China poured cold water on hopes for a trade deal, signaling it would retaliate against the U.S. threat to put Chinese tech companies on a blacklist, just two days ahead of the highly anticipated trade talks in Washington.
Chinese Foreign Ministry spokesman Geng Shuang on Tuesday said "stay tuned," when asked whether China would retaliate for the blacklist over alleged human rights violations against Muslim minorities.
"We urge the U.S. to immediately correct its mistake, withdraw the relevant decision and stop interfering in China's internal affairs," Geng said at a news conference according to a transcript on the Foreign Ministry's website. "China will continue to take firm and forceful measures to resolutely safeguard national sovereignty, security and development interests."
The comments deepened the tensions between the two economic superpowers before they resume high-level trade talks Thursday. The White House is also reportedly discussing blocking government pension funds from investing in China, further dimming expectations for a trade deal. Peter Navarro, the Trump administration's trade policy director, however, last week denied reports the White House is considering limiting U.S. investments in China, calling them "fake news."
China's delegation led by Vice Premier Liu He may cut short its planned stay in Washington and depart Friday instead of Saturday to remove the possibility to extend the talks into Friday evening, the South China Morning Post reported Tuesday, citing a source briefed on preparations for the trade talks.
"There's not much optimism," the source told the paper, which is run by Alibaba but often criticized for being biased in favor of the state.
This time, Liu will not carry the title of "special envoy," which empowered him to negotiate on behalf of President Xi Jinping in May. This could be an indication that Xi has not given Liu any instructions for the negotiations.
Deputy-level talks took place Monday and principle-level negotiations are planned for Thursday and Friday. The Trump administration has imposed tariffs on more than $500 billion of Chinese goods, with another round of tariffs set to go into effect later this month.
A blog called Taoran Notes on Chinese social media WeChat, followed by analysts covering China and market participants for cues on the trade battle, is also toning down expectations for a deal, a reversal from its post last month predicting "new developments."
"Some people may ask, if the U.S. raises tariffs further, is it still necessary to continue the talks … the answer is that it's as necessary to take countermeasures as to continue the talks," a blog post Monday evening reads, adding the talks will be a continuation of "talking while fighting."
Run by a state-owned newspaper called Economic Daily, the blog has been cited by U.S. media including Bloomberg News for additional color from the China side.
However, there are conflicting reports out of Chinese media on Tuesday. The state-run Global Times said the Chinese delegation is one of "the largest and broadest teams" in the history of U.S.-China trade talks, indicating Beijing is "sincerely looking to reach a comprehensive trade deal."