World Economy

Trade investigation pours 'cold water' on US-China relationship, Chinese official says

Key Points
  • An official from the Chinese province of Shaanxi says a Trump administration probe into Chinese companies has negatively affected some companies in the region.
  • The investigation has also thrown "cold water" on the relationship between the U.S. and China.
  • However, economic impact remains limited as the U.S. has not officially changed its China trade policy yet.
A man looks at a notice board in the settlement of Dajing in rural Shaanxi province, China.
Sue-Lin Wong | Reuters

The Trump administration's moves against China have cooled some business activity in the central Chinese province of Shaanxi, according to a local official.

"America's 301 article investigation I believe … has poured cold water on those who strive to build the U.S.-China relationship," an official from the Shaanxi Provincial government told a few U.S. journalists through a translator Thursday, referring to a U.S. investigation into China's trade practices.

"It is a pity to see some of the local enterprises have been affected by this investigation," said the Shaanxi official, who didn't want to be named. The U.S. probe effectively limited access to the U.S. market temporarily and, in particular, hit a solar panel manufacturer, the official said.

China is the largest goods trading partner with the U.S., with $578.6 billion in total goods traded last year, according to estimates from the Office of the U.S. Trade Representative.

Shaanxi provincial statistics bureau and army cadre resettlement office in Xi’an, China.
Evelyn Cheng | CNBC

U.S. Trade Representative Robert Lighthizer on Aug. 18 formally launched a Section 301 investigation into whether Chinese companies are infringing on intellectual property rights, especially in technology, and hampering U.S. commerce. The probe follows a memorandum from U.S. President Donald Trump, who has repeatedly called for tougher trade restrictions on Chinese imports and has tried to use the U.S.-China economic relationship to pressure Beijing into reining in North Korea's nuclear threat.

The Office of the U.S. Trade Representative did not immediately respond to a CNBC request for comment.

"Just having an investigation hanging over your head, people are reluctant to invest, to sign agreements," Stephen Olson, research fellow at the Hinrich Foundation, said Monday in Hong Kong.

Chinese 'chuckle at Trump: State media
Chinese 'chuckle at Trump: State media

The U.S. accounts for one-sixth of Shaanxi's total import and export volume, according to the local government. Overall, Shaanxi ranks 15th in China by gross domestic product, reporting GDP of about 1.92 trillion yuan ($294.31 billion) last year. The province contributed about 2.58 percent to the national GDP, according to the local government.

The region's main industries include natural gas production and high-tech such as aerospace.

"Cooperation only is the best way to resolve trade conflict between China and the U.S.," the Shaanxi official said. "Of course, I believe the Chinese side will firmly safeguard our legitimate rights."

To be sure, the majority of companies in Shaanxi have not been affected by U.S. trade investigations and foreign trade accounts for no more than 10 percent of the province's gross domestic product, according to the government official.

"No concrete actions have been taken" to stop U.S. trade with China, Olson said. "The wild card there is to what extent the North Korean geostrategic considerations are going to, pardon the pun, trump everything else."

Disclosure: Travel to Asia and interview arrangements were supported by the East-West Center, the Better Hong Kong Foundation and the All-China Journalists Association.

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