According to a Bloomberg report based on unnamed source, China is open to a partial trade deal with the US. The condition is that US will refrain from imposing additional tariffs, including the coming batch on October 15 and another batch in December. In return, China would offer to increase agricultural purchases. Financial Times said the annual purchase would be raised from USD 20m to USD 30m.

Yet, China is unwilling to address the core issues, including intellectual property theft, forced technology transfer, subsides to state-owned enterprises, and enforcement of the agreement. Such a position is very unlikely to be accepted by trade hawks in the US administration, probably not by President Donald Trump neither.

Political tensions between US and China are heating up just ahead of the high-level trade negotiations on Thursday and Friday. US expanded the trade blacklist of Chinese companies with involvements in China’s treatment of Uyghurs in Xinjiang, targeting 20 Chinese public security bureaus and eight companies., Also, US has imposed visa restrictions on officials allegedly responsible for the abuse of Uyghurs. China is said to be considering to restrict visa for anti-China US officials too.

China continues to talk down expectations of upcoming Xi-Trump summit at G20 in Osaka next week. Chinese commerce ministry spokesman Gao Feng said “the heads of the two trade teams will communicate, according to instructions passed down from the two presidents.” And, “we hope (the United States) will create the necessary conditions and atmosphere for solving problems through dialogue as equals.”

But most importantly, Gao insisted that “China’s principles and basic stance on Sino-U.S. economic and trade consultations have always been clear and consistent, and China’s core concerns must be properly resolved.” He was clearly referring to disagreement on the three matters of principle that led to the collapse of trade negotiation earlier this year.

To recap, the three main differences include removal of all additional tariffs with the agreement. The among of additional Chinese purchases of US goods have to be realistic. And text of the agreement must be balanced without intrusion of sovereignty. It’s believed that the third one, regarding removal of texts that force China to implement the agreement in domestic laws, is the most crucial red line.