current stage or does not accept verification of its declaration.”

Another scenario that may perpetuate the status quo revolves around the U.S. Congress’ response to the summit and if they refuse to gradually lift sanctions against Pyongyang without it first comprehensively abandoning its nuclear program or making a comprehensive declaration.

Zhang said the “only correct choice is to jointly make [a] long term and worthy effort for the full denuclearization of the Korean peninsula.”

But Kim Sung-han, South Korea’s former Vice Minister of Foreign Affairs and Trade, said President Trump may agree to “something attractive to the U.S. for the easing of sanctions on North Korea.”

“President Trump could choose a part of the North Korean nuclear problem… like ICMBs (intercontinental ballistic missiles) because they are the most threatening to the safety of U.S. citizens,” said Kim.

But the problem, according to Kim Sung-han, is that if, after two summits, Trump and Kim do not come to an agreement where Pyongyang declares its nuclear capability, then the United States would be acquiescing to North Korea’s tactics.

Handong Global University professor Kim Joonhyung said both Kim Jong Un and President Trump are aware of the criticisms.

He said the Hanoi meeting is very much a “moment of truth.”

“If this [summit] fails,” he said, he doesn’t think there will be future meetings between the two leaders.

He added that the big question for the upcoming summit is, “How much sanctions relief Trump is willing to offer in exchange for [partial denuclearization.]”

 

 

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Pompeo: US Aims to ‘Get as Far Down Road as We Can’ with N Korea

The United States aims to “get as far down the road as we can” ahead of a summit with North Korea in Vietnam this month, U.S. Secretary of State Mike Pompeo said on Thursday.

Pompeo said he was sending his team back to Asia in the coming days for further discussions around all issues discussed at a groundbreaking Singapore summit last June between U.S. President Donald Trump and North Korean leader Kim Jong Un.

Trump announced last week he would hold a second summit with Kim in Hanoi on Feb. 27 and 28.

Pompeo told a news conference in Warsaw that Trump and Kim would be looking at the “denuclearisation pillar they agreed to” at their first summit as well as other matters.

“We’ll certainly talk about how we … reduce tension, reduce military risks, take down that risk so we can get peace and security on the peninsula as well,” he said after a conference on the Middle East.

“We are aiming to get this as far down the road as we can in what is now a couple of weeks,” Pompeo said.

Asked later in a Fox News interview how important the formal end of the Korean War was in the discussions, Pompeo said: “It’s something we’ve had a lot of talks about. In fact, my team will redeploy to Asia here in a day or two to continue conversations around all elements that were discussed back in Singapore.”

The United States has been demanding that North Korea give up a nuclear weapons program that threatens the United States, and Trump has been eager for a second summit even though the Singapore meeting produced only vague commitments from Kim and little concrete progress since.

North Korea has been seeking a lifting of punishing U.S.-led sanctions, a formal end to the 1950-53 Korean War and security guarantees.

In an interview with CBS News on Wednesday, Pompeo said of Kim that “now it’s time for him to deliver.”

U.S. Special Representative for North Korea Stephen Biegun is expected to hold further talks with his North Korean counterpart next week to prepare for the Hanoi summit.

Biegun held three days of talks in Pyongyang last week, which he said would be aimed at mapping out “a set of concrete deliverables” for Hanoi. The State Department has offered no indications of any progress in these.

South Korean media said Biegun told a South Korean parliamentary delegation that in Pyongyang the two sides agreed not to negotiate, but to make clear their respective positions, and they would seek to narrow their differences in the next round of talks.

 

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White House Upbeat on Beijing Trade Talks

A top White House economic adviser is expressing confidence in the current U.S.-China trade negotiations in Beijing.

“The vibe in Beijing is good,” National Economic Council Director Larry Kudlow told reporters Thursday at the White House. 

Kudlow provided few details but said the U.S. delegation led by Trade Representative Robert Lighthizer is “covering all ground” ahead of their expected meeting with Chinese President Xi Jinping tomorrow.

“That’s a very good sign and they’re just soldiering on, so I like that story,” Kudlow said, “And I will stay with the phrase, the vibe is good.”

Negotiators are working to strike a deal by March 1, to avoid a rise in U.S. tariffs on $200 million worth of Chinese goods from 10 percent to 25 percent. President Donald Trump suggested earlier this week that if talks are seeing signs of progress, that deadline could be pushed back.

