Xi-Trump summit: Iran, tariffs and tech tightening at the centre

Xi Jinping presents himself in a position of strength when meeting a Donald Trump weakened by war in Iranbut the economic repercussions of the conflict, the internal situation in China and the commercial disputes mitigate this advantage.

The dominance of the Asian giant in the rare earthsmetals indispensable forindustrial modernoffers the Chinese president a trump card to extract concessions from the Republican billionaire, a Beijing dal 13th to 15th May.

Analysts’ assessments of the summit

“China comes to this summit with real aces up its sleeve. But also with a real sense of urgency“, he says Han LinChina director of the American consultancy The Asia Group.

Beijing’s main concerns

Here are the main concerns of Beijing:

War in the Middle East

Thanks to his oil reserves and the diversification of supply sourcesChina is for now relatively spared from energy crisis which is affecting Asia. However, in April i gas prices have risen in the country and industrialists fear an increase in production costs plasticwhich is manufactured from oil. And if the data on the foreign trade were better than expected last month, this recovery was mainly due to the surge in the price of raw and gods electronic chipshe wrote Julian Evans-Pritchardexpert in Capital Economics. Above all, China would suffer economically if the war in Middle East should it continue. “A rise in oil prices that significantly slows global demand would weigh on Chinese activity,” he wrote last week Leah FahyOf Capital Economics. Also the partnership between Beijing e Teheran constitutes a possible source of tension. Donald Trump could push Xi Jinping to demand fromIran of concessions towards United States. But bowing to this American request and “using this influence would risk undermining the trust that China has carefully built” with Tehran, Han Lin points out.

The last meeting between Xi Jinping e Donald Trumpheld in October, had led to a trade trucecertainly fragile, but which made it possible to drastically reduce the level of duties reciprocal punishment. There China has turned to other trading partners to blunt the immediate effects of the trade war.

But the government fears the long-term consequences of the conflict on the country’s attractiveness as a manufacturing base. Beijing issued new regulations in April aimed at preventing businesses from excluding China from theirs supply chains. A response to some Western governments seeking to reduce their dependence on its factories.

Restrictions on technologies

Washington is multiplying measures to hinder the development of technology sector Chinese, in a context of rivalry between the two powers within theartificial intelligence. Chinese companies do not have the right to buy America’s most advanced AI chips Nvidiadue to US legislation adopted in the name of protecting national security. As a result, Beijing had to accelerate the development of its own semiconductors. In this context, China could use the elements of rare earths to get Trump “tariff relief or a freeze of some export controls,” he wrote Ting Lueconomist of Nomurain a note.

Economic slowdown

The talks between Xi and Trump will take place against the backdrop of internal demand stagnant in China. The Asian giant has struggled to relaunch its business economy after the pandemic Covid-19. Among the factors contributing to this situation are the debt crisis in real estate sector and lower levels of consumer spending than in the past. “The real estate crisis has reduced family wealth and… youth unemployment remains stubbornly high,” he observes Han Lin Of The Asia Group. Chinese leaders recently acknowledged that the economy is facing “certain difficulties and challenges” and called for greater national autonomy in strategic technologies and industrial supply chains. “Therefore, Beijing approaches these negotiations not without apprehension,” Lin summarized of this week’s discussions.