When Steven Mnuchin and Robert Lighthizer meet with their Chinese counterparts in Shanghai this week, few observers expect that a breakthrough will be reach. That includes President Trump, who chided the Chinese in a tweet Tuesday morning to cut a deal before the 2020 election - or risk facing a second-term president with a strengthened popular mandate.
But in what appears to be an effort to distract from the lingering tensions over China's promised purchases of American farm products, or Trump's promise to remove Huawei from the Commerce Department's blacklist - neither of which have been kept - Bloomberg reports that the Chinese negotiators are pulling out all of the stops: They will be hosting their American counterparts at the Fairmont Peace Hotel Tuesday evening after the delegation arrives at another hotel on the Bund waterfront shortly after 1:30 pm.
The 1920s art-deco building, which used to be known as the Cathay Hotel, was described by Bloomberg as "one of the most celebrated buildings on the Shanghai riverside" and has hosted famous guests including Charlie Chaplin and Noel Coward. The hotel was briefly used as an administrative building during the early years of the People's Republic.
Negotiations are slated to begin on Wednesday at the Xijiao State Guest Hotel - the leafy compound of luxury reception buildings and accommodations in the west of the city. Neither the US government nor the Chinese would comment when approached by Bloomberg.
Per BBG, the Peace Hotel’s setting in the former International Settlement is freighted with the complicated history of America’s relationship with Chinese.
That could be a message and a reminder that Beijing has no intention of bending to President Trump's rhetoric.
On the east passage from the lobby, the walls show off the hotel’s glamorous past. There’s Chaplin posing on the famous staircase in 1936, and scenes from the Chinese movie blockbuster Shanghai Triad, set in the 1930s. U.S. President Bill Clinton appears with Hillary Clinton on the roof in 1998, posing with Shanghai’s then-mayor. The hotel plays up its origins in Shanghai’s pre-WWII jazz age. The only clear nod to China’s present-day politics are at least two standing signs declaring “Socialism’s Core Values” -- a fifteen-strong list including patriotism, honesty and harmony. Only the heading is rendered in English, though, as “China’s Core Values.”
Over the past few days, Chinese officials have ratcheted up their rhetoric and blamed the US for encouraging pro-democracy protesters in Hong Kong, something the Communist Party officials have warned they won't simply let go.
Chinese officials, meanwhile, again alleged American involvement in Hong Kong’s historic unrest, saying recent violence at protests was "a creation of the US." "Those who play with fire will inevitably burn themselves," Chinese Foreign Ministry spokeswoman Hua Chunying told reporters in Beijing on Monday. "China urges the U.S. to stop as soon as possible." On Tuesday, an editorial in the state-owned China Daily argued that the city was an “auspicious” venue to re-start the talks, and referenced the visit by former U.S. President Richard Nixon there in 1972 in the course of the diplomatic thaw between the communist and capitalist states.
Chinese officials, meanwhile, again alleged American involvement in Hong Kong’s historic unrest, saying recent violence at protests was "a creation of the US."
The market's expectations for a deal are incredibly low. So, any signs of progress could push stocks higher. Then again, with so much going on during this unusually busy summer week, the market's tepid reaction to President Trump's tweets Tuesday morning could be a sign that investors are focused on the Fed, and that trade talks no longer hold the same sway over the markets as they once did.