Posts Tagged ‘Xi Jinping’

Is Gold Mine Next China-India Flash Point?

May 20, 2018
BEIJING: China has begun large-scale mining operations on its side of the border with Arunachal Pradesh where a huge trove of gold, silver and other precious minerals valued at about $60 billion has been found, a media report said on Sunday.

The mine project is being undertaken in Lhunze county under Chinese control adjacent to the Indian border, the Hong Kong-based South China Morning Post reported.

China claims Arunachal Pradesh as part of southern Tibet.

Projecting the mining operations as part of China’s move to take over Arunachal Pradesh, the report said “people familiar with the project say the mines are part of an ambitious plan by Beijing to reclaim South Tibet”.

  • China has discovered a huge trove of gold, silver and other precious minerals on its side of the border
  • The mines could lead to a situation akin to “another South China Sea”, a report said
  • Mining activities would also lead to a rapid and significant increase in the Chinese population in the Himalayas


“China’s moves to lay claim to the region’s natural resources while rapidly building up infrastructure could turn it into ‘another South China Sea’ they said,” it said.

The Post report, with inputs from local officials, Chinese geologists as well as strategic experts, comes less than a month after the first ever informal summit between Prime Minister Narendra Modi and President Xi Jinping that was aimed at cooling tensions to avert incidents like the Doklam military standoff last year.

The 73-day standoff marked a new low in bilateral ties.

Lhunze was in the news last October, just about two months after Doklam, when Xi in a rare gesture replied to correspondence from a herding family in Lhunze County underscoring Beijing’s claim to the area.

The family is based in Yumai, China’s smallest town in terms of population located close to Arunachal Pradesh.

Xi thanked the father and his two daughters for their loyalty and contributions to China, and also urged the people of Lhunze to “set down roots” to develop the area for the national interest.

The Post report said although mining has been going on in the world’s highest mountain range for thousands of years, the challenge of accessing the remote terrain and concerns about environmental damage had until now limited the extent of the activities.

But the unprecedented heavy investment by the Chinese government to build roads and other infrastructure in the area has made travel easy.

Most of the precious minerals which include rare earths used to make hi-tech products are hidden under Lhunze county, the report said.

By the end of last year, the scale of mining activity in Lhunze had surpassed that of all other areas in Tibet, it said.

People have poured into the area so fast that even local government officials could not provide a precise count for the current population, it said.

“Enormous, deep tunnels have been dug into the mountains along the military confrontation line, allowing thousands of tonnes of ore to be loaded and transported out by trucks daily, along roads built through every village,” it said.

Extensive power lines and communication networks have been established, while construction is under way on an airport that can handle passenger jets, it said.

With more mines being dug in Lhunze and surroundings, a county official told the Post that more than 80 per cent of the county government’s tax income came from mining.

The mines would also lead to a situation akin to “another South China Sea” arising out of the world’s highest mountain range, it said.

Zheng Youye, a professor at the China University of Geosciences in Beijing and the lead scientist for a Beijing-funded northern Himalayan minerals survey, confirmed to the Post that a series of discoveries in recent years put the potential value of ores under Lhunze and the nearby area at 370 billion yuan ($58 billion).

“This is just a preliminary estimate. More surveys are under way,” he said.

There could be more big discoveries as Chinese researchers learn more about the area. With strong financial backing from the government, they have already amassed extensive data on the region.

According to Zheng, the new-found ores could tip the balance of power between China and India in the Himalayas.

He said Chinese troops withdrew in the 1962 war from the areas in Arunachal Pradesh as they had no people to hold the territory.

The new mining activities would lead to a rapid and significant increase in the Chinese population in the Himalayas, Zheng said, which would provide stable, long-term support for any diplomatic or military operations aimed at gradually driving Indian forces out of territory claimed by China.

“This is similar to what has happened in the South China Sea” where Beijing has asserted its claim to much of the contested waters by building artificial islands and increasing its naval activity, he said.

Hao Xiaoguang, a researcher with the Institute of Geodesy and Geophysics at the Chinese Academy of Sciences in Wuhan, Hubei who specialises in India-China issues said Beijing was likely to take the same approach to the Himalayas as in the South China Sea.

As China’s economic, geopolitical and military strength continues to increase, “it is only a matter of time before South Tibet returns to Chinese control,” Hao claimed.

“What China (has) achieved today in the South China Sea was almost unthinkable a decade ago. I am optimistic (about) what will happen in the Himalayas in the coming years because President Xi has made it clear that ‘not a single inch of our land will be or can be ceded from China’, which definitely includes South Tibet,” he said.

But Hao said the Lhunze mining boom would not be expanded to other areas due to environmental reasons. In Lhunze, some of the newcomers are still acclimatising. The area is already teeming with people from different parts of China.

Weng Qingzhen, who owns a Sichuan restaurant in the county, said she moved there less than two months ago after friends and relatives told her about the mining boom.

https://timesofindia.indiatimes.com/india/chinas-gold-mine-at-arunachal-border-may-become-another-flashpoint-with-india/articleshow/64245678.cms?utm_source=facebook.com&utm_medium=social&utm_campaign=TOIDesktop
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China Rejects U.S. Target for Narrowing Trade Gap

May 20, 2018

Beijing officials offer to step up purchases, but refuse to commit to Trump administration’s specific $200 billion cut from bilateral deficit

White House chief economic adviser Larry Kudlow, speaking at the White House on May 18, said China offered to boost its annual purchases of U.S. products by ‘at least $200 billion.’
White House chief economic adviser Larry Kudlow, speaking at the White House on May 18, said China offered to boost its annual purchases of U.S. products by ‘at least $200 billion.’ PHOTO: CAROLYN KASTER/ASSOCIATED PRESS
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A last-ditch effort by the Trump administration failed to get China to accept its demand for a $200 billion cut in the U.S. bilateral trade deficit, as Chinese officials resisted committing to any specific targets after two days of contentious negotiations.

