Chinese Vice-Premier Liu He and US President Donald Trump shake hands after signing 'phase one' of the US-China trade agreement on Wednesday. But while businesses are relieved at the temporary easing of acrimony, few are under any illusions that deeper tensions will abate. Picture: Kevin Lamarque/Reuters
Chinese Vice-Premier Liu He and US President Donald Trump shake hands after signing 'phase one' of the US-China trade agreement on Wednesday. But while businesses are relieved at the temporary easing of acrimony, few are under any illusions that deeper tensions will abate. Picture: Kevin Lamarque/Reuters

In a letter read out at Wednesday's trade-deal signing at the White House, Chinese leader Xi Jinping asked US president Donald Trump to take steps to "enhance mutual trust and co-operation between us".

That won't be easy: apart from the trade agreement, the US and China are butting heads on everything from technology to human rights to territorial disputes.

Just this week, secretary of state Michael Pompeo told executives in Silicon Valley that the US is "facing a challenge from China that demands every fibre of your innovative skill and your innovative spirit".

A return to acrimony could have major consequences for China - and for Xi. In the short term, renewed tensions with the US risk weakening an already fragile economic situation, while investment restrictions could hamper plans to secure technologies essential to driving growth.

For Xi, a perceived failure to manage US ties could dent support for a third term in office at a 2022 Communist Party meeting.

"This is China's most important bilateral relationship by a country mile, and Xi Jinping has made it clear that he's in charge from the beginning," said Trey McArver, co-founder of Beijing-based research firm Trivium China.

"He's under pressure to do a good job because if he doesn't it opens him up to criticism that he's ... not a good steward of the nation."

Even with the trade deal, Trump is moving to further curtail Huawei's ability to operate as the US continues a campaign to dissuade other countries from using its 5G technology.

Congress voted last month to pressure China over Hong Kong and is pushing for measures to punish Beijing for detaining an estimated 1-million ethnic Uighur Muslims in "re-education" camps.

There are also military tensions. Since the Pentagon labelled China a "strategic competitor" in 2018, the Trump administration has challenged it on multiple fronts. It increased patrols in the South China Sea and approved an $8bn (R115bn) sale of F-16 fighter jets to Taiwan, the first such deal in almost 30 years.

Last week the US Army announced it would deploy a specialised task force to the Pacific capable of conducting information, electronic, cyber and missile operations against Beijing.

Xi's goal now is to shore up political support at home while also softening China's image abroad. A Pew Research Center survey last month found China's favourability ratings fell dramatically last year in countries from Canada and Australia to Indonesia and the Philippines.

At home, Xi is taking steps to bolster China's ability to modernise without the US if necessary. Either way, while businesses are relieved at the temporary easing of tensions, few are under any illusions that deeper tensions will abate.

"This trade deal is a good thing if it can reduce tension," said James McGregor, China chair of APCO Worldwide, which advises foreign companies.

"But only time will tell if it puts us on a path to finding a way for two incompatible development models to co-exist and work together. That is something way beyond the parameters of any trade deal."

Bloomberg