Xi buys time with Trump as tensions loom over North Korea threat

[HONG KONG] After predicting a "very difficult" encounter with Chinese President Xi Jinping, Donald Trump emerged from their first meeting hailing "an outstanding relationship" between chiefs of the world's biggest economies.

Mr Xi was similarly upbeat about his US counterpart after the 18-hour summit in Florida that ended on Friday, saying they "got deeply acquainted, established a kind of trust and built an initial working relationship and friendship."

For Mr Xi, the warm words amount to a win, particularly in a sensitive political year that will see most of the Communist Party's leadership replaced. The US-China relationship appears stable for the moment, no small feat after Mr Trump regularly attacked Beijing on the campaign trail.

Now comes the hard part: Finding common ground quickly on a host of economic and security issues before they risk leading to a trade war or military conflict that derails the relationship.

Perhaps none is more urgent than curbing North Korea's nuclear threat, underscored by Mr Trump's move to launch missiles on Syria while he dined with Mr Xi.

"This remains the big, explosive issue for US-China relations," William Overholt, senior fellow at Harvard University's Asia Center who has written six books on geopolitics in Asia, said of North Korea.

"The summit apparently agreed to tread water."

Flashpoints Linger

After meeting Mr Xi, Mr Trump called leaders in allies South Korea and Japan to ensure unity regarding Kim Jong Un's regime, while the USS Carl Vinson aircraft carrier was diverted to waters near North Korea instead of making a planned stop in Australia.

Yonhap News reported that Mr Xi's government would send an envoy to visit South Korea on Monday to discuss issues on North Korea, a Chinese ally since the 1950s.

Among the other potential flashpoints looming after the Trump-Xi meeting:

Trade: commerce secretary Wilbur Ross said both sides agreed on a "100-day plan" to address their trade imbalance, without giving details.

Currency: treasury secretary Steven Mnuchin said a decision on the currency manipulator label will be addressed in a report coming out "in the very near future".

Steel: The New York Times reported last week that Mr Trump plans to soon sign an executive order targeting countries, notably China, that sell steel in the US market at below cost prices.

Taiwan: The Washington Free Beacon reported last month that the Trump administration was preparing to provide more and better defensive arms to the island, which Beijing considers a rogue province that will be reunited by force if necessary.

One sign of progress was a new negotiation framework that's directly overseen by the two presidents. It will bring together cabinet members for discussions on security, the economy, law enforcement, cybersecurity and cultural issues, among others.

For China, the new mechanism for talks could ease concerns about Mr Trump's tendency to blurt out policy pronouncements on Twitter. It would appear to broaden the framework used to discuss major issues for the past eight years, known as the US-China Strategic and Economic Dialogue.

"Given the personal decision-making primacy of Xi and Trump in their respective governments, this would seem like a considerable upgrading," Andrew Gilholm, director of analysis for North Asia at Control Risks Group, said of the new arrangement.

Mr Trump accepted Mr Xi's invitation to pay a state visit to China, though details on timing weren't released. A Beijing trip by Mr Trump before the once-in-five-year Communist Party congress later this year, while unlikely, would "send a signal of Xi's strength and confidence," said Taylor Fravel, an associate professor at the Massachusetts Institute of Technology who specializes in China's international relations.

'Time Will Tell'

Still, it remains to be seen how long the good feelings will last. Mr Trump needs to show his working-class base some progress in taking on the country he portrayed as the main reason for the demise of American manufacturing.

In a tweet after the visit, Mr Trump said it was a "great honour" to host Mr Xi and his wife Peng Liyuan, while adding: "Tremendous goodwill and friendship was formed, but only time will tell on trade."

For Mr Xi, the meeting appeared to exceed low expectations. While the Syria strike dominated international headlines, China's domestic and social media were ablaze with the children of White House advisers Ivanka Trump and Jared Kushner entertaining Mr Xi and his wife with a Chinese song and Tang Dynasty poetry.

The visit should allay any Chinese fears that the visit would look like Mr Xi is heading all the way to Florida to appease Mr Trump, said Dali Yang, a political science professor specializing in China's political economy at the University of Chicago.

"President Xi should return home feeling happy," he said.

"Now we can say the two sides have just arrived at the beginning point of a significant negotiation process."

BLOOMBERG