The two days of deliberations in Washington ended with both sides arguing all night on Friday over what to say in a joint statement, people briefed on the matter said. The Chinese had come willing to step up purchases of U.S. merchandise as a measure to narrow China’s $375 billion trade advantage. But U.S. negotiators pushed the Chinese delegates to approve a specific target of $200 billion in additional Chinese purchases. The Chinese refused any such target in specific dollar amounts, and the matter is now in the hands of President Donald Trump and President Xi Jinping, the people said.

The two sides released a joint statement shortly after the Chinese delegation was scheduled to return home, but it made no reference to the specific purchasing amounts that the U.S. had wanted.

“Both sides agreed on meaningful increases in United States agriculture and energy exports,” the statement said, adding that “the delegations also discussed expanding trade in manufactured goods and services. There was consensus on the need to create favorable conditions to increase trade in these areas.”

Chinese officials were wary of appearing to make concessions to Washington, and insisted the statement note that any Chinese purchases of U.S. goods and services are intended to “meet the growing consumption needs of the Chinese people.”

Beijing negotiators had come to Washington to settle a feud resulting from the Trump administration’s impatience with China’s large trade advantage. The U.S. side is also frustrated over allegations China pressures U.S. firms to transfer advanced technology and steals U.S. intellectual property. Washington has demanded China address these issues, under threat of U.S. tariffs on as much as $150 billion in Chinese goods. Should the U.S. make good on those threats, Beijing has promised to respond with its own tariffs on U.S. imports.

The procedural steps toward implementing the first tranche of threatened U.S. tariffs on $50 billion in Chinese imports could be completed by as early as next week, but in the joint statement, the two sides agreed to continue talking. New tariffs don’t appear imminent.

Liu He, the Chinese vice premier who led Beijing’s delegation, said “both sides agreed to avert a trade war and to stop imposing tariffs on each other,” the official Xinhua News Agency reported.

Souring the mood among Chinese officials were some U.S. media reports that China had accepted a U.S. request that Beijing slash its vast merchandise trade surplus by $200 billion, an amount that would cut by more than half the U.S. trade deficit with China. The Chinese side saw those reports as a last-minute effort by Trump administration officials to pressure Beijing into a public agreement that would meet U.S. objectives.

Early Friday, Larry Kudlow, director of the National Economic Council, had told reporters that China offered to boost its annual purchases of U.S. products by “at least $200 billion.” Mr. Kudlow also said “they are meeting many of our demands. There is no deal yet, to be sure.”

While Beijing has been wary of committing to numerical targets of specific purchase amounts, it has in general offered to buy more U.S.-made autos, energy and agricultural products as a way to ease the trade tensions between the two nations that have rattled global financial and commodities markets.

Mr. Liu, the head of the Chinese delegation, impressed Washington officials, Mr. Kudlow said in a Friday interview with White House reporters, adding that the vice premier is a “smart guy, a market guy.”

China on May 18 said it is dropping antidumping and antisubsidy investigations into imported U.S. sorghum.
China on May 18 said it is dropping antidumping and antisubsidy investigations into imported U.S. sorghum. PHOTO: SUE OGROCKI/ASSOCIATED PRESS

One of Washington’s central demands is that China reduce its merchandise trade surplus by at least $200 billion by the end of 2020, even though economists in both nations say the trade deficit is affected by investment and savings patterns in both nations—not trade policy. Beijing has rejected most U.S. demands in the past and has continued to hold firm.

The U.S. Agriculture Department recently asked agriculture companies to come up with a list of products whose production could be ramped up rapidly for export to China, a person following the talks said. At the same time, China put together a list of high-tech products that are barred by U.S. export controls for sale to China but are allowed by other nations.

Beijing argues that if the U.S. would ease the export controls on these items, it would purchase more from the U.S., the person briefed on the matters said. Even so, some U.S. officials believe, the additional Chinese purchases would only total $50 billion to $60 billion in the next year or two, far short of the U.S. goal.

One Chinese request is for a reprieve on China’s ZTE Corp. from crippling U.S. sanctions over its trade with Iran and North Korea. Mr. Trump said early last week that he would work with Mr. Xi to get the telecommunications-equipment maker “back into business,” defending such a move as part of a trade deal the U.S. is negotiating with China.

However, “there is no firm agreement on ZTE as of yet,” a person familiar with the discussions said. U.S. lawmakers from both parties have criticized any effort to ease restrictions on the company, calling ZTE a security threat, with Sen. Marco Rubio (R., Fla.) tweeting on Saturday: “If we don’t wake up & start treating this as a national security issue, China is going to win again.”

China’s top diplomat, Foreign Minister Wang Yi, is due in Washington this coming week and is expected to discuss the ZTE controversy, a person briefed on the issue said.

Settling the trade fight is taking on a degree of urgency as the tensions start hurting businesses in both countries. U.S. goods, including sorghum, soybeans and cars, have faced growing hurdles when entering China, while a U.S. order banning American companies from selling components to ZTE not only threatens the survival of the company but also that of other state-owned Chinese companies.

Responding to Mr. Trump’s promise of a reprieve for ZTE, Beijing has made a number of conciliatory gestures. China’s antitrust regulators had delayed for months U.S. private-equity firm Bain Capital’s $18 billion deal for Toshiba Corp.’s memory-chip unit, but on Thursday, the Japanese firm said regulators had allowed the deal to proceed. Chinese regulators also promised this week to restart their review of U.S. chip maker QualcommInc.’s bid for NXP Semiconductors NV.

