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China is refusing to cede ground as US issues trade threats

  • U.S. Trade Representative Robert Lighthizer called China an "unprecedented" threat to the world trading system
  • China countered that the bilateral relationship is good for both sides
  • State media criticized the American approach and said "many U.S. products are not favored by Chinese"

The long-term battle on trade between the U.S. and China shows no sign of ending as a war of words ensued this week between the two.

First, U.S. Trade Representative Robert Lighthizer called China an "unprecedented" threat, because of the "sheer scale of their coordinated efforts to develop their economy, to subsidize, to create national champions, to force technology transfer and to distort markets."

Then China countered, repeating its long-held stance that the bilateral relationship is good for both sides. "The nature of China-U.S. trade relations is mutually beneficial," said Lu Kang, a spokesperson for China's Foreign Ministry. "China and the U.S. should work together to uphold authority of the WTO rules."

China refuses to be ruffled by what the U.S. has to say, as Beijing is more keen than ever to maintain stability ahead of a major leadership shuffle in a few weeks' time. But the U.S. doesn't look like it plans to simmer down anytime soon, especially as President Donald Trump is expected to visit China later this year and the two sides prepare to sit down at the negotiating table.

President Donald Trump and China's President Xi Jinping chat as they walk along the front patio of the Mar-a-Lago estate after a bilateral meeting in Palm Beach, Florida, U.S., April 7, 2017.
Carlos Barria | Reuters
President Donald Trump and China's President Xi Jinping chat as they walk along the front patio of the Mar-a-Lago estate after a bilateral meeting in Palm Beach, Florida, U.S., April 7, 2017.

The trade deficit between the world's two largest economies is in excess of $300 billion a year, something many critics have pointed to as evidence of an unbalanced relationship. China, meanwhile, counters that "many U.S. products are not favored by Chinese," according to an editorial in state media Global Times. "But China still imports them for its trade balance. Some terribly produced Hollywood movies have profited handsomely on the Chinese market."

It's a tricky line to toe for Beijing — middle-class Chinese consumers have clamored for foreign products in the wake of many food and health safety scares over the years. And the government restricts the number of foreign films that can be released in China each year.

But never mind all that: Clearly, the message China wants to send is that it's not a one-sided relationship. "Washington doesn't need to act as if it has been taken for a ride," wrote the nationalistic Global Times.

The official media goes on to point that China bought U.S. Treasury bonds for the sixth straight month in July, becoming again the largest holder of U.S. debt, which it says is "the epitome of mutually beneficial trade relations." It also said Lighthizer's comment that China unfairly subsidizes companies to create national champions was ironic in light of Trump's "America First" campaign.

Still, the Trump administration continues to pressure China.

A few weeks ago, the U.S. launched an investigation into Chinese intellectual property theft under "Section 301" of the U.S. Trade Act of 1974, a tactic that is rarely used and could see the U.S. take retaliatory action within a year.

Just last week, the U.S. blocked the acquisition of Lattice Semiconductor by Canyon Bridge Partners, a China-backed private equity firm.