President Trump tweeted about a phone call this morning with Chinese Chairman Xi Jinping. There will be a G20 meeting between Trump and Xi. So, extending our conversation from yesterday…. the “magnanimous panda” approach appears confirmed.

[White House] President Donald J. Trump spoke with President Xi Jinping of China this morning. The two leaders discussed the importance of leveling the playing field for U.S. farmers, workers, and businesses through a fair and reciprocal economic relationship. This includes addressing structural barriers to trade with China and achieving meaningful reforms that are enforceable and verifiable. The leaders also discussed regional security issues. The two Presidents look forward to meeting again in Osaka, Japan at the G20 Summit. (read more)

With Chairman Xi Jinping traveling to North Korea for talks with his captive Kim Jong Un prior to the G20; and with the meeting between Xi and Trump confirmed; it certainly looks like Beijing is deflecting the weakness of their economic/trade position by shifting the optic toward a geopolitical magnanimous panda. The scale of the uprising in Hong Kong was also a likely influence on the margins.

What we don’t know is whether Xi will tell/threaten Kim Jong Un to wait-out President Trump, with warnings that Trump may not be around to save him after 2020…. If Xi takes that approach with Kim it means his thinking is similar; if so, the Chairman is taking a big gamble on his own economic survival by trying to wait-out President Trump.

However, if Xi tells Kim Jong Un that Kim’s captivity is over, then the denuclearization of North Korea will be the visible outcome. In this scenario Xi will play the role of magnanimous panda and *guide* Kim into the West. South Korean President Moon Jae-in will be heralded as the hero so that Xi doesn’t look like he lost to Trump.

President Trump has threatened more tariffs and more consequential action as it relates to non-tariff barriers, IP protection, forced technology transfers etc as a result of China reneging on their prior agreement. In essence, President Trump has put Chairman Xi under threat. Beijing’s traditional and cultural position would be no-meeting and no negotiation while under threats.

Chairman Xi agreeing to meet with President Trump at the G20 would normally be a sign of weakness due to Trump threats. This indicates that some outcome from the meeting with Kim will flip “weakness” to “strength” in the eyes of China.

My best guess would be the magnanimous panda play.

However, watch out for the delay and stall approach to wait-out Trump until 2020.