US officials have arrived in China for the first round of talks between the two countries since a 90-day truce was called on their ongoing trade war at the start of December.
Asian markets were optimistic the two could make a breakthrough on Monday, with the Nikkei jumping more than three per cent and smaller jumps in Hong Kong and Shanghai.
The arrival came as the Chinese foreign ministry said the two countries wanted to cooperate on trade. The world’s two largest economies had agreed to hold “positive and constructive” talks to resolve their disputes, in line with statements made by US President Donald Trump and his Chinese counterpart Xi Jinping.
“From the beginning we have believed that China US trade friction is not a positive situation for either country or the world economy. China has the good faith, on the basis of mutual respect and equality, to resolve the bilateral trade frictions,” said foreign ministry spokesman Lu Kang.
Addressing rumours sparked the previous day by Trump that the Chinese economy was weakening, Lu said it had “ample tenacity and huge potential”.
“We have firm confidence in the strong long-term fundamentals of the Chinese economy,” he added.
On Sunday, Trump told reporters: “I think China wants to get it resolved. Their economy’s not doing well. I think that gives them a great incentive to negotiate.”
Trump slapped hundreds of billions of dollars of Chinese goods with import tariffs in 2018, and has made threats to ramp up the stakes even more to force Beijing to change its policy on issues such as industrial subsidies and intellectual property.
China retaliated with tariffs of its own, sparking a trade war that has rocked global markets for months.
Both sides have struck a more conciliatory tone since Trump and Xi met after a G7 summit in Buenos Aires at the end of last year, agreeing to call a 90-day halt to the trade war.
But if the sides do not come to an agreement, US tariffs on $200bn (£160bn) of Chinese goods will rise to 25 per cent in March from the current 10 per cent.
David Madden, analyst at CMC Markets, said “the power dynamic has changed” in favour of the Chinese, moving into the fresh round of talks. “he US stock market is far from reaching record highs, so President Trump might be willing to adopt a more open approach,” he said.