Investment Bank Viewpoint: The probability of a "transactional" agreement between China and the United States is increasing, but China has no urgent pressure -- Citigroup
Citigroup believes that the likelihood of a transactional agreement between China and the United States is increasing, but China does not feel urgent pressure. The report points out that China may make cautious concessions on rare earth export controls in exchange for the United States easing some export controls or lowering tariffs. Despite a significant decline in exports to the U.S. in May, China's exports to other markets remain strong. It is expected that China's GDP growth rate in the second quarter will exceed 5%, and there will be no major policy changes before the Politburo meeting in July
Reuters Beijing, June 10 - As the second round of economic and trade talks between China and the United States takes place in London, investment bank Citigroup believes the likelihood of both sides reaching a transactional agreement has increased; however, Chinese policymakers may only make cautious concessions, such as in the area of rare earth export controls, in exchange for the U.S. relaxing some export controls or lowering tariffs.
In a commentary report released after China's foreign trade data for May, the bank reiterated that there is a significant chance that the 20% tariff on fentanyl could be suspended or even canceled through negotiations.
"Given that Chinese exports remain resilient, China may not have an urgent need to reach an agreement with the U.S. or pressure to stimulate the economy," the report stated.
The report also pointed out that high-frequency tracking data shows that shipping activity has remained strong since June, with the decline in the number of container ships departing from China to the U.S. narrowing, while overall cargo throughput remains stable. It is expected that during the 90-day tariff suspension window, the "export rush" situation may continue.
After experiencing a shift in U.S.-China trade from "hot war" to "ceasefire," China's import and export pace both slowed in May, with export growth hitting a three-month low and exports to the U.S. experiencing the second-largest year-on-year decline in history, indicating that the negative impact of the trade war continues to exist. However, exports to markets such as the European Union, ASEAN, and Canada continued to show strong growth.
Citigroup believes that China's GDP growth rate in the second quarter is expected to exceed 5%, and the economic growth rate in the third quarter will also benefit from a low base effect, so no significant policy changes are expected before the July Politburo meeting or before September.
Senior economic officials from the U.S. and China began talks in London on Monday, which will continue the next day. U.S. President Trump stated on Monday that the talks are progressing smoothly and that he is "talking very well" with China. (End)
(Reported by Liu Xiuhong; Edited by Tian Lianqin)
