China and US reach some deals in trade row, but Beijing says big sticking points remain

Beijing

TOP officials from China and the United States have reached a consensus on some aspects of the countries' trade row, but disagreements over other issues remain "relatively big", China said on Friday.

A statement from the nation's state-run Xinhua news agency at the end of the talks gave little indication that there had been agreements on the biggest issues, stressing instead that there had been exchanges of opinion. However, the two sides committed to resolving their trade disputes through dialogue, Xinhua said.

The Americans have yet to give their account of the talks.

In one specific sign of progress, US negotiators agreed to bring up with US President Donald Trump the question of a ban on US companies selling goods and software to Chinese telecommunication equipment maker ZTE Corp after representations from the Chinese side, the report said.

ZTE faced the seven-year ban after Washington said it failed to keep to an agreement it made after breaching US sanctions.

The talks over the past two days have involved a high-level US trade delegation led by Treasury Secretary Steven Mnuchin and top Chinese officials, including Vice-Premier Liu He, following months of threats and counter threats from both sides in a series of disputes over trade practices.

The US team has already left Beijing and is headed home, a US official told Reuters early on Friday evening.

The trade discussions had been "candid, efficient and constructive", Xinhua said, but gave almost no details on what was agreed upon.

The officials exchanged opinions on resolving tariffs and non-tariff measures, on expanding two-way investment and the protection of intellectual property, and on expanding US exports to China and bilateral services trade, Xinhua reported.

It gave no indication of what actions might be taken based on those exchanges.

Kevin Lai, senior economist at Daiwa Capital markets in Hong Kong, said: "My impression was that (the talks) didn't go well, given the rhetoric. I think the divide is still very big."

In an editorial on its website, widely-read Chinese state-run tabloid Global Times cited people close to the talks as saying the Chinese "hit back hard" at US criticism, letting them know that China would not give in.

The US has proposed tariffs on US$50 billion in Chinese goods under its so-called "Section 301" intellectual property probe. Those could go into effect next month, following the completion of a 60-day consultation period, but activation plans have been kept vague.

China has said its own retaliatory tariffs on US goods, including soybeans and aircraft, will go into effect if the US duties are imposed.

The US tariffs focus heavily on technology products benefiting from the "Made in China 2025" programme, which promotes the development of 10 sectors including aerospace, robotics and clean-energy cars.

A breakthrough deal to fundamentally change China's economic policies was viewed as highly unlikely during the two-day visit, though any signs of meaningful progress in the dispute could delay punitive action from the US.

Mr Mnuchin told reporters earlier on Friday, as he left his hotel: "We are having very good conversations."

President Trump on Thursday praised his relationship with Chinese President Xi Jinping as the US delegation began their talks, which were held at a state guest house in western Beijing.

The American leader has targeted China's massive trade surplus with the US in recent months, demanding a US$100 billion annual reduction in the US$375 billion US goods trade deficit with China.

According to two sources with knowledge of the matter, the US delegation submitted a document to the Chinese before the talks, asking China to cut its trade surplus with the US by US$200 billion by 2020 and to lower tariffs on all products to levels no higher than those imposed by the United States.

The delegation also asked China to halt subsidies for advanced technology, the sources said.

Chinese officials believed the proposal was "unfair", TheWall Street Journal reported, quoting people with knowledge of the negotiations.

Tommy Xie, economist at OCBC Bank in Singapore, said: "I think the US is asking for the impossible. Reducing the deficit by US$200 billion by 2020 is quite an unrealistic demand, but it may also be a negotiation tactic to start high first."

In a proposal submitted by the Chinese side, Beijing offered to increase US imports and lower tariffs on some goods, including cars, said the sources.

But China requested that the US treat Chinese investment equally under national security reviews, stop issuing new restrictions on investment, and halt a proposal to implement 25 per cent tariffs under its Section 301 probe.

China also offered to reconsider anti-dumping duties on US sorghum, said the proposal.

US-based trade experts have 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, auto tariff reductions and increased purchases of US goods.

US complaints about Chinese intellectual property abuses are at the core of the current dispute. The Trump administration says US companies lose hundreds of billions of dollars annually to China's theft of trade secrets.

Members of the Trump administration's delegation to Beijing for talks to try to stave off a trade war between the world's two largest economies included US trade representative Robert Lighthizer, a hard-line and experienced trade negotiator.

He said on Tuesday it was not his objective to change China's economic system, but that he would try to find ways to limit the damage it is causing to the US and to open it further for US companies.

Some economists noted that the deficit with China was the natural result of the large amount of manufacturing assembly of US products, such as iPhones, that takes place in China.

Julian Evans-Pritchard, senior China economist at Capital Economics, said: "As long as China remains the assembly hub of the world, it's always going to have a large trade surplus with developed consumer countries like the US and the EU, and that's not necessarily a problem."

The US delegation also included Commerce Secretary Wilbur Ross and White House trade and manufacturing adviser Peter Navarro, a noted China trade hawk.

Mr Navarro had advised Mr Trump throughout his 2016 election campaign, during which the candidate 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. REUTERS