China prepares to repair relations with the U.S. before Trump's inauguration.

• This week, Beijing signaled its readiness to cooperate with U.S. President-elect Trump in resolving trade disputes, despite the possibility of a trade war.
• Kenneth Jarrett, president of the American Chamber in Shanghai, stated that the flurry of messages from Beijing reflects "a sense of anxiety" and "these overtures have occurred in a very public way."
• If escalation occurs in a darker situation, Beijing can use Washington's early statements to demonstrate to the world that the US is the party that refused cooperation and compromise, according to Derek Scissors, senior fellow at American Enterprise Institute.

This week, Beijing signaled its readiness to cooperate with U.S. President-elect Trump in resolving trade disputes, despite the possibility of a trade war.

In a letter to the U.S.-China Business Council on Thursday, Xi emphasized the importance of dialogue over confrontation and win-win cooperation over a zero-sum game. He also reaffirmed his dedication to opening up the Chinese market to foreign companies, including American businesses.

Xi urged both sides to maintain dialogue and manage differences, as he stated in his speech at a Tuesday meeting with visiting heads of major international economic organizations, saying "there will be no winners in tariff wars, trade wars, technology wars," according to CNBC's translation of his speech in Mandarin.

Kenneth Jarrett, president of the American Chamber in Shanghai, stated that the flurry of messages from Beijing reflects "a sense of anxiety" and "these overtures have occurred in a very public way."

Beijing may believe that working with the new U.S. administration is politically beneficial, despite Chinese authorities lacking channels to communicate with the Trump team, according to Jarrett.

Looming trade war

Shen Meng, a director at Beijing-based boutique investment bank Chanson & Co., stated that Trump's policy stance of prioritizing America first poses a "tremendous threat" for Chinese policymakers, who are already struggling to revive the sluggish economy.

Trump, who will assume office in January, has pledged to impose an additional 10% tariffs on all U.S. imports of Chinese goods. During his campaign, Trump had warned of imposing tariffs exceeding 60% on China.

The Biden administration recently imposed broader restrictions on U.S. exports of advanced memory chips and chipmaking machinery to Chinese companies. In response, Beijing banned exports of several rare materials used in semiconductors and military applications.

Despite its commitment to growth and constructive trade relations, China will not back down in the face of U.S. pressure, according to Daniel Balazs, a research fellow at S. Rajaratnam School of International Studies.

This week, China's market regulators launched an antitrust probe into Nvidia, the American chip giant. Despite being prohibited from exporting its high-end chips to China, Nvidia's sales of less advanced chips and processors to Chinese companies accounted for 15% of its revenue in the October quarter.

Experts believe that both sides are more likely to negotiate a deal rather than imposing heavy tariffs.

Enhance International president Sam Radwan stated that there may be some introduction of tariffs, but they will likely be closely coordinated and nothing sudden, too large or disruptive, according to CNBC.

Despite China's struggling economy, exports have been a bright spot due to companies rushing to ship to the U.S. before higher tariffs take effect. However, once the stronger tariffs are enforced, China's exports will likely slow down.

On Tuesday, President Xi expressed his "full confidence" in achieving this year's growth target and stated that China is the "biggest engine of the world's economic growth."

Overtures but not capitulation

This week, it was reported by CBS that Trump had invited the Chinese leader to attend his inauguration in the upcoming month.

Derek Scissors, senior fellow at American Enterprise Institute, stated that Beijing is taking measures to prevent any perception that Xi is being unfriendly by avoiding attending the inauguration.

Chinese leaders have never previously attended the U.S. inauguration, which is typically attended by Chinese ambassadors, according to CBS.

The spokesperson for China's commerce department stated at a regular briefing on Thursday that China has been in close communication with the U.S. counterpart and is willing to continue communicating with the incoming economic and trade officials under the Trump administration.

Gabriel Wildau, managing director of Teneo, stated that while the Chinese government appears open to negotiating with the incoming Trump government, it does not necessarily mean that China is prepared to make the concessions that Trump desires.

One possible concession that China can make is to increase its oversight on fentanyl trades.

If escalation occurs in a darker situation, Beijing can use these early statements to demonstrate to the world that Washington is the party that refused cooperation and compromise.