China and US begin new round of trade talks

American officials began a fresh round of trade talks in China on Monday amid calmer financial markets after moves by both country's central banks at the end of last week.

A US team led by deputy trade representative Jeffrey Gerrish landed in the People's Republic over the weekend, bringing a delegation that included agriculture, energy, commerce, treasury and State Department officials

Chinese Foreign Ministry spokesman Lu Kang said envoys will have “positive and constructive discussions” during meetings on Monday and Tuesday.

US and China are meeting for the sixth round of talks since Washington began the trade skirmish last summer, but the first since Donald Trump and Xi Jinping's early-December agreement to suspend tariff increases for 90 days, while also looking to reach an understanding on technology transfers, intellectual property theft and cybersecurity.

If nothing is agreed by 1 March, US tariffs on $200bn (£160bn) of Chinese goods will increase from the current 10% to 25%.

But many predict these talks will pave the way for more high-level negotiations later in January, where President Trump could meet with Chinese Vice President Wang Qishan at the World Economic Forum in Davos.

During the 90-day trade truce period, agreements may not be reached "until the last day," Tu Xinquan, director of the China Institute for World Trade Organization Studies in Beijing, told the Associated Press, adding that the talks will focus on technical details before higher-level leaders make "hard political decisions".

Recent data out of China has disappointed as the initial effects of trade disruption starts to bite, with a consequent impact on US companies, with Apple blaming a Chinese consumer slowdown for its massive profit warning last week.

“There are a heck of a lot of US companies that have sales in China that are going to be watching their earnings being downgraded next year until we get a deal with China,” Kevin Hassett, chair of the White House Council of Economic Advisers, told CNN. “That puts a lot of pressure on China.”

An announcement from Beijing about tax cuts for consumers and companies is expected this month, having been well signalled by Chinese leaders.

On Friday, the People's Bank of China responded to the recent slowdown by announcing a reduction in the reserve requirements for banks, freeing up around $116bn for further lending.

Meanwhile, the US central bank Chairman Jerome Powell stated that the Federal Open Market Committee's policy was flexible and that officials are "listening carefully" to financial markets, while Dallas Fed chief Robert Kaplan indicated that he thought there should be no further hikes “in the first couple of quarters of this year” until there is more clarity on the global economy. The market currently expects the Fed to at least stay on hold in March.

Hopes of a breakthrough in the talks was providing a surge for related markets such as the yuan and Australian dollar on Monday, noted Joshua Mahony, senior market analyst at IG.

"Realistically we are unlikely to see any form of tangible breakthrough in the immediate future, with issues such as the protection of intellectual property rights providing a major stumbling block that needs to be overcome," he said.