Highlights
- Senior Beijing officials do not plan to discuss the Trump administration’s two biggest demands,
- Beijing feels its economy has become big enough and resilient enough to stand up to the United States,
- China is insisting that the parameters of any deal be limited, and tariff threat be removed before a final deal,
BEIJING: China will refuse to discuss President Donald Trump’s two toughest trade demands when US negotiators arrive in Beijing this week, people involved in Chinese policymaking say, potentially forcing Washington to escalate the dispute or back down.
The Chinese government is publicly calling for flexibility on both sides. But senior Beijing officials do not plan to discuss the Trump administration’s two biggest demands: a mandatory $100 billion cut in the United States’ $375 billion annual trade deficit with China and curbs on Beijing’s $300 billion plan to bankroll the country’s industrial upgrade into advanced technologies such as artificial intelligence, semiconductors, electric cars and commercial aircraft.
The reason: Beijing feels its economy has become big enough and resilient enough to stand up to the United States.
A half-dozen senior Chinese officials and two dozen influential advisers laid out the Chinese government’s position in detail during a three-day seminar that ended here late Monday morning. A handful of foreign writers were invited from around the world to make sure China’s stance would be known overseas. All of the officials and most of the advisers at the seminar insisted on anonymity because of diplomatic sensitivities.
It is not clear what will happen when the two sides sit down this week or whether either will find a reason to waver. Still, the Chinese and US positions are so far apart that China’s leaders are skeptical a deal will be possible at the end of this week. They are already raising the possibility that Chinese officials may fly to Washington a month from now for further talks.
“I don’t expect a comprehensive deal whatsoever,” said Ruan Zongze, executive vice president of the China Institute of International Studies, which is the policy research arm of China’s Foreign Ministry. “I think there is a lot of game playing here.”
The Chinese government is frustrated with Trump’s threats to impose tariffs on $150 billion in Chinese goods and dismayed by suggestions in the West that China has a weak bargaining position. Chinese officials believe the country’s one-party political system and President Xi Jinping’s enduring grip on power — particularly after the repeal of presidential term limits in March — mean that China can outlast the United States and Trump in any trade quarrel.
The Chinese government believes Trump’s background as a businessman means that at some point he will agree to a deal. Seminar participants also reaffirmed previous Chinese trade policy offers to further open the country’s financial and automotive sectors. They also suggested that China would be willing to tighten its intellectual property rules so as to foster innovation within China as well as protect foreign technologies from counterfeiting and other illegal copying.
But China is insisting that the parameters of any deal be limited, and that the tariff threat be removed before a final deal can be struck.
Chinese officials have reached out to Treasury Secretary Steven Mnuchin, who has reacted positively to China’s overtures in the auto and financial sectors. Mnuchin, a former Goldman Sachs executive who will be on the Trump administration’s team in Beijing later this week, has sought to calm investors in global financial markets, some of whom have been alarmed by the consequences of a trade war for stock prices and economies.
But the Chinese stance is that two long-term demands raised by trade policy specialists in the Trump administration are unacceptable and should be excluded from the talks later this week.
One of these demands is a request by White House officials for a $100 billion reduction in the annual trade deficit with China. The other demand, for limits on China’s industrial policy, is from the US trade representative, Robert Lighthizer, who is also part of the US negotiating team scheduled to come to Beijing later this week.
China’s position is that the bilateral trade imbalance arises from differences in savings rates. Households in China save roughly two-fifths of their incomes. Americans, on average, save almost nothing. So money from China tends to flow to the United States, buying factories, technology companies, real estate and more, and Americans in turn spend much of that money to buy goods from China. Many economists in the United States, including some at the Treasury, share that view.
By contrast, many trade lawyers, lawmakers on both sides of the aisle and Trump contend that the trade deficit stems to a large extent from unfair trade practices, including cheap loans by state-controlled banks to exporters.
China is ready to discuss shrinking the $375 billion annual trade deficit. But it wants to do so by buying more high-tech U.S. goods, which Washington has long blocked because of concerns that they may have military value, and by buying more fossil fuels and other goods from the United States.
China is not ready to discuss a mandatory $100 billion reduction in the annual deficit, as the administration has suggested.