China has also offered to hold back penalties on a variety of U.S. agricultural products it announced in early April as retaliation for U.S. tariffs on Chinese steel and aluminum exports. China is a top buyer of U.S. farm products. On Friday, China’s Commerce Ministry announced an end of its antidumping investigation into imported U.S. sorghum.

Write to Bob Davis at bob.davis@wsj.com and Lingling Wei at lingling.wei@wsj.com

Merkel to Seek China as Free-Trade Ally on Beijing Trip

May 19, 2018

German Chancellor Angela Merkel said she’ll renew efforts to enlist China as an ally on free trade when she visits leaders including President Xi Jinping in Beijing next week.

Merkel and Russi’a President Putin last week.  AFP/Getty Images

It’ll be Merkel’s first trip to the world’s second-biggest economy since she began her fourth term in March. While Europe and China have points of friction from investment reciprocity to human rights, they’re finding common cause in rebuffing U.S. President Donald Trump’s tariff threats against both.

“China and Germany are committed to the rules of the World Trade Organization, yet we will also talk about reciprocal access in trade and intellectual property issues,” Merkel said in her weekly podcast published Saturday. “And we want to strengthen multilateralism.”

Merkel plans to meet Xi and other Chinese leaders on May 24, followed by a stop in Shenzhen to tour sites including a Siemens AG facility. She may strike a more reserved tone than French President Emmanuel Macron, who visited China in January and said European nations must stand up toChina’s global reach.

Relations with China have always been a balancing act for Merkel, even more so since China overtook the U.S. as Germany’s biggest trading partner in 2016. At the same time, the U.S. and Germany need each other to rein in China’s growing political and economic influence.

https://www.bloomberg.com/news/articles/2018-05-19/merkel-says-she-ll-seek-china-as-free-trade-ally-on-beijing-trip

China Pledges $200 Billion in U.S. Purchases by Overhauling Trade Rules

May 19, 2018

American and Chinese officials made progress on Friday toward an agreement that could help avert a trade war, with China pledging to increase its purchase of American goods by at least $200 billion by 2020, largely by lifting existing barriers that would make it easier for United States firms to sell and operate in China, according to a senior Trump administration official.

By  Ana Swanson and Jim Tankersley
New York Times
May 18, 2018

To help narrow the trade deficit the United States runs with China, the Chinese would reduce tariffs and other nontariff barriers that currently hinder the flow of American goods and services into China. Removing tariffs and other structural barriers would essentially allow another $200 billion worth of goods to enter China through 2020, the official said.

On Day 2 of high-level talks between American and Chinese officials, China said it would drop an investigation into imports of American sorghum, which is used in pig feed.Credit Daniel Acker/Reuters

Administration officials described the potential deal as a victory that would result in China making some of the structural changes to its economy that the United States has long sought. Right now, China imposes tariffs on a range of American products, including autos, agricultural goods and energy, and has other stiff barriers to entering its market, such as requiring American companies to enter into joint ventures with Chinese firms to gain entry and additional hurdles to shipping goods into the country.

But hard-liners within the Trump administration have cautioned that China has a long history of making promises to overhaul its trade practices and open its market to American goods, only to walk back or delay those moves. Those advisers have pushed Mr. Trump to take a tougher stance that would ensure China follows through on changing practices that American businesses have long complained about, including rampant intellectual property violations and discrimination against foreign companies.

The official did not specify which barriers would be lifted but said the structural changes would enable American companies to sell a wider array of goods and services in China.

How the U.S.-China Trade Conflict Has Evolved

The United States wants American companies to have a level playing field with their Chinese counterparts. China wants to build its industries into sophisticated global competitors. Both countries have demonstrated a willingness to offer concessions — and escalate tensions — to get what they want.

The deal, which is still being negotiated, would also include provisions to address concerns about American companies being forced to hand over intellectual property if they want to operate in China. And it would include measures to help American companies avoid some of the onerous partnerships they are currently forced to strike with Chinese companies to do business in the world’s largest consumer market.

Liu He, a vice premier and top economic adviser to the Chinese president, met on Thursday with President Trump and his top trade officials, and meetings continued into Friday afternoon.

Larry Kudlow, the head of the National Economic Council, said in an interview on Fox Business Network that Mr. Liu had given “an excellent presentation” to a small group of trade advisers in the Oval Office on Thursday, in which he outlined multiple remedies for the trade deficit issue, tariff and nontariff barriers and technology theft problems. “President Trump was very engaged,” Mr. Kudlow added.

Sarah Huckabee Sanders, the White House spokeswoman, said on Friday that the United States and China are “ continuing to have productive conversations.”

Though Chinese leaders have presented a strong front to the Trump administration, they are eager to dissuade the United States from imposing multiple trade penalties, including tariffs on $150 billion of Chinese goods exported to America, pending restrictions on Chinese investments in the United States, and sanctions that are crippling the business of one of its largest telecom firms, ZTE.

The measures against ZTE threaten to put tens of thousands of Chinese out of work, and they have provoked a backlash within the country, with some Chinese bemoaning that their country is not technologically strong enough to survive without the United States, a potential embarrassment for President Xi Jinping of China.

China also appears eager to act quickly to take advantage of a period of enhanced leverage, as the White House prepares for a historic meeting with North Korea’s leader, Kim Jong-un, next month in Singapore that would burnish Mr. Trump’s reputation as a deal maker.