When asked Thursday if there would be an extension, Kudlow said, “No such decision has been made so far.”

Analyst William Reinsch, a former president of the National Foreign Trade Council and senior adviser at the Center for Strategic and International Studies, says the talks are complicated by the three main areas under negotiation.

“Market access, which I think is well on the way to completion. Some Chinese offers on intellectual property, which I think they are not going to offer what we want. … And some compliance in enforcement matters,” he said.

Reinsch told VOA’s Mandarin service that U.S. negotiators are specifically seeking ways to hold China accountable for the commitments it makes in any deal.

Munich Security Conference

While American and Chinese negotiators continue talks in Beijing, both countries are setting up for another potential faceoff in Europe.

The U.S. and China are sending large delegations to Friday’s Munich Security Conference in Germany, a high-level conference on international security policy. Vice President Mike Pence leads the U.S. delegation while Politburo member Yang Jiechi will be the most senior Chinese official.

Yang Jiechi is heading the largest-ever Chinese delegation to the conference traditionally attended by the U.S. and its European allies. He is pushing back against Washington’s campaign pressing Europe to exclude Chinese tech giant Huawei from taking part in constructing 5G mobile networks in the region.

U.S. officials say allowing the Chinese company to build the next generation of wireless communications in Europe will enhance the Chinese government’s surveillance powers, threatening European security.

Although the technology behind 5G is complex, Brad Setser, a senior fellow at the Council on Foreign Relations and former assistant secretary at the U.S. Treasury Department, said the decisions for European countries is simple.

“Given the nature of modern telecommunication, countries do have to make a choice whether or not that Huawei, given its ownership relationship with the Chinese government, can it be trusted to provide their future communication systems.”

Both Pence and U.S. Secretary of State Mike Pompeo warned allies in Poland and other Central European countries this week on the dangers of closer ties with Beijing and collaboration with Chinese firms. In Budapest, Hungary, on Monday, Pompeo said American companies might scale back European operations if countries continue to do business with Huawei.

Huawei has repeatedly denied its products could be used for espionage.

U.S. prosecutors have filed charges against Huawei including bank fraud, violating sanctions against Iran, and stealing trade secrets. The company refuted these accusations and rejected charges against its chief financial officer Meng Wanzhou, who is currently on bail in Canada following her arrest in December.

This year’s Munich Security Conference topics include the “great power competition” between the United States, China and Russia. Conference organizers have listed U.S.-China tensions as one of their top 10 security issues of 2019.

VOA’s Mandarin Service reporter Jingxun Li contributed to this report.

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Myanmar Charter Change Bid Unlikely to Loosen Military Grip on Power

Aung San Suu Kyi is unlikely to win any big changes to Myanmar’s military-drafted constitution, despite launching her boldest challenge yet to the generals’ entrenched role in politics, analysts have said.

Her civilian National League for Democracy (NLD) party, which dominates parliament, last week comfortably won a vote to set up a committee to amend the charter — but observers say that’s about as easy as it’s going to get.

Amending the constitution

The roughly 200-page document guarantees soldiers a quarter of all seats in parliament, giving them the ability to veto any constitutional changes, which require 75 percent of the vote to pass.

That means the NLD’s super majority from a landslide 2015 election win is effectively useless when it comes to striking down clauses that bar Suu Kyi from becoming president and allow the military to control key ministries.

The constitution came into force following what is regarded as a sham referendum in 2008, held just a few days after a devastating cyclone killed around 140,000 people.

The death of Ko Ni

Hopes of reform dampened after the assassination in early 2017 of Ko Ni, a top constitutional lawyer and close advisor to Suu Kyi.

The NLD appeared to be signaling those hopes were still alive when it used the second anniversary of Ko Ni’s death to announce its plan to form the committee last month.

Power of the military

Making the charter more democratic was a key NLD election pledge, but the committee appears to be less about making good on that promise than trying to show voters that they tried, and were hamstrung by the generals.

“They already know very well that if they cannot get the military to agree, they cannot change the constitution,” said Ye Myo Hein, an analyst with the Tagaung Institute of Political Studies, a Yangon-based think-tank.

With the next election in 2020 looming ever larger, he added, “they want to send the message to the people that the NLD is always trying to fulfill its campaign promises.”