A senior Chinese government official said that Beijing is unwilling to negotiate with the United States on any curbs on China’s industrial policy, which includes large-scale government assistance to favored industries in advanced-technology manufacturing. China perceives the U.S. demands for curbs on industrial policy as an attempt to stop China’s economic development and technological progress, the senior Chinese official said.
The Chinese government is publicly calling for flexibility on both sides. But senior Beijing officials do not plan to discuss the Trump administration’s two biggest demands: a mandatory $100 billion cut in the United States’ $375 billion annual trade deficit with China and curbs on Beijing’s $300 billion plan to bankroll the country’s industrial upgrade into advanced technologies such as artificial intelligence, semiconductors, electric cars and commercial aircraft.
The reason: Beijing feels its economy has become big enough and resilient enough to stand up to the United States.
A half-dozen senior Chinese officials and two dozen influential advisers laid out the Chinese government’s position in detail during a three-day seminar that ended here late Monday morning. A handful of foreign writers were invited from around the world to make sure China’s stance would be known overseas. All of the officials and most of the advisers at the seminar insisted on anonymity because of diplomatic sensitivities.
It is not clear what will happen when the two sides sit down this week or whether either will find a reason to waver. Still, the Chinese and US positions are so far apart that China’s leaders are skeptical a deal will be possible at the end of this week. They are already raising the possibility that Chinese officials may fly to Washington a month from now for further talks.
“I don’t expect a comprehensive deal whatsoever,” said Ruan Zongze, executive vice president of the China Institute of International Studies, which is the policy research arm of China’s Foreign Ministry. “I think there is a lot of game playing here.”
The Chinese government is frustrated with Trump’s threats to impose tariffs on $150 billion in Chinese goods and dismayed by suggestions in the West that China has a weak bargaining position. Chinese officials believe the country’s one-party political system and President Xi Jinping’s enduring grip on power — particularly after the repeal of presidential term limits in March — mean that China can outlast the United States and Trump in any trade quarrel.
The Chinese government believes Trump’s background as a businessman means that at some point he will agree to a deal. Seminar participants also reaffirmed previous Chinese trade policy offers to further open the country’s financial and automotive sectors. They also suggested that China would be willing to tighten its intellectual property rules so as to foster innovation within China as well as protect foreign technologies from counterfeiting and other illegal copying.
But China is insisting that the parameters of any deal be limited, and that the tariff threat be removed before a final deal can be struck.
Chinese officials have reached out to Treasury Secretary Steven Mnuchin, who has reacted positively to China’s overtures in the auto and financial sectors. Mnuchin, a former Goldman Sachs executive who will be on the Trump administration’s team in Beijing later this week, has sought to calm investors in global financial markets, some of whom have been alarmed by the consequences of a trade war for stock prices and economies.
But the Chinese stance is that two long-term demands raised by trade policy specialists in the Trump administration are unacceptable and should be excluded from the talks later this week.
One of these demands is a request by White House officials for a $100 billion reduction in the annual trade deficit with China. The other demand, for limits on China’s industrial policy, is from the US trade representative, Robert Lighthizer, who is also part of the US negotiating team scheduled to come to Beijing later this week.
China’s position is that the bilateral trade imbalance arises from differences in savings rates. Households in China save roughly two-fifths of their incomes. Americans, on average, save almost nothing. So money from China tends to flow to the United States, buying factories, technology companies, real estate and more, and Americans in turn spend much of that money to buy goods from China. Many economists in the United States, including some at the Treasury, share that view.
By contrast, many trade lawyers, lawmakers on both sides of the aisle and Trump contend that the trade deficit stems to a large extent from unfair trade practices, including cheap loans by state-controlled banks to exporters.
China is ready to discuss shrinking the $375 billion annual trade deficit. But it wants to do so by buying more high-tech U.S. goods, which Washington has long blocked because of concerns that they may have military value, and by buying more fossil fuels and other goods from the United States.
China is not ready to discuss a mandatory $100 billion reduction in the annual deficit, as the administration has suggested.
A senior Chinese government official said that Beijing is unwilling to negotiate with the United States on any curbs on China’s industrial policy, which includes large-scale government assistance to favored industries in advanced-technology manufacturing. China perceives the U.S. demands for curbs on industrial policy as an attempt to stop China’s economic development and technological progress, the senior Chinese official said.