Speaking from the Cabinet Room on Thursday, Mr. Trump drew a link between China’s recent meetings with North Korean leaders and Mr. Kim’s threat to cancel the summit meeting. “It could very well be that he’s influencing Kim Jong-un,” Mr. Trump said, referring to Mr. Xi.

As Mr. Liu met with American officials, China appeared eager to pave the way for a rapid resolution of trade tensions between the economies. On Friday, the Chinese Commerce Ministry announced that the country was dropping its antidumping and antisubsidy investigation into American sorghum. The investigation had effectively shuttered imports of sorghum, which is used to feed pigs and make China’s signature rice liquor, baijiu, and was widely viewed as a direct response to American tariffs on solar panels and washing machines.

“The Chinese want this to go away, and the Chinese are willing to write a check to make it go away,” said Leland Miller, the chief executive officer of China Beige Book International. “They just want a deal where they can say we came to the table, we answered your problems, we’re not doing it again. This is the major danger with a short-term deal, it extinguishes almost all leverage the U.S. has.”

During a visit to Beijing in early May, the Trump administration presented the Chinese with a long list of demands to overhaul their economy that went far beyond just reducing the trade deficit they run with the United States. The list also included reducing the subsidies China provides to its own industries and several restrictions that encourage foreign businesses to transfer technology to Chinese companies or the government.

Mr. Trump has threatened China with an array of penalties, including tariffs and restrictions in investments in the United States. The administration has cited national security concerns as a reason to limit the inflow of investment from China and the Treasury Department is supposed to outline potential restrictions to the White House by May 21. However, it is unclear whether the administration would take those off the table in exchange for an agreement with China that alleviates some of its broader concerns.

Many economists question the ability of the United States to actually sell China an additional $200 billion in goods, given the economy is already at full production, and the total would be more than half of the United States’ trade deficit with China last year.

Chad Bown, a senior fellow at the Peterson Institute for International Economics, said that under World Trade Organization rules, China must lower its tariffs not just for the United States, but for all trading partners. But that could lead to a situation where more Japanese, South Korea or European goods are flooding into China, rather than American ones.

Scott Kennedy, the deputy director of the Freeman Chair in China Studies at the Center for Strategic and International Studies, said the American effort to ramp up pressure on China through tariffs, investment restrictions and other measures has substantially raised tensions with China and other American allies, as well as provoked conflict within the administration, interest groups and various branches of government.

“If we get a deal which is essentially about expanding exports, we’ll really want to ask ourselves whether going through all this was worth it,” he said.

Alan Rappeport contributed reporting.

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China hopes to use Merkel to counter-balance Trump and boost ‘mutual trust’ amid global trade concerns

May 18, 2018

German Chancellor Angela Merkel will visit China next week, Chinese officials said on Friday, at a time of rising global concern about protectionist trade measures undermining growth.

Merkel will meet Chinese President Xi Jinping and Premier Li Keqiang during the May 24-25 visit, Foreign Ministry spokesman Lu Kang said at a regular briefing in Beijing.

Merkel’s visit would “further increase mutual political trust,” Lu said, although he did not say what would be discussed.

Chinese-German relations had been “developing well in recent years,” he added.

Image result for German Chancellor Angela Merkel, photos

In a phone conversation in March, Merkel and Xi underscored the importance of multilateral cooperation on global trade, following a shift away from multilateral action by the United States.

Merkel’s trip will include a stop in the southern city of Shenzhen, home to several major technology companies.

Reporting by Michael Martina; Writing by Christian Shepherd; Editing by Darren Schuettler

Reuters

China Offered Trump $200 Billion Cut in U.S. Trade Deficit (Later Denied by People’s Daily)

May 18, 2018

China cast doubt on reports that it had offered to reduce its annual trade surplus with the U.S. by $200 billion through increased imports of American products.

Image result for Liu He, white house, Donald Trump, Photos
US President Donald Trump and top Chinese trade negotiator Liu He

The offer was made during talks in Washington this week as Vice Premier Liu He visited to try to resolve a trade dispute, according to a Trump administration official who spoke on condition of anonymity. On Friday, two posts on Chinese state social media disputed the report, and a foreign ministry official said no such offer had been made to his knowledge.

Bloomberg

In a sign that the Chinese government is seeking a conciliatory stance, on Friday it announced that it would end its anti-dumping and anti-subsidy investigation into imports of U.S. sorghum, citing “public interest.” That move comes days after the restarting of a review of Qualcomm Inc’s application to acquire NXP Semiconductors NV.

“If Trump can cut a deal with China for a $200 billion reduction in the bilateral trade deficit, then he’ll have won the trade deal of the century,” said Rajiv Biswas, chief Asia-Pacific economist at IHS Markit in Singapore. “The devil will be in the details, with key factors being the timeframe over which China is offering to achieve this reduction.”

List of Demands

A $200 billion reduction in the U.S. trade gap with China by 2020 was on a list of demands the Trump administration made earlier this month as Treasury Secretary Steven Mnuchin led a delegation to Beijing. The U.S. merchandise trade deficit with China hit a record $375 billion last year.

The U.S. had earlier made additional demands, including a halt to subsidies and other government support for the Made in China 2025 plan that targets strategic industries from robotics to new-energy vehicles. China had made its own demands, including giving equal treatment to its investment, and warned U.S. companies may be excluded from measures to open its economy.

The Trump administration has threatened to impose tariffs on as much as $150 billion of Chinese imports to the U.S. as tensions over trade have escalated. Trump expressed doubt before his meeting with Liu that China and the U.S. would come to an agreement to avoid a damaging trade war.

“Will that be successful? I tend to doubt it,” Trump said during a press briefing on Thursday with NATO Secretary-General Jens Stoltenberg. “The reason I doubt it is because China’s become very spoiled.”

