China Rejects U.S. Target for Narrowing Trade Gap

May 21, 2018

One of Washington’s central demands is that China reduce its merchandise trade surplus by at least $200 billion by the end of 2020, even though economists in both nations say the trade deficit is affected by investment and savings patterns in both nations — not trade policy. Beijing has rejected most U.S. demands in the past and has continued to hold firm.

The U.S. Agriculture Department recently asked agriculture companies to come up with a list of products whose production could be ramped up rapidly for export to China, a person following the talks said. At the same time, China put together a list of high-tech products that are barred by U.S. export controls for sale to China but are allowed by other nations.

Beijing argues that if the U.S. would ease the export controls on these items, it would purchase more from the U.S., the person briefed on the matters said. Even so, some U.S. officials believe, the additional Chinese purchases would only total $50 billion to $60 billion in the next year or two, far short of the U.S. goal.

One Chinese request is for a reprieve on China’s ZTE Corp. from crippling U.S. sanctions over its trade with Iran and North Korea. Mr. Trump said early last week that he would work with Mr. Xi to get the telecommunications-equipment maker “back into business,” defending such a move as part of a trade deal the U.S. is negotiating with China.

However, “there is no firm agreement on ZTE as of yet,” a person familiar with the discussions said. U.S. lawmakers from both parties have criticized any effort to ease restrictions on the company, calling ZTE a security threat, with Sen. Marco Rubio (R., Fla.) tweeting on Saturday: “If we don’t wake up & start treating this as a national security issue, China is going to win again.”

China’s top diplomat, Foreign Minister Wang Yi, is due in Washington this coming week and is expected to discuss the ZTE controversy, a person briefed on the issue said.

Settling the trade fight is taking on a degree of urgency as the tensions start hurting businesses in both countries. U.S. goods, including sorghum, soybeans and cars, have faced growing hurdles when entering China, while a U.S. order banning American companies from selling components to ZTE not only threatens the survival of the company but also that of other state-owned Chinese companies.

Responding to Mr. Trump’s promise of a reprieve for ZTE, Beijing has made a number of conciliatory gestures. China’s antitrust regulators had delayed for months U.S. private-equity firm Bain Capital’s $18 billion deal for Toshiba Corp.’s memory-chip unit, but on Thursday, the Japanese firm said regulators had allowed the deal to proceed. Chinese regulators also promised this week to restart their review of U.S. chip maker Qualcomm Inc.’s bid for NXP Semiconductors NV.

China has also offered to hold back penalties on a variety of U.S. agricultural products it announced in early April as retaliation for U.S. tariffs on Chinese steel and aluminum exports. China is a top buyer of U.S. farm products. On Friday, China’s Commerce Ministry announced an end of its antidumping investigation into imported U.S. sorghum.

Source: Dow Jones

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