US treasury, commerce chiefs in China for tariff talks

Beijing

A US trade delegation arrived in China on Thursday for talks on tariffs, with state media saying China will stand up to US bullying if need be and hit back, but it was better to work things out at the negotiating table.

A breakthrough deal to fundamentally change China's economic policies is viewed as highly unlikely during the two-day visit, though a package of short-term Chinese measures could delay a US decision to impose tariffs on about US$50 billion worth of Chinese exports.

The discussions, led by US Treasury Secretary Steven Mnuchin and Chinese Vice-Premier Liu He, are expected to cover a wide range of US complaints about China's trade practices, from accusations of forced technology transfers to state subsidies for technology development.

"Thrilled to be here. Thank you," Mr Mnuchin told Reuters upon arriving at his hotel, when asked if he expected progress. He made no other comments.

As Mr Mnuchin arrived, US President Donald Trump tweeted: "Our great financial team is in China trying to negotiate a level playing field on trade! I look forward to being with President Xi in the not too distant future. We will always have a good (great) relationship!"

Throughout his 2016 election campaign, Mr Trump routinely threatened to impose a 45 per cent across-the-board tariff on Chinese goods as a way to level the playing field for American workers. At the time, he was also accusing China of manipulating its currency to gain an export advantage, a claim that his administration has since dropped.

The US Embassy in Beijing said the delegation planned to meet Chinese officials on both days, in addition to US Ambassador Terry Branstad, before leaving on Friday evening.

Asked about the talks, Chinese foreign ministry spokesman Hua Chunying said they had just begun and she had no information.

She reiterated that China welcomed the talks but that they had to be founded on equality and mutual respect.

In a commentary widely cited in Chinese media on Thursday, the official Xinhua news agency said if things went poorly and a trade war did break out, China would never yield and would hit back strongly.

"China will inevitably suffer losses, but China has the political advantage of a centralised and unified leadership and support of a massive domestic market," it said.

The official China Daily said in an editorial that China would "stand up to the US' bullying as necessary".

"The US wants greater access to China's market, but it should not use trade actions as a battering ram to force China to open its doors. It is already in the process of opening them wider," the English-language newspaper said.

In doing so, China expected Washington to reciprocate and open its market to Chinese investment and competition, it said.

Widely read Chinese tabloid the Global Times, published by the ruling Communist Party's People's Daily, said it hoped the talks were a beginning of a resolution of the dispute.

"Washington and Beijing should be clear: neither side can scare the other down. Negotiations are the best way to resolve the problem."

The first round of threatened tariffs under the US government's "Section 301" intellectual property probe focused heavily on technology products benefiting from a "Made in China 2025" programme to upgrade China's domestic manufacturing base with more advanced products.

The US tariffs could go into effect in June following the completion of a 60-day consultation period.

China, which denies it coerces technology transfers, has threatened retaliation in equal measure, including tariffs on US soybeans and aircraft.

US-based trade experts said they expected Beijing to offer Mr Trump's team a package of policy changes that may include some previously announced moves, such as a phase-out of joint venture requirements for some sectors, tariff reductions and increased purchases of US goods.

Mr Trump has demanded a US$100 billion annual reduction in the US$375 billion US goods trade deficit with China.

But the diverse US trade delegation is likely to have differing views among its members on the merits of such an offer.

The group includes Commerce Secretary Wilbur Ross along with noted China hawks Robert Lighthizer, the US trade representative, and White House trade and manufacturing adviser Peter Navarro. REUTERS