Thoughts on the trade talks (a win-win?) and China's stimulus

CHINA ADVISORY - Report 07 May 2025 by Andrew Collier

China and the U.S. plan to hold two days of trade talks in Switzerland starting May 10 for the first time since the beginning of Trump’s second administration. The Financial Times noted that “The meeting will be the first high-level interaction between the two sides since Vice President Han Zheng attended Trump’s inauguration in January.” The talks are highly significant mainly because of the people attending. He Lifeng is a vice premier and Chinese economist in charge of economic policy. He’s also an old colleague of Xi Jinping from his time in Fujian Province twenty years ago and is rumored to have attended Xi’s wedding. On the U.S. side, Treasury Secretary Scott Bessent is an experienced former macroeconomic trader for Soros. Trade Representative Jamieson Greer is a former trade lawyer and Chief of Staff to Robert Lighthizer in the first Trump Administration, during which he was involved in trade negotiations with China.

The second important announcement is a stimulus package in China. The cut in the reserve rate requirement will release $138 billion in new loans. It sounds like a lot but this is 27.4 percent of March’s $503 billion in new loans, 5.5 percent of 2024’s new bank loans of $2.5 trillion, and 0.004 percent of outstanding loans of $36.7 trillion. The timing of the stimulus is actually more interesting than the package itself.

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