‘Positive Sign’

Shane Oliver, head of investment strategy at AMP Capital Investors Ltd. in Sydney, said the Chinese proposal is “a positive sign that a full on trade war may be averted.”

“By making a significant offer to the U.S. it indicates that China is taking the negotiations very seriously,” Oliver said. “Much will depend on the details and time period and later in terms of the implementation.”

Reuters reported China’s trade deficit reduction offer earlier.

The U.S. and China were expected to exchange new trade proposals during the Washington talks, Trump economic adviser Larry Kudlow said earlier Thursday. Mnuchin is leading the talks with Liu, along with Commerce Secretary Wilbur Ross and U.S. Trade Representative Robert Lighthizer, according to the White House.

Victor Shih, a professor at the University of California in San Diego who studies China’s politics and finance, said he finds an agreement to cut the U.S. deficit by $200 billion “difficult to contemplate.”

“Even with a drastic reallocation of Chinese imports of energy, raw materials and airplanes in favor of the U.S., the bilateral trade deficit may reduce by $100 billion,” he said. “A $200 billion reduction would mean a drastic reduction in Chinese exports to the U.S. and a dramatic restructuring of the supply chain.”

Market Access

Kudlow said the U.S. focus is on China opening market access to American companies by lowering their trading barriers and addressing U.S. concerns over the theft of intellectual property.

“American ownership of its own companies in China must be permitted,” Kudlow said. “We are going to have serious talks dealing with a difficult trade situation that needs to be fixed.”

Trump also said on Thursday that his decision to order a review of U.S. penalties on China’s ZTE Corp. came directly at the request of Chinese President Xi Jinping. “The president of China, President Xi, asked me to look at it. I said I would look at it,” Trump said, adding “But anything we do with ZTE is always — it’s just a small component of the overall deal.

In a surprise move, Trump on Sunday said that the U.S. was considering ways to help get ZTE ‘’back in business fast,” fueling speculation of a softening of his get-tough position on China. The Commerce Department blocked ZTE’s access to U.S. suppliers last month, saying the company had violated a 2017 sanctions settlement related to trading with Iran and North Korea and then lied about the violations.

— With assistance by Saleha Mohsin, Justin Sink, Kevin Hamlin, Miao Han, Enda Curran, and Shuping Niu

https://www.bloomberg.com/news/articles/2018-05-17/china-said-to-offer-trump-200-billion-cut-in-u-s-trade-deficit

Related:

Trump casts doubt on success of China trade talks — European Union has become very spoiled

May 18, 2018
President Donald Trump said Thursday he doubted high-level trade talks with China this week would be successful because the Chinese have been treated too easily by past administrations. But he also struck a more optimistic tone in the same set of comments.

“The reason I doubt it is because China has become very spoiled,” Trump told reporters ahead of a meeting later Thursday with Chinese Vice Premier Liu He, who is leading the delegation in Washington for talks aimed at averting a trade war.

Image may contain: 2 people, people smiling, people standing and suit

US President Donald Trump and top Chinese trade negotiator Liu He

“The European Union has become very spoiled, other countries have become very spoiled because they’ve always gotten 100 percent of whatever they wanted from the United States,” Trump said.

Later he modified his comments, saying he believed the United States and China would be happy with their trade relations because of his tough approach.

Thursday’s face-to-face meeting with Liu shows Trump’s great interest in “trying to reach some remedies regarding unfair and illegal trading practices,” Larry Kudlow, director of the National Economic Council, told reporters earlier. “That’s what we want.”

Heading into this week’s meetings, China has indicated it would ease up on U.S. agriculture if the Trump administration rolls back criminal penalties on Chinese telecommunications giant ZTE – something Trump has already signaled he is willing to do, despite protests from both Republican and Democratic members of Congress.

Trump acknowledged he told Chinese President Xi Jinping he would look at easing the current 7-year ban on ZTE doing business with American companies after it was recently caught violating the terms of $1.19 billion penalty agreement announced last year. But he also defended his administration’s handling of the case.

 

“Don’t forget it was my administration, with my full knowledge, that put very, very strong clamps on ZTE,” Trump said. “It wasn’t President Obama. It wasn’t President Bush. It was me.”

However, the investigation that led to the record fine on ZTE was started during the Obama administration, even though the penalty for making illegal sales to Iran and North Korea was announced early in Trump’s tenure.

Obama administration officials said they spent two years making the case and were prepared to impose a $1.3 billion fine, but the Trump administration scaled it back.

“They did very bad things to our country. They did very bad things to our economy,” Trump continued. “The one thing I will say they also buy a very large portion of the parts for the phones that they make … from the United States. That’s a lot of business.”

“But anything we do with ZTE [is] just a small component of the overall deal,” Trump said. “I can only tell you this, we’re going to come out fine with China. Hopefully, China’s going to be happy. I think we will be happy.”

However, the House Appropriations Committee on Thursday unanimously approved an amendment to keep the sanctions in place, in one of sign of the difficulty Trump might have satisfying Xi on the issue.

Sen. Jeff Flake (R-Ariz.) also said Trump’s decision to use the sanctions on ZTE as a bargaining chip in negotiations with China was “deeply troubling.”

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“In essence, ZTE has repeatedly engaged in malign activity by deliberately misleading the government for years, all while attempting to deliver American technologies into the hands of state-sponsors of terrorism,” Flake said in a speech on the Senate floor.

Some observers fear that Trump — after promising to push for major changes in China’s industrial policies that put American companies at a disadvantage — is prepared now to settle for a short-term package aimed at significantly reducing the U.S. trade deficit with China, which increased last year to a record $375 billion.

