In the latest round of economic and trade negotiations between China and the United States in Kuala Lumpur, the focus has been on Chinese rare earths and American soybeans. Businesses in Jiangsu and Zhejiang are concerned that the agreement may not materialize easily and are hoping for swift implementation to stabilize exports and employment.
The economic and trade negotiations between China and the U.S. in Kuala Lumpur resulted in a preliminary consensus being reached on issues such as tariffs and export controls, initiating internal approval processes. Although the negotiation text has not been made public, information revealed by U.S. representatives to the media indicates that China has agreed to delay the implementation of the rare earth export control originally set for September 25 for one year. At the same time, clear commitments have been made regarding arrangements for TikTok and the resumption of purchasing American soybeans. China has also temporarily avoided a new round of high tariffs from the U.S.
Observers in Beijing have noted that the outcome of these negotiations is limited, merely bringing the relationship back to the state before China announced the rare earth control. Some analysts believe that a comprehensive trade agreement between the two sides is still far from being reached.
Foreign trade officials in Beijing have revealed that China presented three core demands during the negotiations: firstly, the request for the U.S. to cancel additional tariffs on Chinese imports, returning to the tax rates at the beginning of the Trump administration; secondly, the removal of export restrictions on Chinese technology products; and thirdly, the easing of review processes for cooperation between American and Chinese companies in the semiconductor and artificial intelligence fields.
The individual indicated that the Chinese representatives had set a “bottom line” before departing and that the head of the delegation, Vice Premier of the CCP He Lifeng, had received high-level authorization to make limited concessions if necessary, but without compromising under unilateral conditions. He stated, “They really want to make a deal, so the bottom line may be adjusted further. China’s economy heavily depends on trade with the U.S.”
However, mainland Chinese businesses are concerned that the China-U.S. agreement may face challenges in implementation. Mr. Hong, a factory manager of an electronic components factory in Wenzhou, Zhejiang, expressed, “With rising raw material costs and high shipping fees, many small factories may struggle if the agreement is not finalized soon.”
He pointed out that over the past two years, orders from European and American markets have significantly decreased, leading companies to rely on domestic sales to compensate for the shortfall, but the demand remains weak.
The director of a foreign trade processing company in Kunshan, Jiangsu, mentioned that his company has already downsized its workforce by 20% this year. If there is no news of the agreement being finalized in the fourth quarter, further production line cuts and employee reductions may be necessary.
According to a report by Reuters, U.S. Trade Representative Jamieson Greer stated that negotiations between the two sides were progressing towards an agreement text that could be reviewed by the leaders of both countries. They achieved several textual consensuses regarding tariff adjustments, export controls, and supply chain stability during the meeting.
Mr. Zhang, a scholar in Beijing, pointed out that although tensions in Sino-U.S. trade are easing, the focus remains on technology supply chains and security reviews. Without mutual political acceptance, there might be uncertainties in the implementation of the agreement. He said, “China needs to report the negotiation results and get approval from Xi Jinping. Whether there will be a last-minute turnaround at the signing moment, as happened the first time, is unpredictable. Trump may also make new demands.”
Mr. Zhou, a technology trader in Yiwu, Zhejiang, expressed his concern about potential mid-negotiation reversals in the agreement, stating, “Traders like us fear sudden changes during negotiations and hope for a successful outcome this time. Recently, many have been setting up factories abroad, manufacturing products there, and then exporting to the U.S. to avoid many complications.”
Before embarking on his journey to Asia, Trump expressed optimism about reaching a “comprehensive agreement” with Xi Jinping. Analysts suggest that progress in tariffs and technology could help prevent a new round of trade conflicts, while global markets are closely monitoring the future direction of the trade agreement.
Since the end of 2023, China and the U.S. have experienced trade frictions again, escalating into a new round of tariff disputes by early 2024. Delegations from both sides have held talks in Geneva, Switzerland, Jakarta, Indonesia, and Kuala Lumpur, Malaysia. The Kuala Lumpur negotiations are seen as an important step for both sides to attempt to restart practical dialogue. Several Chinese foreign trade executives have mentioned that the key lies in whether concrete policies can be formulated after high-level contact. Currently, the two sides have not disclosed the agreement text or the approval progress.