An audience for the arm-wrestling

The Washington delegation that landed in Beijing last week to negotiate in the trade dispute between the US and China could hardly have been more high-ranking: Apart from US Treasury Secretary Steven Mnuchin and Commerce Secretary Wilbur Ross, President Donald Trump also sent his most important trade advisor, Robert Lighthizer, and his most important economic advisors, Peter Navarro and Larry Kudlow. Washington could not have made clearer its understanding of China's status as a global power.

China feels confident

The fact that neither Chinese Prime Minister Li Keqiang or President Xi JInping had time for the delegation also shows how confident China is. It didn't help that the US officials presented a set of demands in a document as if Washington wanted to give a lesson to a spoiled child. One was that China should not "oppose, challenge, or otherwise retaliate against the United States' imposition of restrictions on investments from China in sensitive US technology sectors or sectors critical to US national security." The underlying tone was that China should sit still and not do anything if this went against the interests of Washington.

The team also made clear that it did not want China to target US farmers directly by imposing sanctions on agricultural products such as soy in response to the tariffs. China was also told that it could not subsidize certain key industries, such as robotics, e-mobility and plane construction, in which the country is hoping to play a pioneering role. China was also told to change its technology transfer policy for foreign firms and reduce its trade deficit with the US by $200 billion (€167 billion) by 2020. Until recently, the sum mention had been $100 billion.

It's clear what this means: Washington is playing up again before it goes into compromise mode. This also means that ZTE — the second-biggest manufacturer of telecom network equipment in China — has been forbidden from using US technology for seven years after being accused of supplying Iran with network technology via fake firms despite an embargo. This has been under investigation since 2012, when Barack Obama was still US president. Iran and the West had come closer in recent years thanks to the nuclear deal that Trump just scrapped. It is clear that the US wants to have extra leverage and a good negotiating position for a compromise in this trade dispute with China.

The US does not pose a risk to China's stability

The saber-rattling has been more to impress Trump's electorate. The US president knows that Chinese growth would only be reduced by 0.1 to 0.3 percentage points even if there was a full-scale trade war, because China's economy is much less dependent on exports than in the past. Only a fifth of exports go to the US. China is also the biggest buyer of US bonds, so the means of pressure are unfairly distributed. A trade war would hurt Beijing, but would not do to much to China's economic growth and economic stability. That's why the phase of both sides talking to each other with respect will soon begin.

Next week, a high-ranking Chinese delegation will be traveling to Washington. It will be led by Xi's most important economic advisor, the Harvard-educated 66-year-old Vice Premier Liu He. A solution won't be found just like that. There will have to be one or two more rounds of negotiations first. But it is already clear that both sides seem to be aware of the fact that a compromise will be found that both can live with.

Frank Sieren has lived in Beijing for over 20 years.