China: Smaller trade surplus, OK. But tech concessions? No.
BEIJING» Narrow our trade surplus with the United States? No problem, say Chinese negotiators. But change technology tactics that are China’s path to prosperity and its rightful place as a global leader? Absolutely not.
China highlighted the sensitivity of the issue with its threat Sunday to scrap deals aimed at settling a trade dispute with Washington if President Donald Trump’s tariff hike on $50 billion of Chinese technology goods goes ahead.
It sheds more light on where President Xi Jinping’s government might compromise and where it rejects any challenge to a Communist Party-led model for technology development that it sees as hugely successful.
“Where China does not budge is in areas it considers to be its fundamental development strategy,” said Louis Kuijs of Oxford Economics, a former World Bank economist in Beijing. “If the U.S. is asking China to stop these industrial policies to become a global technology leader, that is where China says, ‘Look, that’s not possible.’“
The desultory end to weekend talks led by Commerce Secretary Wilbur Ross and China’s top economic official, Vice Premier Liu He, revived worries Beijing and Washington are sliding again toward open conflict.
The dispute is in two largely unrelated halves: American frustration with China’s overall trade surplus with the United States — a record $375.2 billion last year and forecast to grow — and more narrowly focused complaints about Beijing’s technology policy.
China already agreed to address the first with a May 19 pledge to buy more American farm goods, energy supplies and other products.
That is fairly easy, say private sector analysts. Beijing can buy more U.S. natural gas and soybeans and less from Russia and Brazil. Its overall trade balance would stay the same.
The focus on China’s trade surplus is politically appealing, economists say, but distracts from goals that matter more to American companies and that Washington’s European and Asian partners support. Those include gaining the same access to Beijing’s markets that its companies enjoy abroad and improving protection of intellectual property such as patents and trademarks.
“The Trump administration’s fixation on the trade deficit is exactly where I think the Chinese would prefer to have this,” said Paul Haenle, director of the Carnegie-Tsinghua Center for
Global Policy in Beijing. “It kind of lets them off the hook on these bigger, more important issues.”
Technology is thornier. It strikes at the heart of plans the ruling Communist Party sees as critical to reducing poverty that remains widespread despite two decades of explosive economic growth.
The United States and other governments complain Chinese technology industries are built on know-how Beijing steals or pressures foreign companies to hand over.
Before Beijing joined the World Trade Organization in 2001, such “technology transfer” often was an explicit requirement for foreign companies that wanted access to China’s state-dominated economy.
Today, regulators say no one is obliged to give up technology. But foreign companies in autos, pharmaceuticals and other fields are required to operate through local partners. That forces them to share know-how with potential rivals or help them to create their own.
Xi’s government sees Chinese strength in technology as a path to restoring the country’s political and cultural greatness after two centuries of what nationalists see as humiliation by foreigners.
“Make no mistake about this: China aims to be the world’s largest economy, its advocate of free trade, its geopolitical leader,” Carl B. Weinberg of High Frequency Economics said in a report.
Beijing has staked out a role as defender of free trade in response to Trump’s support for import controls. That is despite China’s status as the most-closed major economy — a paradox some foreign businesspeople call, “free markets abroad, socialism at home.”
Trump’s tariff threat targeting technology goods reflects American alarm about China’s status as a potential competitor in profitable fields from solar power to electric cars to biotechnology.
After a lull in tensions following China’s May 19 pledge, the White House renewed its threat last week. It said details of goods targeted would be released June 15, but an earlier tentative list included telecoms, medical and other technology.
Beijing is ready to make concessions to avoid a real trade war with Washington, but worries about the economic and political costs, said Shi Yinhong, a professor at Renmin University’s School of International Studies in Beijing.