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story.lead_photo.caption A forklift transfers goods at a logistic warehouse in Nanjing in east China's Jiangsu province, Thursday, June 6, 2019. China's Commerce Ministry will release a list of "unreliable" foreign companies in the near future, a spokesman said Thursday, without giving a specific date. The new list, announced last week, is widely seen as a response to a U.S. decision to put Huawei Technologies on a blacklist for alleged theft of intellectual property and evasion of Iran sanctions. (Chinatopix via AP)

BEIJING -- China is creating a system to protect its technology, according to state media, as the U.S. restricts the access of Chinese companies to American technology in the nations' ongoing trade dispute.

The People's Daily newspaper said Sunday that the system will build a strong firewall to strengthen the nation's ability to innovate and to accelerate the development of key technologies.

"China ... will never allow certain countries to use China's technology to contain China's development and suppress Chinese enterprises," the main paper of the ruling Communist Party said, without directly referring to the United States.

The announcement came as global finance leaders gathered in Japan for a meeting of the Group of 20 major economies, where the trade war between the U.S. and China was a focus of concern.

No details have been released about what China is calling a national technological security management list. The plan was announced Saturday evening in a brief three-paragraph dispatch by the official Xinhua news agency.

The goal is to forestall and defuse national security risks more effectively, Xinhua said, adding that detailed measures would be unveiled in the near future.

The initiative follows U.S. moves to restrict sales to Huawei Technologies and other Chinese tech firms on national security grounds.

The U.S. Commerce Department last month added Huawei to its list of entities that are engaged in activities contrary to U.S. national security or foreign policy interests.

As a result, any sale of U.S. technology to Huawei will require Commerce Department approval.

China responded by saying its Commerce Ministry would develop its own list of foreign entities that it regards as "unreliable."

The weekend announcement of plans for a technological security management list is clearly related to the unreliable entities list, the state-owned Global Times newspaper said in an editorial posted online Sunday.

It said the move would provide a legal basis to manage technology exports and counter American supply cutoffs to some Chinese companies.

"Since 2018, the U.S. has repeatedly drawn on its domestic law to exert pressure on Chinese high-tech enterprises," the English-language editorial said. "China's countermeasures against the U.S. require more legal weapons."

The world's two largest economies appear as far apart as ever in their dispute, though U.S. Treasury Secretary Steve Mnuchin said he held a constructive meeting Sunday with the head of China's central bank.

In a Twitter post, Mnuchin said he and Yi Gang, governor of the People's Bank of China, had a "candid" discussion about trade issues. The post showed the two shaking hands and smiling.

They met on the sidelines of the G-20 finance meeting in Fukuoka, Japan.

Mnuchin earlier urged China to rejoin talks on the dispute, which have stalled after 11 rounds of negotiations. He said no talks were scheduled, however, and that major progress would likely have to wait for a meeting of Presidents Donald Trump and Xi Jinping later this month.

G-20 CONCERNS

In a closing statement at the G-20 meeting, officials warned that trade tensions have "intensified" and agreed to address the risks.

But the Trump administration gave no sign that it was ready to back down. Mnuchin blamed China for prolonging a trade dispute that he insisted was not hurting America's economy or hampering global growth.

"I don't think in any way that the slowdowns you're seeing in parts of the world are a result of trade tensions at the moment," Mnuchin told reporters on the sidelines of the G-20 meeting.

Trump is expected to meet with Xi in late June, an encounter that could determine whether the the U.S. and China can resolve their dispute. Talks between the two countries fell apart last month, with Trump accusing China of reneging on a trade deal and China insisting that the United States was not negotiating in good faith.

Tensions have since increased as Trump raised tariffs on $250 billion worth of Chinese goods and threatened to tax nearly all Chinese imports. Beijing has responded with higher tariffs on U.S. goods, and in a white paper released June 2, Chinese officials vowed to "never give in" on issues of principle.

Trump will make a decision about the next round of tariffs after his meeting with Xi.

