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Trade war

Headwinds at home push Xi to show progress in US trade talks

No quick deal in sight as rifts on soybeans and Huawei persist

Washington and Beijing have not held face-to-face meetings on trade at the cabinet level since the month before U.S. President Donald Trump, left, and Chinese President Xi Jinping agreed in Osaka this June to restart the talks.   © Kyodo

SHANGHAI/NEW YORK -- With China's annual leadership conclave approaching, President Xi Jinping faces growing pressure to make concrete headway on trade negotiations with the U.S.

Current and retired Communist Party leaders are gearing up for their annual gathering at the beach town of Beidaihe next month. Xi is believed to be under extra scrutiny this year amid the ongoing protests in Hong Kong, and he needs something to show in order to appease his critics.

U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin are meeting in Shanghai on Tuesday with top Chinese officials, including Vice Premier Liu He. This marks the countries' first cabinet-level talks on trade in about three months.

If the meeting were in Beijing, Xi would have to decide whether to meet with the Americans and risk appearing weak -- or to snub them and fuel speculation of a lack of progress. Holding the meeting all the way over in Shanghai avoids this dilemma.

In a bid to move the trade talks along, China has been signaling a commitment to agreements made at Xi's last meeting with U.S. President Donald Trump. The official Xinhua News Agency reported Sunday that China has bought millions of tons of U.S. soybeans since Trump and Xi met in late June and that Chinese enterprises will continue to make inquiries on purchasing American farm products. It said several million tons of soybeans were already on ships headed to China.

The U.S. agriculture sector has been hit hard since the trade war started. China is American soybean farmers' biggest customer. Without massive Chinese purchases, owing to the trade tensions and African swine fever, many U.S. farmers still have last year's bushels in storage. They have thus been pressing Trump to make a deal with Beijing.

China has been buying more soybeans from the U.S., but it is still not buying as much as President Donald Trump wants.   © Reuters

China has agreed to buy more American soybeans as goodwill purchases, but it seems the amount is much less than Trump expected.

China has purchased only roughly 1 million tons of soybeans from the U.S. since June 28, according to data from the U.S. Department of Agriculture. Instead, it seems China has continued to buy the feed grain from elsewhere.

Last week, Brazil sold at least eight ships of soybeans to China, according to Chinese agriculture database Cofeed. This means that up to an estimated total of 5.2 million tons of Brazilian soybeans have been sold to China in July.

China's General Administration of Customs on Friday also approved soybean imports from all parts of Russia as the U.S.-China trade talks drag on. Chinese Foreign Ministry spokeswoman Hua Chunying on Monday avoided commenting on the discrepancy in recorded soybean purchases but said that Chinese and American trade delegations soon hold the 12th round of trade talks and that Beijing hopes Washington will hold up its end of the deal.

Meanwhile, the U.S. has yet to ease sanctions on Huawei. While Trump has hinted at the possibility, both Republican and Democratic lawmakers strongly oppose the idea.

Washington is likely considering allowing exports of generic low-tech products to Huawei on a case-by-case basis while keeping it on the Entity List. But no specifics have been officially announced.

The U.S. allows exceptions on exports to Huawei that is necessary to maintain mobile networks. But this license is set to expire on Aug. 19.

The American side wants to announce a new framework on Huawei before then, a Commerce Department official said. China is thinking about halting purchases of U.S. farm products unless there is some progress on Huawei.

Beijing has refused to compromise so far on industrial subsidies and other policies it views as key elements of its state capitalism.

The upcoming meeting will begin with deciding whether the start from scratch or pick up from the 90% point where talks fell apart last time, a source familiar with the negotiations said.

Trump and Xi set a 90-day deadline for a trade deal when they met in December. But no such cutoff exists this time around. Top U.S. officials are curbing expectations of a swift agreement.

"I wouldn't expect any grand deal," U.S. National Economic Council Director Larry Kudlow said Friday of the upcoming meeting in Shanghai.

China is celebrating its 70th anniversary on Oct. 1, and Xi is unlikely to make controversial moves between now and then. "We can't really make any compromises until October, and likely won't make much progress on talks," a Chinese government source said.

China probably wants to wait and see whether Trump is reelected in 2020, an American official said.

Takeshi Kawanami in Washington contributed to this report.

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