As US equity markets head for yet another week of losses, the hope that President Trump and President Xi will arrive at a breakthrough during the G-20 Summit in Osaka next month is one of the few sources of optimism holding the S&P 500 above 2,800 (need more evidence showing just how central the trade war narrative has become? Look no further than the market shrugging off yesterday’s Fed minutes).
But as the White House has enraged Beijing with its crackdown on Huawei, Chinese officials have a message to the Western media: A meeting between Trump and Xi next month in Osaka – even a brief informal one – is far from a certainty.
One think tank researcher told the South China Morning Post that a meeting between the two leaders next month is “up in the air” as the “current conditions” aren’t right.
“Given the current conditions, what can really come out of the G20?” said Zhang Yansheng, the chief research fellow at the state-backed China Centre for International Economic Exchanges think tank, at a government-arranged press briefing on Wednesday. “We in the East need to save our face whereas the Americans have complete disregard for that. I think we need to wait and see.”
While Zhang’s agency is not directly involved in planning Xi’s overseas trips, his comments suggest that Beijing is not in a rush to arrange a formal sit-down summit between the two leaders as they did in Argentina in December, playing down expectations that Trump and Xi are likely to meet next month to break the impasse in the trade talks.
The functionary’s comments echo the line being pushed by the Chinese media and the Party leadership: Beijing is in no rush to reconcile with the US, as President Xi has warned the Chinese people to prepare for a new “long march.” During a Thursday press briefing, China’s Ministry of Commerce spokesman Gao Feng refused to answer a question about a potential Trump-Xi meeting. A Japanese diplomatic source told the SCMP that Washington would need to “fly someone to Beijing to make arrangements” for a face-to-face summit. Treasury Secretary Steven Mnuchin has said he expects to visit Beijing “in the near future” but, again, nothing is set in stone.
Trump, presumably eager to stop the markets from going completely apeshit, said last week that he would meet Xi on the sidelines of the summit, which will take place on June 28 and June 29.
News of a formal bilateral summit would likely be taken by the markets as a strong sign that tensions will soon decelerate. Even an informal meeting would probably help instill some optimism in the market. But if the two leaders depart the summit without a meeting, investors will likely interpret that as a sure sign the trade tensions will worsen.