Date
23 April 2019
A file picture shows China's Vice Premier Liu He (C) in conversation with US Treasury Secretary Steven Mnuchin (R) and US Trade Representative Robert Lighthizer (L) at Diaoyutai State Guesthouse in Beijing on March 29. Pool photo via Reuters
A file picture shows China's Vice Premier Liu He (C) in conversation with US Treasury Secretary Steven Mnuchin (R) and US Trade Representative Robert Lighthizer (L) at Diaoyutai State Guesthouse in Beijing on March 29. Pool photo via Reuters

US waters down demand on subsidies in China trade talks: report

US negotiators have tempered demands that China curb industrial subsidies as a condition for a trade deal after strong resistance from Beijing, Reuters reports, citing sources familiar with the matter.

In the push to secure a deal in the next month or so, American negotiators have become resigned to securing less than they would like on curbing industrial subsidies and are focused instead on other areas where they consider demands are more achievable, the sources were quoted as saying.

Those include ending forced technology transfers, improving intellectual property protection and widening access to China’s markets. 

“It’s not that there won’t be some language on it, but it is not going to be very detailed or specific,” one source familiar with the talks told Reuters in reference to the subsidies issue.

The issue of industrial subsidies is thorny because they are intertwined with the Chinese government’s industrial policy.

Beijing grants subsidies and tax breaks to state-owned firms and to sectors seen as strategic for long-term development. Chinese President Xi Jinping has strengthened the state’s role in parts of the economy.

“If US negotiators define success as changing the way China’s economy operates, that will never happen,” a second source with knowledge of the trade talks told Reuters.

“A deal that makes Xi look weak is not a worthwhile deal for Xi. Whatever deal we get, it’s going to be better than what we’ve had, and it’s not going to be sufficient for some people. But that’s politics,” that source said. 

The role of the state firms may benefit the United States in another part of the trade deal. The Trump administration wants China to make big-ticket purchases of over a trillion dollars of US goods in the next six years to reduce its trade surplus. The companies likely to make the purchases are the state-run firms, both the sources pointed out to Reuters.

“The purchasing, for example, reinforces the role of the state sector because the purchasing is all being done through state enterprises,” one of the sources said.

Another point of contention between the two countries, telecommunications, may drive China to increase the state’s role rather than reduce it, the source said.

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RC

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