But using the military’s legal veto as an excuse for failure might ring hollow, said Soe Myint Aung, founder of the Yangon Centre for Independent Research.

Changing the charter would require an imaginative political solution to win concessions from the generals, he added; simply suggesting changes they are bound to vote down won’t be enough.

“I don’t think the NLD is really in a position to put the blame on the military if the amendments do not happen,” he said. “The constitutional amendment question is really about political will. It’s not really about the legal matter.”

The NLD has tried to harness popular support to amend the constitution before, but that was before they came to power.

Mandalay demonstrations

And while hundreds of demonstrators rallied this week in the city of Mandalay to support changes, drawing on the power of the public to pressure the generals may not be the best strategy for the NLD this time, said Ye Myo Hein.

“In the near future they will be very busy with the election. I think it is very risky and also they would have to invest a lot of time and energy to mobilize,” he said.

While key clauses that preserve the military’s power are off limits for now, there are some less significant changes that the NLD may be able to make ahead of the next general election to show it has made progress.

Some change possible

Scrapping section 261, which gives the president a key role in appointing regional chief ministers, is plausible because the military would not see that as a threat, says Ye Myo Hein.

“They will allow constitutional reform that cannot damage their role in politics,” he said.

Decentralizing some power to Myanmar’s conflict-torn borderlands in this way might even serve the military’s interests, he added, allowing them “to pressure ethnic armed groups to participate in politics rather than taking up arms.”

The question is whether or not the NLD itself would want such a change; the party has been accused of using the clause to get the upper hand while in power.

The committee could be seen as an opportunity for Aung San Suu Kyi to win back some of the trust she has lost amid criticism she is unwilling to negotiate with ethnic parties.

Rather than using it to try to push through the changes they already want, the government should open a wider dialogue, said Melissa Crouch, an expert on Myanmar constitutional law.

“I think there’s a lot the NLD could do around transparency and public participation in this process,” she said.

That will be a precarious path to tread, said Soe Myint Aung: “The worry is that the NLD will not be able to please anyone, and this will just be seen as a political ploy.”

 

 

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North Korea Looking for Home-Grown, Sanctions-Proof Energy

Power-strapped North Korea is exploring two ambitious alternative energy sources, tidal power and coal-based synthetic fuels, that could greatly improve living standards and reduce its reliance on oil imports and vulnerability to sanctions.

Finding a lasting energy source that isn’t vulnerable to sanctions has long been a priority for North Korean officials. Leader Kim Jong Un used his New Year’s address last month to call on the country to “radically increase the production of electricity” and singled out the coal-mining industry as a “primary front in developing the self-supporting economy.” For the longer-term, he stressed the importance of atomic, wind and tidal power.

Since further development of atomic energy is unlikely anytime soon, the power-scarce country is developing technology to “gasify” coal into substitute motor fuels. It also is looking into using huge sea barriers with electricity-generating turbines to harness the power of the ocean’s tides.

​Coal and hydropower

Coal and hydropower are North Korea’s main energy resources. The North imports nearly all of its oil and petroleum products from China. Solar panels are visible just about everywhere, from urban balconies to rural farm buildings and military installations. Wind remains a very minor energy source.

The North’s renewed focus on oil alternatives underscores what some foreign observers believe are two of its long-term best bets.

Kim’s late father, Kim Jong Il, tried to get international support for developing nuclear power in the 1990s before the North ultimately opted instead for nuclear weapons. That brought some of the most intense sanctions ever applied by the United Nations against the country, making its energy situation even more precarious.

But coal is something North Korea has in abundance.

It’s used to supply thermal power plants and factories, to heat homes and to make fertilizer and even a kind of cloth, called Vinylon. Slow-running, smoke-belching trucks that use a gasification process with firewood are common in the North Korean countryside. Coal isn’t generally seen as a good oil-product substitute because converting it to a liquid form is inefficient and expensive — coal gasification was last used on a large scale in Nazi Germany to keep its cars and trucks moving.

Efforts paying off

Given North Korea’s limited options, it’s a technology that appears to be paying off.

