China ‘won’t bow to US pressure and is ready to fight to the end’ if a trade war breaks out

Senior official strikes defiant tone by ruling out major concessions ahead of visit to Beijing by high-level US delegation

PUBLISHED : Thursday, 03 May, 2018, 12:00am
UPDATED : Thursday, 03 May, 2018, 9:49am

China has insisted that it will not succumb to US pressure to change its industrial policy nor offer major concessions on the bilateral trade deficit.

A Chinese government official close to the high-level trade talks with America said on Wednesday that Washington should not set any preconditions for negotiations, adding that China had sufficient strength to fight to the end if a trade war broke out.

“We will not offer concessions on anything we consider to be a core interest,” the official said.

US Treasury Secretary Steven Mnuchin is leading the delegation on the two-day visit that starts on Thursday and will meet Vice-Premier Liu He for talks.

US Trade Representative Robert Lighthizer, Commerce Secretary Wilbur Ross, White House trade adviser Peter Navarro and White House economic adviser Larry Kudlow are the other senior members of the US delegation. 

Trade tensions between the two nations have escalated after Washington moved to impose hefty tariffs on US$50 billion worth of imports from China – a measure that will take effect next month – and threatened to restrict Chinese investment. 

Although expectations of an immediate breakthrough are low, observers and trade industry representatives are watching whether China will move to calm the tensions.

Mnuchin ‘cautiously optimistic’ ahead of China trade talks

But the Chinese official said Beijing would not offer concessions on two of US President Donald Trump’s main areas of concern – the demand for a US$100 billion reduction in the record US$375 billion trade deficit, and the Made in China 2025 plan. 

The plan has caused concern in the United States and Europe about forced technology transfers and the acquisition of foreign companies by Chinese firms to obtain advanced technologies.  

“Whether it’s the 2025 plan or the US$100 billion trade deficit … we will not bow to threats, nor will we accept any preconditions for negotiations,” the official said.

The official said Beijing was willing to have further rounds of negotiations, but it was prepared for the worst.

“There are too many issues that we may not be able to solve in one round. Both sides can continue the discussions in Beijing or in Washington,” said the official. “If the talks break down and the US side escalates their actions, we are also well prepared for it.”

The official said China’s economy was strong and resilient enough to weather a trade war with the US, saying the nation’s political system has given Beijing advantages.

“In the event of a trade war, China’s economy is going to be more resilient than America’s,” he said.

China hit back at the US by imposing a 25 per cent tariff on a range of American products after Washington released its trade action plan.

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The official also said China was determined to press ahead with its market reforms, but any measures to further open up the economy, including plans to ease companies’ market access and increase exports, were not tied to the negotiations with the US.

“We will take these measures according to our country’s need … it’s not related in any way to the trade negotiations with the US.”

The US delegation’s visit will be the first time that key economic and trade officials from both countries have met to lay out their demands.

Speaking before he left for Beijing, Ross said Trump was prepared to impose the tariffs if a negotiated settlement could not be reached during the trip.

He said he had “some hope” that an agreement could be reached, but added that the final decision rested with the White House.

Meet the team China hopes will ward off US trade war

“President Trump is of the view that it’s now time for action. Our trade deficit is too big … too chronic and too inspired by evil practices,” Ross told CNBC on Tuesday. 

The US tariffs, to be imposed on imports of Chinese electronics and machinery as well as automotive and aerospace products, were the result of a so-called Section 301 investigation into policies that force foreign companies in China to transfer their intellectual property to their joint venture partners on the mainland. Trump has also threatened to target US$100 billion worth of additional Chinese imports. 

But Lighthizer sent mixed signals by playing down the potential tariffs, saying that the intention of the US was not to “change the Chinese system”.

Jake Parker, vice-president of China operations on the US-China Business Council, urged both nations to get past the tariff threats.

“It is unlikely that the issues will be resolved in this meeting, but we hope the two sides will be able to lay out a path for continued negotiations that will lead to a solution and avoid tariffs and other sanctions. That would be a positive outcome,” he said.

Parker added that for the past two months the council had been telling both governments “it is time to sit down and negotiate a solution to improve IP protection and end forced tech transfers in China”.

Additional reporting by Wendy Wu