Location China China

China-US trade talks: Beijing and Washington agree only to keep talking after two days of dialogue

China and the United States wrapped up their first round of trade talks on Friday with no breakthrough, agreeing only to have more dialogue to ease tensions.

A short statement released by state-run Xinhua said both sides were still “very divided” on some issues and “more work needed to be done”.

The two sides “reached some consensus” and exchanged views on expanding US exports to China, bilateral investment, intellectual property protection and the imposition of tariffs, the statement said, without elaborating.

A separate statement by China’s commerce ministry said Beijing also protested against a US ban on Chinese tech giant ZTE buying American components. The US delegation said it would report back to US President Donald Trump on the matter, according to the ministry.

A Chinese government official who was briefed on the trade talks said they did not go as well as described by official news agency Xinhua, which called them “candid, efficient and constructive”.

“Candid means there was a heated exchange. Efficient means the talks were very short. And constructive means there’s still a huge gulf between the two sides,” said the government source, who declined to be named.

The US delegation led by US Treasury Secretary Steven Mnuchin was expected to meet President Xi Jinping and Vice-President Wang Qishan during the two-day visit, but there was no mention of this in Chinese state media reports on the talks.

The US finance team – which included Trade Representative Robert Lighthizer, Commerce Secretary Wilbur Ross and Trump’s hawkish economic adviser Peter Navarro – did not release a statement before they left Beijing. But a US embassy spokesperson said they were likely to brief reporters once they are back in Washington.

According to a draft framework of US demands seen by the South China Morning Post, Washington asked China to cut the trade deficit by at least US$200 billion by the end of 2020, halt subsidies for industries under the “Made in China 2025” plan, and not resort to retaliatory measures against Washington.

The US also pushed for better market access for American companies, demanding Beijing improve its “negative list” by July, according to the draft.

Negative lists spell out which parts of the economy are off limits to foreign investment.

In addition, the US demanded that China reduce its tariffs and non-tariff barriers on all products in non-critical sectors to levels no higher than the US’ corresponding tariffs on Chinese goods.

While the US did not specify that China withdraw threatened tariffs on American soybeans, a key US export to China, the draft said Beijing needed to achieve “fair treatment” for US agricultural products.

Ruan Zongze, a foreign policy expert with the China Institute of International Studies, said the US team’s expectations were too high before the talks.

“The US demands are too high and they leave China with little room to manoeuvre,” Ruan said. “The two sides are deeply divided. At the moment, they’re just presenting their positions … they need to find common ground before they can resolve these issues.”

Ahead of the talks, Beijing set out its own demands for the US delegation. They included the US halting its Section 301 investigation into China’s trade and industrial policies, not imposing the 25 per cent tariffs on US$50 billion of Chinese imports announced in April, and making it easier for Chinese companies, particularly tech firms, to access the US market, according to an official Chinese document seen by the Post.

Beijing also asked for Chinese companies to be allowed to participate in Trump’s US$1.5 trillion plan to repair and upgrade America’s infrastructure, the document showed.

In exchange, China would not impose its own 25 per cent duties on US imports including soybeans and planes, it would lower duties on American cars, and “purchase in bulk [US] goods that China needs”.

It would also import more US films, and open up medical, architectural and green sectors to foreign companies in the new free-trade zone on island province Hainan, according to the document.

But it makes no mention of stopping subsidies for industries under Made in China 2025, a strategy to support domestic technology, or of its alleged practice of forced tech transfers.

The Chinese delegation was led by Vice-Premier Liu He and included commerce minister Zhong Shan, central bank governor Yi Gang, finance minister Liu Kun and deputy finance minister Zhu Guangyao.

The two sides agreed to maintain close communications and create “relevant working mechanisms” to address the issues, according to Xinhua.

Former commerce ministry official He Weiwen said China saw the demand for a US$200 billion trade deficit cut as “unreasonable”, but he was optimistic the two sides could resolve their differences in other areas in the future.

“At least the talks didn’t break down,” said He, now a senior fellow at the Centre for China and Globalisation in Beijing.

“The most important outcome is that the talks are a start for further rounds of negotiations.”

by Wendy Wu, Catherine Wong


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