Liu appears set to offer a two-year $200 billion-plus deficit reduction plan focused heavily on purchases of U.S. farm goods and energy products, but that would also shower dollars on as many as 20 other industry sectors, one source familiar with the talks said.

“It’s shaping up to be the art of the bad deal,” the source said. “The impression is the administration is caving or folding its tent after revving things up quite a bit.”

Liu’s visit comes as the Trump administration is moving ahead with plans to impose tariffs on around $50 billion worth of Chinese goods to pressure Beijing to do more to stop theft of American intellectual property and to change policies and practices that require U.S. companies to transfer technology to do business in China.

Image may contain: 1 person, smiling, standing and text

China has responded to Trump’s tariff threat by vowing to strike back by raising duties on about $50 billion worth of agriculture, chemical and other goods.

In addition, Beijing has already imposed duties on about $3 billion of U.S. farm products, steel and other goods in response to Trump’s decision to slap an additional 25 percent duty on Chinese steel and 10 percent duty on Chinese aluminum.

U.S. officials initially told the Chinese that they’d be open to granting some relief from the pending tariffs in exchange for a commitment to reduce the trade deficit with China by $200 billion over two years, an administration official said Wednesday.

But the Chinese have countered with a proposal to buy $150 billion in U.S. products instead, though the talks are still very much in flux, the official said.

Neither the White House or the Treasury press office would comment on the prospects for the two sides to reach a deal that primarily involves Beijing writing a series of checks to make Trump happy, without addressing the systemic issues that drove Trump to threaten tariffs.

However, Kudlow indicated the U.S. still had a substantive list of demands it want Beijing to address.

China offers trade olive branch by scrapping tariffs on US sorghum

May 18, 2018

Move to lift anti-dumping penalties boosts hopes for interim trade agreement

Image may contain: plant, sky, cloud, outdoor and nature

A field of US sorghum, which is a popular ingredient in China animal feed © AP

Tom Mitchell in Beijing and Alice Woodhouse in Hong Kong

China’s Commerce ministry has axed anti-dumping penalties imposed on US sorghum imports, bolstering hopes that the world’s two largest economies can seal an interim trade agreement when negotiations resume in Washington on Friday.

The announcement came just hours after US President Donald Trump received Liu He, China’s lead trade negotiator and vice-premier, in the Oval Office on Thursday.

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US President Donald Trump and Liu He

The two sides have been discussing a possible “mini agreement” in which Washington would revise sanctions against a Chinese telecommunications group in return for pledges by Beijing not to impose punitive tariffs on US agricultural exports.

Negotiating teams led by Mr Liu and Steven Mnuchin, US Treasury secretary, are also discussing Mr Trump’s earlier demand that China more than halve its $375bn trade surplus with the US over the next two years.

In a statement on Friday, China’s commerce ministry said the anti-dumping measures were “not in the public interest” because of their inflationary impact on animal feed, which would especially impact pig farmers already suffering from falling pork prices.

The ministry had required importers of US sorghum to pay a 178 per cent surcharge. Last year China imported $1.1bn worth of US sorghum, which is grown principally in Kansas and Texas.

The retraction of the measures was the latest signal that the Chinese government is moving rapidly to facilitate an agreement in Washington that would at least postpone moves by both side to impose tariffs of up to 25 per cent on $100bn worth of bilateral trade. 

On Thursday evening Beijing time, Toshiba announced that Chinese competition regulators had cleared the stalled $18bn sale of its memory chip business to Bain Capital of the US. Chinese regulatory approval of Qualcomm’s proposed $47bn takeover of NXP is still pending.

But people briefed on the talks cautioned that a larger agreement formally ending the threat of a trade war might not be reached for weeks or even months. President Xi Jinping’s administration wants the US to end its “ Section 301 ” investigation of Beijing’s allegedly unfair trade practices, while US negotiators are pushing for dramatic changes in Chinese foreign investment and industrial development policies.

“It would be very awkward for [Mr Trump] to say OK, you’ve bought a bunch of our stuff so it’s OK if you continue to force our companies to transfer technology and block market access,” one of the people said.

While America’s European and Japanese allies are broadly supportive of Mr Trump’s effort to force wholesale changes in China’s foreign investment environment and industrial policies, they remain angry at his March decision to impose unilateral tariffs on steel and aluminium imports.

Japanese officials said they were considering a response to US steel tariffs via the World Trade Organization. But Tokyo is unlikely to impose retaliatory tariffs straight away, preferring to use them as negotiating leverage as its seek an exemption from the US tariffs.

China’s anti-dumping investigation into US sorghum exports was launched in early February, shortly after the Trump administration imposed a 30 per cent tariff on imported solar cells.

After Mr Trump proposed tariffs on imported steel and aluminium, China’s Commerce ministry announced retaliatory measures targeting $3bn worth of US imports including fruits, wine and nuts.

Additional reporting by Robin Harding

https://www.ft.com/content/79287cb8-5a4e-11e8-bdb7-f6677d2e1ce8

On Trade, the U.S. and China Consider the Unthinkable: Breaking Up $700 Billion in U.S.-China Trade

May 17, 2018

The economic relationship between China and the United States has defined the modern era. It helped lift hundreds of millions of people in China out of poverty. It gave affordable iPhones and other gadgets to American consumers, handed big profits to American companies and delivered 1.3 billion hungry customers to American farmers.

Now some people in both countries want to tear it apart.

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As a top Chinese economic policymaker meets with the Trump administration this week in hopes of heading off a potential trade war, some officials in both countries are planning for a time when the world’s two biggest economies do not need each other quite so much any more. They are seeking nothing less than a fundamental rethinking of a trade relationship that encompasses more than $700 billion in goods and services that flow between the countries every year.

