China Economy

As Trump demands major concessions, Beijing wants the world to think that the US will blink first

Key Points
  • The Chinese government is trying to convince the world that the onus is on the U.S. to resolve trade tensions between the two countries.
  • "But if we look at the whole situation, China is in no hurry because time is on our side," says Liang Ming, director of the Institute of International Trade, a research unit under the Ministry of Commerce. He was speaking in Mandarin via an official translator at a press briefing on Thursday.
  • Liang said that talks at the G-20 meeting between the U.S. and China leaders were still possible "but the precondition is that the U.S. shows good faith."
U.S. and Chinese flags seen at the US Department of State on May 23, 2018.
Brendan Smialowsk | AFP | Getty Images

BEIJING – The Chinese government is trying to convince the world that the onus is on the U.S. to resolve trade tensions between the two countries.

As negotiations remain at a standstill, Beijing has yet to confirm whether Chinese President Xi Jinping will meet U.S. President Donald Trump at the G-20 meeting in Japan at the end of this month. Trump on Monday threatened more tariffs on Chinese goods if Xi does not attend.

Representatives from the Chinese side said Thursday they think it's likely that Xi will go to the G-20 meeting.

But in order to reach a trade deal, they emphasize, the U.S. must agree to certain conditions. These include the cancellation of all additional tariffs; following the direction of what was agreed at the G-20 meeting in Argentina last year; and abiding by terms which China considers equal.

"China's position has been very clear and explicit. It is the U.S. who initiated the trade friction," said Liang Ming, director of the Institute of International Trade, a research unit under the Ministry of Commerce. He was speaking in Mandarin via an official translator at a press briefing on Thursday.

"Now I think China has greater confidence than the U.S. At the G-20 we could have talks, but the precondition is that the U.S. shows good faith," Liang said. "If it continues to go backtracking on its own commitments, then we'd rather not have the talks."

China's in no hurry

Negotiations between the U.S. and China took a turn for the worse last month. Trump increased tariffs on $200 billion worth of goods from China, and his administration put Chinese telecom giant Huawei on an "entity list" that effectively cuts the company off from its U.S. suppliers.

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The view of Chinese academics, Liang said, is that China's economy can withstand the pressure of prolonged trade tensions, which they see are at the behest of Trump's presidential campaign efforts.

"We know that starting from the (June) 18th, President Trump will start the new round of general election campaign, and so we think he is also eager to reach a deal," Liang said. "But if we look at the whole situation, China is in no hurry because time is on our side."

US must show 'sincerity'

Since then, the Ministry of Commerce's official line has been this: For talks to continue, the U.S. must "adjust its wrong actions" with sincerity.

Liang laid out three points in which the U.S. could show such "sincerity."

  • First, echoing China's Vice Premier Liu He, who is also the country's chief trade negotiator, Liang said the U.S. must agree to cancel all additional tariffs.
  • Second, Liang said Beijing would like the U.S. to "significantly ease export controls on high tech export products" in order to reach demands that China increase its imports of American goods by at least $1.2 trillion.
  • "The third point is about a balanced text that is about expressions and wordings," Liang said. "We don't think there should be a lot of strong, forceful words such as 'must', 'should,' etc."

Efforts to ensure that Beijing and the Trump administration will adhere to the terms of any trade deal have been a source of uncertainty on both sides. Each country claims the other backtracked on what appeared close to a deal just weeks before talks fell apart.

It's hard to imagine a complete break of the United States from China or of China from the United States.
Xi Jinping
Chinese president

In early June, China's powerful State Council published a white paper laying the blame on the U.S. for the trade tensions.

Zhu Guangyao, former vice minister of finance and an advisor to the Chinese government on trade, affirmed Thursday that China is waiting for the U.S. to agree to Beijing's terms. He said he expects Xi will attend the G-20 meeting given a previous agreement with Japan. But he emphasized the need for multiple levels of communication and full information for progress toward any kind of deal.

"Since the negotiations are so (serious), both sides are beginning to put their red lines on the table — what we can negotiate, what not," Zhu told CNBC's Eunice Yoon in English. "So people's interests, national sovereignty, national dignity, certainly is the red line. No one can go beyond that."

Beijing's 'core interests'

In a commentary piece published in late May, state news agency Xinhua said that U.S. demands, including restricting the development of China's state-owned enterprises, is an attempt to damage Beijing's "core interests."

Foreign businesses have complained of an unequal playing field with Chinese companies due to government support. In addition, there's poor protection of intellectual property rights and forced technology transfer to China in order to operate there, they say.

Beijing has made some moves to address those issues in the last several months. But for an international community watching the country since it joined the World Trade Organization in 2001, China is still moving too slowly.

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As trade tensions escalate, China is increasingly digging in its heels for a longer-term dispute, while trying to keep the door open to the U.S., which has long been the Asian country's largest trade partner.

In a rare public comment on the trade dispute, Xi indicated last week at an economic forum in St. Petersburg, Russia that he would like to maintain a connection with the U.S.

"It's hard to imagine a complete break of the United States from China or of China from the United States," Xi said in Chinese, interpreted into Russian and then translated into English by Reuters.

"We are not interested in this, and our American partners are not interested in this," Xi said. "President Trump is my friend and I am convinced he is also not interested in this."

— CNBC's Eunice Yoon and Reuters contributed to this report.