China tries to ease retaliation fears with pledges to help foreign businesses weather trade war

China will hit back with tariffs but harassing US firms not on the cards, commerce ministry signals

PUBLISHED : Thursday, 05 July, 2018, 12:58pm
UPDATED : Thursday, 05 July, 2018, 5:37pm

The Chinese government has said it will protect the “legitimate interests” of foreign businesses in China and lessen the fallout from a China-US trade war, in an apparent attempt to ease fears that Beijing could single out US businesses for retaliation.

Asked on Thursday whether China would target US-funded businesses in China to counter US restrictions on Chinese products, Chinese Ministry of Commerce spokesman Gao Feng said it was not part of Beijing’s plan and, instead, China might compensate foreign businesses for losses from a trade war.

“As for possible impacts on businesses from the trade war initiated by the United States, we will keep assessing the situation and make efforts to help [foreign] businesses to mitigate any possible impacts,” Gao said.

“In the past few decades, China has always been one of the most popular markets for foreign investors. It is not only because of China’s large market size, but it is also because the Chinese market is stable, rational, and committed to the rule of law.”

The comments come a day before Washington and Beijing plan to implement tariffs against each others’ goods in an escalating trade conflict that has rippled out to financial markets.

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Gao said China would not bow to threats or blackmail and would have to fight back if the US went ahead and imposed the tariffs.

China’s customs agency said Chinese tariffs on US goods would take effect immediately after the US duties on Chinese goods kicked in, although Beijing has said it will not be the first to pull the trigger.

Apart from a 25 per cent tariff on US$34 billion worth of US products as a tit-for-tat response to the US move, Gao did not specify what “qualitative measures” China would take if US President Donald Trump followed through on threats to impose tariffs on another US$200 billion worth of Chinese products.

China’s imports from the US were just US$130 billion last year and so Beijing does not have the capacity to hit back in kind, raising speculation it could respond by creating administrative headaches for companies in China.

The Washington Post reported on Wednesday that US companies had already felt Beijing’s sting “in the form of stalled product approvals, worker visas and licensing applications”. The newspaper quoted observers as saying there was “anecdotal evidence” of a build-up in sanctions against US businesses.

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Foreign firms operating in China have complained in the past of being singled out for antitrust and pricing investigations. In addition, they face new hurdles in the form of security and cyber laws.

US companies had US$256 billion in investment in China by the end of last year, exceeding China’s US$140 billion in the United States, according to a report by the National Committee of US-China Relations and Rhodium Group in April.

At the same time, China is trying to present a friendly face to foreign businesses, including American players.

In recent weeks, Beijing has opened more sectors to foreign investment by shortening its “negative list”, which deems which sectors are off limits.

Gao also said US business interests would suffer from the first set of tariffs, with about US$20 billion of the targeted goods, or 59 per cent, produced by foreign firms, including US ones.

“The US measures are essentially attacking global supply and value chains,” Gao said. “To put it simply, the US is opening fire on the entire world, including itself.”

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China’s exports to the US grew 5.4 per cent in the first half, 13.9 percentage points lower than for the same period last year, according to the General Administration of Customs.

Additional reporting by Reuters