China Urges U.S. to Safeguard Trade Progress Before Xi-Trump Talks

China Calls for Protection of Trade Achievements Ahead of High-Level Meeting

The official publication of the Chinese Communist Party, People’s Daily, has urged the world’s two largest economies to collaboratively ensure the preservation of the "hard-won results" from their recent trade discussions. This appeal comes in anticipation of a pivotal meeting between President Donald Trump and President Xi Jinping.

Trade Negotiators Reach Key Agreements in Malaysia

On Sunday, trade representatives from China and the United States announced a series of agreements covering a range of topics, including tariffs, shipping fees, fentanyl, and export controls following two days of negotiations in Malaysia. This development marks a notable de-escalation of tensions that had recently flared up due to threats of new tariffs and additional export restrictions that jeopardized the bilateral relationship.

A Message of Cooperation

In a tone aimed at reconciliation, People’s Daily emphasized on Monday that the recent progress illustrates that both Beijing and Washington can effectively manage their differences. According to a commentary by Zhong Sheng, a name that translates to "Voice of China" and is often used to communicate Beijing’s foreign policy stance, “Neither side was blindsided by these issues; instead, they concentrated on problem-solving.”

Market Reactions to Trade Developments

In response to the positive outcomes of the trade negotiations, the Hang Seng China Enterprises Index saw an increase of up to 1.3% on Monday, while the broader MSCI AC Asia Pacific Index rose by 1.5%, achieving a new intraday record. Additionally, yields on China's 10-year government bonds experienced a slight uptick as investors began to shift away from safety assets.

Upcoming Xi-Trump Meeting in South Korea

Xi and Trump are expected to finalize the terms of these agreements this week in South Korea during their first in-person meeting since Trump regained the presidency. This gathering could unveil critical details regarding topics such as China's imports of U.S. soybeans, the U.S. plans for shipping fees on Chinese vessels, and China's regulations on rare earth exports.

Market Stability in Question

Economists from Bloomberg, including Chang Shu, David Qu, and Jennifer Welch, expressed cautious optimism, stating, “We expect the leaders to approve the deal, but whether it will bring lasting relief to markets is less clear—the new reality for U.S.-China ties appears to be one of frequent ruptures and short-term fixes.”

China's Economic Focus Amid External Uncertainties

From Beijing’s viewpoint, reducing external uncertainties will allow policymakers the opportunity to concentrate on bolstering the domestic economy and improving technological self-sufficiency. Although Chinese industrial companies reported their highest earnings growth in nearly two years last month, challenges remain, including a struggling job market and a prolonged housing crisis.

Request for Adherence to Trade Mechanisms

The People’s Daily commentary urged the U.S. to remain committed to the trade and economic consultation framework led by U.S. Treasury Secretary Scott Bessent and Chinese Vice Premier He Lifeng. Recent export restrictions imposed by U.S. officials outside of this structured framework have disrupted the system multiple times in recent months, prompting Beijing to tighten its rare earth supply chain, which is vital for American manufacturing.

Rare Earth Restrictions in Limbo

Bessent indicated that he anticipated China would postpone its latest rare-earth restrictions for a year while they re-evaluate the situation following these recent negotiations. It remains uncertain how Beijing would enforce its proposed limitations, which would exert control over any global shipment containing even a trace of certain rare metals from China, a decision that has also sparked backlash in Europe.

Potential for a Quick Resolution on Fentanyl Tariffs

Another area that could see prompt agreement is the 20% tariff on fentanyl, which remains a point of contention that both countries are keen to address.