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TRADE WARS
China 'worried' over US trade relations as surplus narrows
By Ryan MCMORROW
Beijing (AFP) Feb 8, 2018

Trade on agenda as China's top envoy visits US
Washington (AFP) Feb 9, 2018 - US Secretary of State Rex Tillerson welcomed Chinese state councillor Yang Jiechi to Washington on Thursday as the world's two most powerful diplomats talked trade, drugs and North Korea.

Yang is in Washington for two days at a time when relations between the top powers are dominated by the North Korean nuclear stand-off and President Donald Trump's concerns about their trade imbalance.

His first port of call was the State Department, where he held closed door talks and had a working lunch with Tillerson, who is keen to keep China on board with a diplomatic push to force Pyongyang to negotiate its own nuclear disarmament.

"During the meeting, both sides reaffirmed President Trump and President Xi's commitment to keep up pressure on North Korea's illegal nuclear weapons and missile programs," State Department spokeswoman Heather Nauert said.

"They discussed the need to achieve a fair and reciprocal bilateral economic relationship, and shared approaches to stemming the flow of deadly narcotics," she added.

Yang told Tillerson that the two countries could address trade disputes by further opening their markets to each other and "making a bigger cake of cooperation," the official Xinhua news service reported after the meeting.

Washington is also pushing China to support Trump's "maximum pressure" drive to force Pyongyang to abandon its quest to build nuclear-armed long-range missiles capable of hitting US cities.

"We hope that China will do more because we know that they can do more in terms of adhering to UN Security Council resolutions and sanctions that have been put in place against North Korea," Nauert said.

In the talks, however, Yang apparently stuck to China's long-standing position that the issues on the Korean peninsula "should be solved through dialogue and negotiation," Xinhua reported, implying that Washington's approach could damage peace efforts.

Nauert said some diplomatic conversations are best kept private but noted that: "We have a frank exchange of ideas and information, and our viewpoints. Our president has made it very clear his concerns about trade imbalances, that's the kind of thing that comes up."

China's long-standing trade surplus with the United States grew 10 percent last year to $276 billion, a sum Trump finds intolerable, and senior officials from both countries are in talks to try to head off a trade war.

"We're not seeking an adversarial relationship with the government of China," Nauert said.

"We are simply identifying actions that China has taken that undermine a rules-based order."

Washington is also pushing China for more cooperation on cutting off the flow of synthetic drugs and chemical precursors used in the production of narcotics to Latin America, as these are often smuggled into the United States and fuel an epidemic of opioid addiction.

China expressed concern on Thursday over the US ramping up trade investigations as official data showed its surplus with America narrowed in January after reaching record levels last year.

This week China announced an investigation into imports of a US agricultural product after President Donald Trump's administration launched a spate of new trade tariffs and probes into Chinese goods.

The Trump administration has shown no signs of letting up, with major decisions looming on Chinese aluminium, steel and intellectual property practices.

The tensions are raising the spectre of a tit-for-tat trade war between the world's two largest economies.

"There has been an upward trend in US investigative organs looking into China's products and launching trade relief cases," said Ministry of Commerce spokesman Gao Feng during a press conference.

"China is worried about this."

The US imposed new tariffs on Chinese-made solar panels and washing machines this year after hitting aluminium foil and plywood last year.

China has so far held off from retaliating by adding new tariffs on US imports, but Beijing has indicated it may not show such restraint for much longer.

This week China initiated an anti-dumping investigation into sorghum imports from the US, worth almost $1 billion last year.

That was a sliver of the $14 billion in US soybean imports, which China hinted could be in its crosshairs as well. It was America's largest export to China last year.

Gao did not deny reports Chinese authorities were looking into soybean and cotton imports, after a journalist from state news agency Xinhua asked about reported meetings regarding the two items over anti-dumping and anti-subsidy issues.

"Recently we did hold a symposium with enterprises that import and export agricultural products," Gao said, noting it was to "understand the operation of foreign trade in agriculture".

Though Gao denied it was connected to "Sino-US trade frictions", he said "related agricultural companies did indeed mention issues in the Sino-US agricultural product trade" with some producers "expressing concerns about the impact of imported agricultural products".

- Surplus slims down -

Official data released by China's General Administration of Customs may relieve some pressure generated by its vast trade surplus with the US.

It reached record highs during Trump's first year in office -- $375.2 billion by US counting, or $275.8 billion according to Chinese data.

In January, China's trade surplus with the US dropped to $21.9 billion, from $25.6 billion in December. The figure is roughly equal to the surplus China posted with the US in January 2017.

Still, analysts worry the persisting deficit will compound sensitive trade relations between the two countries.

"The uncertainty surrounding Sino-US trade ties remains a key potential downside risk in the near term," said Betty Wang, senior China economist at ANZ bank.

There is a large gulf between the two sides on how they view the massive deficit.

"Generally Sino-US trade interests are relatively balanced," Gao said, after explaining the gap shrinks when considered on a value-added basis.

- China's booming imports -

Beyond the risks in the US-China trade relationship, official data on Thursday showed China's imports soared and exports remained strong in January.

Imports for the month surged 36.9 percent year-on-year, pointing to robust demand in the world's number two economy to start the year.

China's continued economic strength flies in the face of the authorities' campaign to limit credit growth and reduce winter pollution by cutting industrial production.

The wave of imports -- buoyed by rising commodity prices -- greatly surpassed analyst estimates of 10.6 percent growth for the period, according to Bloomberg News.

Analysts attributed part of the rise to the Chinese New Year holiday falling in February this year, as opposed to January last year.

Even so, the "outturn exceeded expectations", wrote Julian Evans-Pritchard, China economist at Capital Economics.

China's exports remained strong as well, posting 11.1 percent growth for the month, beating analyst expectations of 10.7 percent.

The humming global economy continues to eat up China's products, giving its leaders more time to achieve their goal of transitioning the economy from one driven by exports and investment to a more stable model propelled by domestic consumption.


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