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Economic "red lines" can collide with the Trump Plan



US. President Donald Trump and Chinese President Xi Jinping may have stopped their collective bargaining, but differences between the two countries' views on technology and state-sponsored companies will call into question the negotiations between the two economic giants, analysts said. 19659002] div> div.group> p: first child "/>

"Firmly adhering to the Chinese economic model, Xi will continue to provide government support to targeted industries, especially in technology under the Made in China 2025 program," said Eleanor Olcott, China analyst at TS Lombard on Monday Washington has accused China of enforcing technology transfers and tacitly supporting intellectual property violations and cybercrime, but these issues have been downplayed in official descriptions of the weekend agreement.

"90 days that suggest the two sides are quite close to an intellectual property theft agreement," writes Zhu Huani, economist at Mizuho Bank, in a note on Tuesday.

"While reducing the trade differential could be the simpler part, China makes less concessions to its industrial policy, such as" Made in China 2025, "which could hinder the discussion on technology transfer," Zhu added. 1

9659003] The "Made in China 2025" plan is Beijing's industrial policy of investing in high-end technologies such as artificial intelligence to compete with rivals such as the US and Germany.

Analysts follow Trump and Xi's agreement at the weekend of the Argentinian G-20 meeting temporarily suspended its bilateral trade war. According to official figures, after the negotiations between the two countries after January 1, they would limit themselves to extra tariffs on each other's goods.

As part of the deal, China said it would buy more US imports, especially in the energy sector and agriculture. Beijing will also exercise more control over the flow of fentanyl, a synthetic opioid that is 50 times more addictive than heroin and has been linked to thousands of overdose deaths in the United States. According to the US Department of Justice, China is one of the world's leading producers of ingredients for the production of fentanyl.

However, it is unclear how this [deal at the G-20] will solve issues related to the protection of intellectual property and the forced transfer of technology in China – "It will not," wrote the economist of French trade credit insurer Coface on Monday in a note.

Finally, some even jokingly ask if Trump and Xi have even participated in the same meeting, given the significant differences in their statements.

"There is reason to believe that the details of the agreement are not fully met by the two parties, and no joint statement was expressly made after the meeting, and the separate statements made by the US and China revealed material divergences However, the Chinese statement did not mention the 90-day deadline for threatening to increase customs by 25 percent, Pictet Wealth Management economists wrote Monday

Industrial policy "Made in China 2025," Pictet noted [19659003] "Given the differences in starting positions, it is very unlikely that the Chinese side will put red lines around the state-run system. Days will allow the US to make concessions that Trump could present with any conviction as a 'big win'" said Olcott of TS Lombard.

This report.

Disclosure Hungarian: Larry Kudlow is a former CNBC employee.


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