China-US trade talks did not address crux of the matter: IP protection

WASHINGTON – ANZ Bank believes U.S. wariness about technology transfers is still the major hurdle to resolve differences between the U.S. and China – and, going forward, it expects the U.S. to continue to initiate other trade measures, with China reciprocating.

Following talks in Washington, the two countries issued a joint statement vowing not to launch a trade war against each other, but based on the official release, ANZ researchers do not see any substantial progress in resolving existing issues in the Sino-US trade relationship.

China intends to lift the value-added content of its economy,” says the report. “This is reflected in the change in China’s import structure, which has been shifting towards the development of semiconductors in the last five years.

“Thus, technology transfers from the U.S. will be essential. However, the U.S. apparently remains doubtful about China’s progress in the protection of IP rights.

“It has been in China’s own interests to improve IP protection, as President Xi Jinping mentioned at the Bo’ao Forum in April.

“According to the official statement last Saturday, China has agreed to revise related laws and regulations, including its patent law.

“The question is whether Saturday’s statement is sufficiently credible for the US to consider reversing its current ban on technology transfers, including China’s direct investment in sectors that the US deems sensitive.

“The ZTE incident, which was not mentioned in the joint statement, has definitely triggered Chinese concerns about ‘chip security’ in the electronic supply chain.

“We expect China to devote massive resources to develop its semiconductor industry, which will eventually reduce US exporters’ market share.”

The ANZ report says the two sides also agreed that China would “meaningfully” increase imports of US agricultural and energy products.

“However, China has been increasing foreign agricultural imports in the last few years. Thus the joint statement did not introduce anything new on this issue.

“Some farming States in the U.S. are reportedly worried about China’s tariff measures.

“Saturday’s statement may help alleviate some domestic pressure within the U.S., but over the long run, the fundamental issues remain unsolved.

The chances are that the U.S. will continue to implement some targetted measures and that China will make reciprocal responses, in our view.”  www.live.anz.com (ATI).