The news prompted stocks to surge in Hong Kong and China, while the offshore yuan jumped as much as 0.31 percent before paring gains to trade 0.26 per cent higher. The Hang Seng Index rose as much as 4 percent, headed for its biggest gain since 2015, and the Shanghai Composite Index climbed more than 2 percent, on track for a fourth day of gains for its longest winning streak since February.
The telephone conversation on Thursday was Trump and Xi’s first publicly disclosed call in six months. Both sides reported that they had constructive discussions on North Korea and trade, with Chinese state media saying that Trump supported “frequent, direct communication” between the presidents and “joint efforts to prepare for” the planned meeting on the sidelines of the Group of 20 summit, which is scheduled to take place from from Nov. 30 to Dec. 1.
“Those discussions are moving along nicely,” Trump wrote on Twitter Thursday. At a campaign rally in Columbia, Missouri, on Thursday night he said, “they want to make a deal.”
“He wants to do it,” Trump said of Xi. “They all want to do it.”
It was unclear if Trump was easing up on U.S. demands that China has resisted.
Reaction to the news was mixed, with some analysts viewing it as a positive sign of a breakthrough and others seeing it as a ploy by the Trump administration to boost market sentiment ahead of midterm elections next week.
“I don’t buy the story for a second,” said Michael Every, head of Asia financial markets research at Rabobank in Hong Kong. “This seems a perfect way to ensure equities rally into election day, put Xi into a box in terms of what is expected of him and then have someone to blame when the deal then falls through."
Tuuli McCully, head of Asia-Pacific economics at Scotiabank in Singapore, called the news “encouraging.” It “likely reflects the fact that businesses in the U.S. are starting to feel the impact of the trade conflict through higher prices and squeezed margins,” she said.
The possible warming of relations comes after months of escalating tensions over trade that are threatening to spill into other areas of disagreement, including freedom of navigation in the South China Sea. The Trump administration this year has already imposed tariffs on $250 billion in trade with China and is threatening to impose tariffs on all remaining imports from China, which last year were worth $505 billion.
U.S.-China talks have made little progress since May, when Trump put a stop to a deal that would see China buy more energy and agricultural goods to narrow the trade deficit. In Beijing that was seen as an insult to Xi, who sent a personal emissary to Washington for the negotiations, and cemented a view that Trump’s real goal was to thwart China’s rise.
In recent months China has repeatedly questioned the U.S.’s sincerity in trade talks, wary of agreeing to something only to have Trump change his mind. While Beijing is open to striking a deal that narrows the trade deficit, officials have resisted Trump’s other demands -- including an end to subsidies for strategic industries, a stop to forced technology transfer and more competition for state-owned enterprises.
One person said a sticking point in any potential deal is intellectual property theft, where the Trump administration has sought to take a hard line.
On Thursday, the U.S. accused a Chinese state-owned company of conspiring to steal trade secrets of U.S. chipmaker Micron Technology Inc. as part of a Justice Department crackdown against China in cases of suspected economic espionage.
Fujian Jinhua Integrated Circuit Co. and Taiwan’s United Microelectronics Corp. were indicted along with three individuals, the Justice Department said. The U.S. also sued to stop the companies from exporting to America any products that were created using the trade secrets.
White House economic adviser Larry Kudlow said at an event in Washington that Trump and Xi might be able to break the logjam on issues during the summit. But Kudlow cautioned that Trump would “aggressively” pursue his agenda against China, if no deals were reached on intellectual property theft, cybersecurity and tariffs on commodities, among other issues.
Trump’s posture toward China has been closely watched by investors, who are looking for the possibility of tensions cooling.
Xinhua, China’s state news agency, reported on Friday that Trump had told the Chinese leader that "he looks forward to meeting Xi during the G20 summit so they can have an in-depth discussion about some major issues."
"If a Trump-Xi deal at the G-20 Summit can set the broad framework for renewed bilateral trade negotiations it may help the global trading system avert the abyss of an escalating US-China trade war
in 2019,” said Rajiv Biswas, Asia Pacific chief economist at IHS Markit in Singapore.