Full disengagement is impossible, leaders on both sides acknowledge. But the plans being developed in Beijing and Washington anticipate a time when the economic engines of China and the United States are not so closely linked, particularly in high-tech industries.

“In the next step of tackling technology, we must cast aside illusions and rely on ourselves,” President Xi Jinping of China said last month after visiting a new computer microchip factory in the country’s center.

Semiconductor research in China. A plan known as Made in China 2025 is built around the idea of developing the country’s high-tech industries. Credit Kim Kyung Hoon/Reuters

Beijing has Made in China 2025, a plan that calls for the country to become largely self-sufficient and globally competitive in 10 advanced manufacturing sectors now dominated by the West. These include commercial aircraft, robotics, 5G mobile phone communications and computer microchips.

China currently depends on the United States and its allies for those elements of a high-tech future. Washington showed that last month with its move to deny American-made components to ZTE, bringing the Chinese company’s factories to a halt.

But Washington is also worried about China’s efforts to build homegrown champions. The Trump administration blocked the chip maker Broadcom’s proposed acquisition of Qualcomm, a rival, this year, over concerns that the deal would give China’s Huawei an advantage in 5G technology.

The United States has outlined its own strategy of sorts to wean itself from China. Should the Trump administration enact its threated tariffs on $150 billion in Chinese-made goods, the thinking goes, American corporations would begin to reduce their reliance on Chinese-made small components, machinery and other dull-but-essential parts in the global supply chain.

President Trump’s proposed tariffs are partly targeted at industries where customers would have an easier time switching to a supplier based in either the United States or a friendly ally like Germany, Japan, Taiwan, South Korea, Mexico or India. In most of the initial product categories the administration has identified for tariffs, less than half of the goods imported by American companies come from China.

Levi’s has a plan for protecting itself should tensions escalate further. If the Trump administration imposes a levy on clothes made in China, the company could sell American consumers jeans made in Vietnam, Cambodia or one of the three dozen or so other countries where it has suppliers.

“It’s a shell game,” said Chip Bergh, the chief executive of Levi’s. He added, “We’ll probably still be making a lot of product in China but it just won’t be coming to the U.S.” He noted that jeans made in China could be sold to consumers in Mexico instead.

The tariffs are also geared toward the products that will shape the future. China exports almost nothing now in some categories that the Trump administration carefully included in its list for planned tariffs, like electric cars and satellites. But China’s leaders hope that with government nurturing, such industries will soon become big exporters.

American laws and World Trade Organization rules allow countries to impose tariffs on subsidized goods from overseas that harm domestic industries. But the Trump administration is trying to pre-empt Chinese exports of subsidized high-tech goods to the United States by imposing tariffs in advance.

A Hongqui electric concept car at the China Auto Show in Beijing in April. The electric car category is among the areas in which China now exports almost no products that would be affected by the Trump administration’s tariff plans.CreditAndy Wong/Associated Press

United States trade officials are counting on tariffs to have long-lasting effects. Decades-old levies on imported pickup trucks, for example, help explain why essentially all pickups sold in the United States — even those made by Japanese companies like Toyota — are made in America.

American trade policy “will respond to hostile economic competitors, will recognize the importance of technology, and will seek opportunities to work with other countries that share our goals,” Robert E. Lighthizer, the United States trade representative, recently told the Senate Finance Committee.

The focus on disengagement reflect broader political realities. China is rapidly building a world-class navy; conducting military exercises in Africa and off the shores of northern Europe; and developing some of the world’s most advanced stealth fighter planes and ballistic missiles. The military muscle-flexing has caused alarm in Washington and directly influenced trade policy.

In China, leaders were alarmed five years ago by the former National Security Agency contractor Edward Snowden’s disclosures that American intelligence services had involved technology companies in the United States in its spying on China and its allies. China also faces rising labor costs — meaning cheap manufacturing will no longer provide as many jobs — and has a rising class of educated young people for whom it needs to find well-paying, high-tech jobs. While many American and European companies see Made in China 2025 as building up government-supported rivals, Chinese leaders see the plan as essential to the country’s future prosperity.

ZTE’s punishment, in particular, exposed big gaps in China’s economic prowess.

“It seems likely that the current trade dispute, and the ZTE sanctions in particular, will spur the Chinese government to double down on its economic autarky model, where they seek self-sufficiency in a wider array of technology-based products,” said Robert D. Atkinson, the president of the Information Technology and Innovation Foundation, a Washington policy research group backed partly by Western technology companies.

The Chinese and American plans both face long odds.

At first glance, China’s might seem to have a better chance of success. The country’s state-controlled banking system can steer huge loans at very low interest rates to any industry the central government chooses. Local governments have also been urged to promote targeted industries, which they can do through subsidies like providing downtown land at virtually no cost. Semiconductor factories are now rising in major cities all over China, posing a formidable challenge to the industry’s global players.

But China has a long way to go. It trails the United States significantly in crucial areas like microchips, software design and high-end precision manufacturing. As one example, semiconductors designed in the United States make up half the chips China buys every year. American companies can already design and will soon be manufacturing semiconductors with circuits just one-fifth of the size of Chinese circuits.

China is rapidly building a world-class navy; conducting military exercises in Africa and off the shores of northern Europe; and developing some of the world’s most advanced stealth fighter planes and ballistic missiles.Credit China Stringer Network/Reuters

But the United States faces its own challenges. Washington could find it extremely difficult to lure back factories that moved to China over the years. Chinese workers may be more expensive to employ than they once were, but they are still paid a quarter or less than American workers. China has also become a vast new market in its own right — one that companies are loath to leave — and has invested huge sums in highways, bullet trains and other systems that make connecting buyers and sellers cheap and easy.

