China denies ‘rumour’ it offered to cut trade surplus with US by US$200 billion a year

Foreign ministry says talks in Washington are ‘ongoing and constructive’, while government adviser estimates it would take three to five years to hit the target

PUBLISHED : Friday, 18 May, 2018, 2:40pm
UPDATED : Friday, 18 May, 2018, 11:39pm

Beijing on Friday denied that it offered Washington a package of measures to cut its trade surplus with the United States by US$200 billion a year during talks aimed at staving off a trade war.

Senior officials from both sides – led by Chinese Vice-Premier Liu He and US Treasury Secretary Steven Mnuchin – held talks in Washington on Friday to find ways to ease trade frictions, after Liu also met US President Donald Trump on Thursday.

Media reports of a trade surplus offer were denied, but China’s commerce ministry dropped an anti-dumping investigation and levy on US sorghum in what was seen as a goodwill gesture after the previous round of talks in Beijing failed to make any breakthroughs.

Bloomberg reported that the offer to cut the surplus was made by Liu in Washington this week, while Reuters said US aircraft maker Boeing would be a major beneficiary of the offer. Both reports quoted anonymous sources.

But Chinese foreign ministry spokesman Lu Kang dismissed the suggestion as “rumour”.

“As far as I know, the negotiations are ongoing and they are constructive,” Lu said in a daily press briefing.

A Chinese government adviser who is familiar with the talks said reducing the trade surplus by US$200 billion would take at least three to five years, by expanding imports from the US, limiting Chinese exports and boosting investment.

“The authorities hope they will have three to five years to resolve this,” the adviser said. “They can start with the target of US$20 billion first, and gradually cut China’s trade surplus with the US.”

Hours before Lu’s remarks, Communist Party mouthpiece People’s Daily published an article saying reports suggesting Beijing had made the offer were “pure fantasy and rumours”.

“Some people are worried that China will make major unilateral concessions. Such worries are unfounded,” the article said, citing people familiar with the talks. “Neither side gave much away and the negotiations were still deadlocked a few hours before the meeting between Trump and Liu.”

But it also said China could boost imports from the United States in the energy and manufacturing sectors and step up investment cooperation – areas that were covered during the meeting between Liu and Trump.

According to US data, the trade imbalance between the two countries was US$375 billion last year. Narrowing that gap is a priority for Trump, who has vowed to put “America first” from his first day in office.

In his talks with Trump, Liu said China and the US needed to properly resolve their trade disputes in an equal and mutually beneficial manner.

“Both sides should ensure that economic and trade cooperation continues to be the driver of Sino-US relations,” Liu was quoted by state-run Xinhua as saying.

Hours after the meeting, China’s commerce ministry said it would drop an anti-dumping levy of 178.6 per cent imposed on US sorghum a month ago, saying it had increased costs for consumers and created operational difficulties for pig farmers. One of the main uses of the grain is for animal feed.

China scraps levy on US sorghum imports amid trade war talks

Louis Kuijs, chief Asia economist at Oxford Economics, said it was positive to see there had been some agreement, with China scrapping the levy.

“But that is only a partial agreement. Realistically, a broader agreement to sustainably remove the threat of a trade war will be harder to reach,” he said. “Demands by the US for China to substantially reduce its bilateral surplus with the US are hard to meet.”

Trump was more critical of China in comments made during an earlier meeting with Nato Secretary General Jens Stoltenberg, saying the US had been “ripped off by China” for years and denying his comments about helping to resolve US penalties on Chinese telecoms firm ZTE meant his administration was going soft on Beijing.

China watchers have expressed scepticism as to whether the target to cut US$200 billion from the trade surplus can be achieved in a year. To achieve that target, they say, China will have to almost double the value of goods it buys from America annually, which will not be achieved by simply buying more Boeing aircraft, LNG or soybeans.

Mei Xinyu, a researcher at the Chinese Academy of International Trade and Economic Cooperation affiliated with the commerce ministry, said restricting China’s exports to the US would not be enough to achieve that goal either.

“It is not possible that China would set such target,” he said. “If the two nations are to reach a deal, it will have to be mutually agreed and it will have to be a deal that Trump can list as an achievement.”

Larry Hu, chief China economist at Macquarie Capital, said the negotiations would be tough, but he expected that a deal would be reached at the last minute, with compromises from both sides.

Wang Huiyao, director of the Centre for China and Globalisation, a think tank in Beijing, said while it was impossible to reach the US$200 billion target, China could help the situation by expanding its services trade with the US in areas such as tourism and e-commerce.

“The target could be achieved if the US relaxes its restrictions on exporting hi-tech products to China,” he said.

Additional reporting by Frank Tang and Wendy Wu