"We are not far from a real and open trade war between China and the U.S.," Bruno Le Maire, France's finance minister, said in an interview on the sidelines of the gathering Sunday. "I think all the G-20 people are aware that kind of situation would lead to an economic crisis, to a lack of growth and to a slowdown everywhere in the world."

Policymakers from around the world voiced to Mnuchin their concerns about Trump's protectionist approach, hoping that the former Goldman Sachs banker, who has been a more moderate voice on trade, might persuade the president to back away from tariff threats and find a way to make peace with China.

"We have to take a multilateral approach. Trade doesn't work well with a bilateral approach," Japanese Finance Minister Taro Aso told reporters. If economic activity deteriorates, then "all possible policy tools should be mobilized," Aso said.

"We all hope that the trade tensions will vanish," German Finance Minister Olaf Scholz said. For now, "pending questions" on the U.S.-China trade negotiations are having a real effect on global development, and removal of that uncertainty would have a "big impact" on Germany's economy, he said.

Canadian Finance Minister Bill Morneau took a more upbeat view on trade issues, but with qualifications. The U.S.' decision to lift its tariff threat on Mexico helps push forward the joint U.S.-Mexico-Canada trade deal, as does the U.S. cancellation of steel and aluminum duties on Canada, he said in an interview. Canada remains opposed to the use of tariffs as a global trade strategy, he said.

Morneau said he is also hopeful that a thawing in U.S.-China relations will help Canada mend its own relationship with China. For now, Canada and China are in a "difficult moment," marred by a dispute over the arrest of a Huawei executive whom the U.S. accuses of misleading banks about the company's business dealings in Iran.

TOLL ON OTHER COUNTRIES

The greater uncertainty around the use of tariffs globally has helped nudge Barclays PLC to a call that the Federal Reserve will cut its benchmark interest rate in July.

"Tariffs need not go into effect to slow the economy down," according to a research note Saturday -- after the U.S. threat on Mexico was lifted -- by the bank's chief U.S. economist, Michael Gapen. "The perpetual threat of tariffs may be sufficient, even if worst-case outcomes are avoided."

Recently, Fed Chairman Jerome Powell signaled a willingness to act if the economy needs it, European Central Bank President Mario Draghi vowed to support growth, and China's Yi said he has "tremendous" policy options to stoke demand. Australia, India and Chile all lowered interest rates in the past week.

In an interview, Mnuchin expressed confidence that the United States could weather the trade dispute with China despite economic weakness around the world. He dismissed recent warning signs, such as weak employment and retail sales figures, as aberrations and said he saw no indication that the economy was slowing.

"Like a lot of negotiations, sometimes you go backwards before you go forwards," Mnuchin said. "We're either going to have an agreement or we're not going to have an agreement. We're prepared for both outcomes."

Le Maire said he made this case directly to Mnuchin and urged the treasury secretary to consider a multilateral approach, such as working through the World Trade Organization, to confront China. He also noted that the steel and aluminum tariffs that Trump imposed on imports last year have had a ripple effect, compounding the protectionism emanating from the United States.

All the friction is taking a toll on many of the world's largest economies as businesses race to reorient their supply chains and anxiously await new trade barriers. Trump has added to the uncertainty in recent weeks, threatening tariffs on allies like Mexico to solve problems, such as immigration, that have nothing to do with trade.

This month, the World Bank and the International Monetary Fund warned about the prospects of slowing economic growth, and both pointed to widening trade disputes as a culprit. The World Bank noted that global trade growth has slowed to its lowest level in a decade, while the IMF said that the tariffs the United States and China placed on each other's imports could reduce global gross domestic product by 0.5%, or $455 billion, next year.

Information for this article was contributed by Ken Moritsugu and Elaine Kurtenbach of The Associated Press; by Alan Rappeport of The New York Times; and by Enda Curran, Toru Fujioka, Xiaoqing Pi, Jessica Shankleman, Saleha Mohsin, Jeffrey Black and Birgit Jennen of Bloomberg News.

A Section on 06/10/2019

Print Headline: China plans system to secure technology

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