Chinese officials are signaling they're increasingly reluctant to agree to a broad trade deal pursued by President Donald Trump ahead of negotiations this week that have raised hopes of a potential truce.
In meetings with U.S. visitors to Beijing in recent weeks, senior Chinese officials have indicated the range of topics they're willing to discuss has narrowed considerably, according to people familiar with the discussions.
Vice Premier Liu He, who will lead the Chinese contingent in high-level talks that begin Thursday, told visiting dignitaries he would bring an offer to Washington that won't include commitments on reforming Chinese industrial policy or the government subsidies that have been the target of longstanding U.S. complaints, one of the people said.
That offer would take one of the Trump administration's core demands off the table. It's emblematic of what analysts see as China's strengthening hand as the Trump administration faces an impeachment crisis -- which has recently drawn in China -- and a slowing economy blamed by businesses on the disruption caused by the president's trade wars.
People close to the Trump administration say the impeachment inquiry isn't affecting trade talks with China. Any attempt to portray anything different is an attempt to weaken the U.S. hand at the negotiating table and, they argue, would be a miscalculation by the Chinese.
China's foreign and commerce ministries in Beijing didn't immediately respond to faxed requests for comments Monday. The Chinese government was expected to resume normal work today after a week-long National Day holiday.
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U.S. stocks declined, the yen edged up and the yuan slipped Monday. Treasuries fluctuated.
China -- beset by its own escalating political crisis in Hong Kong -- was drawn into the Washington furor after Trump last week called for a Chinese investigation into his Democratic rival Joe Biden and the former vice president's son, moments after threatening another escalation in the trade spat.
Trump insisted on Friday that there's no link. Yet the president's latest comments suggest why Chinese leaders may see room to take advantage.
China's leadership "are interpreting the impeachment discussion as a weakening of Trump's position, or certainly a distraction," said Jude Blanchette, an expert on China's elite politics at the Center for Strategic and International Studies.
In a statement on Monday, the White House said the gathering this week "will look to build on the deputy-level talks of the past weeks. Topics of discussion will include forced technology transfer, intellectual property rights, services, non-tariff barriers, agriculture, and enforcement."
Trump has said repeatedly he would entertain only an all-encompassing deal with China. People close to him say he remains firm in that view.
"We've had good moments with China. We've had bad moments with China. Right now, we're in a very important stage in terms of possibly making a deal," Trump told reporters on Friday. "But what we're doing is we're negotiating a very tough deal. If the deal is not going to be 100% for us, then we're not going to make it."
People familiar with the state of play say contacts that resumed over the summer after a breakdown in May have focused on how to resume negotiations and avoid further escalating the tariff wars that have unnerved financial markets.
Discussions have focused on what U.S. administration officials view as a three-phase process, people familiar with the talks said. The sequence would involve large-scale purchases of U.S. agricultural and energy exports by China, implementing intellectual-property commitments China made in a draft agreement this year and, finally, a partial rollback of U.S. tariffs.
Bloomberg News reported in September that Trump's team was discussing a potential limited agreement that includes those elements. That could clear the way for broader negotiations next year. Yet if China insists it will not engage in any discussions on industrial policy, those plans could be scuttled.
Addressing issues such as industrial subsidies "were the whole reason this case started in the first place," said Rufus Yerxa, a former U.S. trade official who heads the National Foreign Trade Council, a lobby group that's critical of Trump's trade wars. "At a minimum, the administration will have a lot of explaining to do if those drop off the table."
Also on Monday, the Trump administration placed eight Chinese technology companies on a U.S. blacklist, accusing them of being implicated in human-rights violations against Muslim minorities in China's far-western province of Xinjiang.
The companies include two video surveillance companies -- Hangzhou Hikvision Digital Technology Co. and Zhejiang Dahua Technology Co. -- that by some accounts control as much as a third of the global market for video surveillance and have cameras all over the world.
"Specifically, these entities have been implicated in human rights violations and abuses in the implementation of China's campaign of repression, mass arbitrary detention, and high-technology surveillance against Uighurs, Kazakhs, and other members of Muslim minority groups" in Xinjiang, the U.S. Commerce Department said in a Federal Register notice published on Monday.
Besides Hikvision and Dahua, the companies put on the blacklist include artificial intelligence companies iFlytek, Megvii Technology, Sense Timeand Yitu Technologies.
Information for this article was contributed by Dandan Li and Jennifer A. Dlouhy of Bloomberg News
Business on 10/08/2019