And some industries simply may never come back. For example, Mr. Trump’s proposed tariffs will not touch the consumer electronics industry, in an acknowledgment that the business of making iPhones and Xboxes will stay in China for the foreseeable future.

Foxconn, a Taiwan company that makes iPhones and other devices, has begun building a manufacturing complex in India and is preparing to build one in the United States, too. Devendra Fadnavis, the chief minister of Maharashtra state in India, which includes Mumbai, said in an interview that he had recently met with a group of chief executives of American companies who also wanted to place big bets on new factories in the country.

“They were very bullish on India,” Mr. Fadnavis said, “and now I’m getting more and more inquiries from the U.S.”

But politics, not economics, have played a major role in those decisions, and progress has been slow. Despite a plan to build factories employing 50,000 people in the western Indian state of Maharashtra by 2020, Foxconn now has 16,500 workers in all of India. In China, it has one million.

“We are continuing to invest in expanding our presence and capabilities in locations throughout China,” Foxconn said in a statement.

Jie Zhao, a public policy specialist at Fudan University, predicted that increased economic self-reliance in the United States and China would not come quickly, but that it may lie ahead anyway.

“Neither China nor the U.S. can eliminate the economic interdependence of each other at this moment in time,” she said. “But reducing their dependence could be an option for getting ahead in the technological competition and world-power reorganization.”

Follow Keith Bradsher on Twitter: @KeithBradsher.

Natalie Kitroeff contributed reporting from New York

A version of this article appears in print on , on Page B1 of the New York edition with the headline: Trade Giants See a Future With Few Ties

US team divided as trade talks with China begin

May 17, 2018

Beijing is hoping for a deal on ZTE but Trump’s olive branch has been criticised

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Treasury Secretary Steven Mnuchin — Steven Mnuchin is among senior officials seen as eager to strike a deal with China © AP

Shawn Donnan in Washington and Tom Mitchell in Beijing

China and the US are set to begin a second round of high-level talks aimed at averting a trade war, amid questions over President Donald Trump’s dealmaking acumen and signs of his administration’s internal divide over how to deal with Beijing.

Chinese officials are hopeful that Liu He, President Xi Jinping’s top economic adviser, can leave Washington this weekend with a deal that would spare ZTE, the Chinese telecoms equipment manufacturer, from a corporate death sentence.

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On Thursday, just hours before formal talks were due to begin in Washington, China’s Commerce ministry said Beijing “did not want to see Sino-US frictions escalate” but would not trade its “core interests” in return for a quick settlement.

While Chinese government officials have indicated their willingness to reduce China’s $337bn trade surplus with the US, they are reluctant to make compromises related to their controversial Made in China 2025 industrial policy and other “systemic issues”.

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Liu He

ZTE suspended its shares from trading in April and said it had halted operations earlier this month as a result of the US ban on it sourcing vital parts from American suppliers. The ban was imposed by the US Department of Commerce after ZTE allegedly violated the terms of an earlier settlement related to sales of restricted equipment to Iran and North Korea.

But after flagging his support for measures that would save ZTE on Twitter last weekend, Mr Trump has been forced to defend himself against both Republicans and Democrats in Congress who criticised his U-turn.

ZTE has admitted violating US sanctions on Iran and North Korea and has long been a focus of suspicion for US intelligence agencies. In return for a lesser penalty against ZTE, Chinese officials may offer regulatory clearance of Qualcomm’s proposed $44bn takeover of NXP and agree not to target US agricultural exports with punitive tariffs.

In a separate development on Tuesday, the same day that Mr Liu arrived in Washington, Arizona-based Microchip Technology said Chinese competition regulators had signed off on its $8.4bn purchase of Microsemi, another US tech company.

Thursday’s trade talks will begin against a backdrop of continuing divisions between senior officials eager to strike a deal, such as Treasury secretary Steven Mnuchin, and China hawks, such as White House trade adviser Peter Navarro, according to people familiar with the administration’s internal discussions.

The White House on Wednesday initially said Mr Mnuchin, Commerce secretary Wilbur Ross and US trade representative Robert Lighthizer would lead Thursday’s discussions with Mr Liu and his delegation.

It only later added that Mr Navarro and National Economic Council chair Larry Kudlow, another vocal critic of China’s trade policies, would join them.

People briefed on an initial round of negotiations in Beijing earlier this month said that Mr Mnuchin and Mr Navarro clashed during those talks over a one-on-one meeting scheduled between the Treasury secretary and Mr Liu with Mr Navarro objecting to being left out.

One person briefed on the first round of talks in Beijing said Mr Navarro made it clear that he was “aggressively opposed” to a suggestion that Mr Mnuchin meet individually with Mr Liu.

But the person added that it was not clear if the Chinese registered the angry exchange as the Americans were huddled on the other side of the room. “Peter has a hot temper,” added a second person familiar with the incident.

The clash does not seem to have diminished Mr Mnuchin’s desire to put his stamp on the discussions with Beijing or China’s appetite for treating him as their lead interlocutor.

According to a copy of China’s official schedule for Thursday’s meetings seen by the Financial Times, Mr Liu, who met with congressional leaders on Wednesday, is due to hold additional one-on-one meetings with Mr Mnuchin and also join him for a private dinner.

A Treasury spokesman did not immediately respond to a request for comment. But Chinese officials complained before the Beijing talks that they did not know whom to engage with after Mr Trump decided to send seven senior officials.

https://www.ft.com/content/befafe44-597e-11e8-bdb7-f6677d2e1ce8

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