US-China Issues: Deeper Than Something That Can be Resolved by a Tweet - Expert

Both the US president and his Chinese counterpart Xi Jinping expressed hope about resolving the trade dispute ahead of their meeting at the G20 summit. In addition, Trump tweeted on Thursday that he had had a good conversation with President Xi about trade. Radio Sputnik has discussed a possible trade deal between China and the US with Ananth Narayan, an international banking and financial markets expert.

Sputnik: How lasting is this boom of Asian stock market, do you feel?

Ananth Narayan: Well, it's certainly come as a relief for a market that's been stressed for a while with all the issues around geopolitics and of course the US-China trade wars. And to that extent, any good news and chance to it certainly qualify as one was a relief all around. But the issues between China and the US probably go deeper than something that can be resolved over a tweet. Let's not forget that China has aspirations.

It has a plan to become a technology superpower by 2025 and there are deep issues of disagreement between the US and China on intellectual property rights, on opening of Chinese markets as per WTO and so on and so forth, which look frankly intractable in many, many ways. So, while we will celebrate for a while a relief rally, the core issues around China versus the US, simply haven't run away.

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Sputnik: Yeah, it's interesting, isn't it, you are obviously dissecting this particular tweet and comment by President Trump but there is obviously many, many facets to a potential trade agreement. We need to have a look at the finer detail, I don't know, the market may be taking a bit of a step beyond what the protracted situation could potentially be. Now, President Trump's announcement of a draft trade deal with China was said to be one of the main factors behind this price spike that we've just both alluded to. Are there other issues that are simply not particularly public knowledge at the moment why this has had such an effect on the Asian stock markets? You've seen a sort of a decent growth in all the different marketplaces, in Shanghai, in Hong Kong and other far eastern markets. Can you add anything to what I have just said?

Ananth Narayan: Well, besides, of course, a potential thaw in the US-China trade issue. The fact that oil prices and commodity prices, in general, have come off. Remember this November 4 is the day on which Iran sanctions on oil start to kick in and the fact that oil markets are still well behaved is again a sign of relief, particularly for countries in Asia which are large importers of oil barring a couple of nations.

So that's been good news as well. But I think one factor to keep in mind which is where the market has to be careful, is one has to remember the domestic compulsions of both President Trump and President Xi at this point in time. We have very critical elections in the US coming up shortly and clearly, President Trump would want markets to be benign going into those elections.

So it's quite possible that the relief that we are seeing right now is more playing to domestic constituents than actually signaling a long-term thaw between the US and China.

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Sputnik: Now, we are obviously reading and reporting that after this telephone call between the two leaders this is when Trump first stated that there is an agreement in the pipeline. What are your feelings, do you think China has actually given in a little bit in terms of its being a bit more flexible in terms of what the United States is requesting? What is your particular take in terms of a prediction on who's actually given ground here?

Ananth Narayan: Well, it certainly looks like the US has the upper hand here. Remember, the US has renegotiated its NAFTA, and Mexico and Canada had to give some concessions to the US, particularly with respect to them having separate chats and separate trade agreements with China.

So, to that extent, I am sure China has been watching that very-very closely and it probably has realized that the US this time around means business. And for the first time in many, many years we've actually seen policymakers in China looking slightly confused, shall we say, and not really sure about which way to handle issues as they go along.

So at some stage, I am sure they will have to compromise and they will have to probably give some concessions to the US; but again here is where realpolitik comes in. Remember that President Xi has domestic constituents to keep happy as well. And he is seen as a strong man, it wouldn't look nice if China actually has to give in too much into US demands. So, it is an interesting situation which is both economic as well as political.

And one has to see how this plays out. My own bet is that this is going to last for a long, long time. It's unlikely it will get resolved as we clearly would like it to.

Sputnik: Well, it's interesting you should say that, I agree with you but it will certainly be interesting to see what the finer detail is as to why President Trump is being so positive in his tweets. Let's just move along a little bit, the US sanctions on Iran are poised to take effect next week. What impact can they have on the trade markets? Is it likely that we're gonna then see a regression in the stock markets? What's your particular feeling with regards to that?

Ananth Narayan: Well, I think the markets have been positioning themselves in preparing for this particular event for a while now. So, we did see a spike in Brent prices and WTI prices about a month back. But it's now recovered quite sharply. So, it's quite possible that between Russia and the United States and Saudi Arabia that oil production has come in to fill the breach that Iran might otherwise face.

In addition, the US has given leeway  to a few countries including big importers like Japan and India to continue to import from Iran for a while and smoothen out the process. So, I think hopefully next week's Iran event, which is unknown, really should go by smoothly.

The medium-term impact of having Venezuela, Iran and a whole bunch of other oil-producing nations under trouble of course will need to be watched. Oil trade should do okay because let's remember the US is actually doing extremely well and as a sign of US growth should do well for trade globally, irrespective of what transpires from the trade war.

Views and Opinions expressed in the article are those of Ananth Narayan and do not necessarily reflect those of Sputnik.