The output from one gasifier unit reportedly destined for the North Sunchon Chemical Plant, north of Pyongyang, could yield synthetic fuel amounting to about 10 percent of the North’s recent petroleum supply, according to a recent study for the Nautilus Institute by David von Hippel and Peter Hayes, two of the foremost experts on the issue. The study cited as one of its sources a Wall Street Journal report from December that tracked the unit to a Chinese exporter.

The facility is believed to be a center of “C-1” technology, which uses coal to make a kind of gas used to produce synthetic fuels, industrial chemicals and fertilizers.

Now that China has reduced its coal imports from the North in line with the sanctions, there’s more available for gasification.

“The project appears to provide a significant benefit to the DPRK, in terms of supplying fuels to compensate for petroleum product imports that run afoul of United Nations Security Council sanctions passed in the last two years, although the project will not completely replace all lost imports on its own,” they wrote in the report.

DPRK is short for the North’s official name, the Democratic People’s Republic of Korea.

​Power from the tides

The North’s interest in tidal energy also reflects a practical desire to exploit existing resources.

Glyn Ford, a former member of the European Parliament with extensive experience with the North, said he has had several discussions with North Korean officials regarding tidal power and even helped arrange a study tour to a facility in the UK a decade ago. He said they have tried to invite experts to the North.

The country is perfectly situated for tidal power.

“The bulk of the Korean Peninsula’s west coast is a rich tidal power resource,” Ford said in a telephone interview with The AP. “There are some detailed studies of the potential in South Korea and the same resources are there to be exploited north of the Demilitarized Zone.”

The world’s largest functioning tidal power plant is near the South Korean city of Ansan. It opened in 2011 and produces about enough power to support a city of 500,000.

Kim Jong Un has shown a strong penchant for mobilizing his million-man military on big projects. And the North has shown it can build something like a tidal power plant.

One of North Korea’s proudest accomplishments is the gigantic West Sea Barrage, which was completed in 1986 at a cost of $4 billion. The huge seawall near the city of Nampo, a port about an hour’s drive from the capital, crosses the mouth of the Taedong River and helps control flooding and reduce the amount of salt that seeps in from the ocean, increasing the amount and quality of arable land.

“The attraction is that, apart from the turbines, it is all a gigantic earth-moving project,” Ford said. “That’s ideal for the Korean People’s Army skillset.”

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US-China Trade Talks Set to Open in Beijing

U.S. and Chinese negotiators are set to kick off two days of official trade talks in Beijing on Thursday as the world’s top two economies try to patch up their festering economic dispute.

Pressure to seal an accord ahead of a March deadline lessened before the talks as U.S. President Donald Trump indicated Tuesday in Washington he was open to extending a trade truce, depending on progress in Beijing.

Trump in December put on hold sharp tariff hikes on $200 billion of Chinese imports to allow time for negotiators to work out a resolution to the thorny spat.

The two countries have already slapped tariffs on more than $360 billion in two-way trade, which has weighed on their manufacturing sectors and shaken global financial markets.

U.S. officials including U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin will meet with China’s top economic czar Liu He and central bank governor Yi Gang as the two sides aim to build on progress made in Washington last month.

Lower level officials arrived earlier for what the White House called preparatory meetings starting Monday.

Expectations for a trade deal have grown as China faces pressure from slowing economic growth, and swooning global markets rattle Trump and his economic advisers.

Chinese President Xi Jinping plans to meet with top U.S. officials in Beijing this week, a report in the South China Morning Post said Wednesday, bolstering hopes for the talks and markets in Asia.

Trump also said he expects to meet with Xi “at some point” to clinch a trade deal.

“Markets will continue to watch — and react — closely to the ups and downs of the negotiations,” said Trey McArver of Trivium Research.

“But Sino-U.S. relations are all about the two leaders, and it will ultimately be up to Xi and Trump to come to a deal — or not,” he wrote Wednesday in a newsletter.

Previous talks

The two sides said major progress was made in talks last month in Washington, but a wide gulf remains on some issues.

The U.S. is demanding far-reaching changes to Chinese practices that it says are unfair, including theft of U.S. technology and intellectual property, and myriad barriers that foreign companies face in the Chinese domestic market.

Beijing has offered to boost its purchases of U.S. goods, but is widely expected to resist calls for major changes to its industrial policies such as slashing government subsidies.

The International Monetary Fund warned on Sunday of a possible global economic “storm” as world growth forecasts dip, citing the U.S.-China trade row as a key pivot point.