The Trump administration's economic team held its first day of talks in Beijing on Thursday without giving any sense of progress toward a deal to halt a potential trade war.
Treasury Secretary Steven Mnuchin, who is leading the delegation, Commerce Secretary Wilbur Ross, U.S. Trade Representative Robert Lighthizer and White House economic adviser Larry Kudlow declined to comment to reporters on arrival at their hotel after meetings and a dinner with their Chinese counterparts. Talks are expected to resume today.
The U.S. has tempered expectations of a major breakthrough from the discussions, which are expected to focus on U.S. concerns over China's state-driven economy, forced technology transfers and America's widening trade deficit with the world's No. 2 economy. Underscoring the friction, a U.S. report released Thursday showed the trade gap with China surged by 16 percent to more than $91 billion in the first quarter of this year.
A White House economist described the first day of talks as "fairly positive" but said the real test will be China's ability to deliver on its promises of economic change.
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The U.S. has turned over to China a "detailed list of asks," Mark Calabria, chief economist to U.S. Vice President Mike Pence, said during an event in Washington on Thursday. While he declined to give specifics, he said the U.S. wants China to lower its tariffs rates to match U.S. levies, which could increase exports of American goods to the world's No. 2 economy.
"What I heard from the first day, and again they've been there for a full day of negotiations, has been fairly positive," Calabria said.
China's government won't accept any U.S. preconditions for negotiations such as abandoning its long-term advanced manufacturing ambitions or narrowing the trade gap by $100 billion, said a senior U.S. government official, who asked not to be named.
Analysts aren't optimistic about potential outcomes beyond possibly delaying the threatened imposition of tit-for-tat tariffs. China's largest media outlets have been ordered to refrain from reporting any material beyond official press releases related to the talks, according to people familiar with the matter.
"Our expectations are low. The U.S. negotiating position is unclear -- indeed it's not even clear if the U.S. representatives have a unified view on what they want to achieve," according to Tom Orlik, chief economist at Bloomberg Economics. "The Chinese side has already made concessions and won't rush to make more. The past few weeks have shown that markets can be roiled by tariff chatter, so that's certainly a possibility in the next couple of days."
The meetings are an opportunity for the sides to exchange their views after the official channel for U.S.-China high-level economic talks was suspended last year.
President Donald Trump has threatened to impose tariffs on as much as $150 billion of Chinese goods to punish China over its intellectual property practices if the talks fail to yield progress, a move that China said would spark retaliation in equal measure on American exports.
The United States is also looking at ways to crack down on Chinese investment in the U.S. in an effort to balance the scales and protect sensitive technology. China has announced tariffs on $3 billion of U.S. goods such as pork and wine in retaliation for new global steel and aluminum tariffs imposed by Trump. The U.S. levies were aimed at tackling China's overcapacity.
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Trump sounded a more positive note as his economic team entered the talks in Beijing. "Our great financial team is in China trying to negotiate a level playing field on trade!" Trump tweeted as his team arrived in Beijing. "I look forward to being with President Xi in the not too distant future. We will always have a good (great) relationship!"
China's official Xinhua News Agency said in a commentary Wednesday that the U.S. should show sincerity in trade talks instead of making unreasonable demands. China will take retaliatory steps of the same intensity if the U.S. imposes tariffs on its goods after the talks, Xinhua said.
The discussions should involve equal-footed consultation and mutual respect, and work toward mutual benefits, a Chinese Foreign Ministry spokesman told reporters in a regular briefing on Thursday. Chinese Vice Premier Liu He, the top economic adviser to President Xi Jinping, is leading his nation's delegation.
Another irritant in the relationship is a U.S. ban on sales of crucial American technology to telecommunications-gear maker ZTE Corp. and an investigation it is said to be leading against Huawei Technologies Co., China's largest mobile and telecommunications company.
Xi said Wednesday that China must firmly control major technologies and rely on domestic innovation, echoing comments from days earlier when he used a visit to a semiconductor company in Wuhan to say the industry must make major breakthroughs.
"The Made in China 2025 industrial policy concerns China's long-term development plan, so the overall direction won't change at all," said Yu Miaojie, professor at Peking University's National School of Development. Yu says China would rather cut the trade deficit by importing high-tech products from the U.S. that are currently tightly restricted.
The state-run Global Times newspaper said Thursday in a commentary that it's "our sovereign right to develop high-tech industry and it is connected to the quality of rejuvenation of the Chinese nation. It will not be abandoned due to external pressure."
The "Made in China 2025" plan calls for domestic producers to supply 70 percent of the country's chip demand.
The Trump administration's efforts may actually spur China to ramp up efforts to develop its domestic industry as it strives to fulfill Xi's vision, said Jian-Hong Lin, an analyst at research firm TrendForce.
China now consumes nearly 60 percent of the world's semiconductors but supplies only about 16 percent, according to PricewaterhouseCoopers. The country spends more than $200 billion a year on foreign-made semiconductors, which in 2015 surpassed crude oil as the country's biggest import.
Information for this article was contributed by Paul Allen, Saleha Mohsin, Andrew Mayeda, Peter Martin, Xiaoqing Pi, Elena Popina and Katia Dmitrieva of Bloomberg News, Gillian Wong and Kelvin Chan of The Associated Press.
A Section on 05/04/2018