Trump's Team Arrives in Beijing for Trade Talks With Wary China

(Bloomberg) -- The Trump administration's top economic officials arrived for trade talks in Beijing Thursday as China said it's not willing to back down on key issues or submit to any U.S. threats.

China's government won't accept any U.S. preconditions for negotiations such as abandoning its long-term advanced manufacturing ambitions or narrowing the trade gap by $100 billion, a senior government official, who asked not to be named, said late Wednesday.

A U.S. team led by Treasury Secretary Steven Mnuchin and Commerce Secretary Wilbur Ross landed Thursday morning in Beijing and will meet Chinese officials in the afternoon and for dinner, the State Department said. Talks are set to resume Friday before the officials depart China's capital in the evening. No details of any planned press conferences have been given by either side, and analysts aren't optimistic about potential outcomes.

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“This has been hastily thrown together,” said Andrew Polk, co-founder of research firm Trivium China in Beijing. “The best we can hope for is an agreement to slow down the imposition of tariffs but aside from that Trump wanting to broaden the discussion to industrial policy is a non-starter.”

Trump administration officials this week have already lowered expectations for a breakthrough, saying the trip could be cut short if it's not satisfactory and that President Donald Trump will have the final say on accepting any deals.

Read More: U.S. Downplays Chance of Breakthrough in Trade Meeting

“Our great financial team is in China trying to negotiate a level playing field on trade!” Trump tweeted as his team arrived in Beijing. “I look forward to being with President Xi in the not too distant future. We will always have a good (great) relationship!”

The American team is too large and unwieldy to accomplish much and its internal rivalries make it more likely to produce more posturing than actual negotiations, according to Evan Medeiros, Asia managing director at Eurasia Group and former senior director for Asian affairs at the White House National Security Council.

“The lack of coherent U.S. priorities in trade policy toward China will become apparent during the talks and further undermine U.S. credibility in China's eyes,” Medeiros wrote in a report. “Trade relations are about to go from bad to worse.”

The senior Chinese official who spoke late Wednesday said the nation's unique political system and centralized leadership mean it will have more endurance should a trade war break out, adding that China won't compromise on core interests and is prepared for all possible outcomes of the talks.

In Beijing, a foreign ministry spokeswoman confirmed Thursday afternoon that the talks had begun. The discussions should involve equal-footed consultation and mutual respect, and work toward mutual benefits, she told reporters in a regular briefing.

The Chinese yuan rebounded Thursday from its biggest decline in almost three months, strengthening to 6.3493 per dollar as of 8:38 a.m. New York time. UBS Group AG said in a note yesterday that the yuan's slide was a reflection of the dollar's strength, not a preemptive move directed at trade policy. The currency is up about 2.5 percent so far this year.

Vice Premier Liu He, the top economic adviser to President Xi Jinping, is leading the delegation that's meeting with Mnuchin, Ross, Trade Representative Robert Lighthizer and White House advisers Larry Kudlow and Peter Navarro.

Tensions between the two biggest economies have been rising as the U.S. banned sales of crucial American technology to telecommunications-gear maker ZTE Corp. and is said to be probing Huawei Technologies Co., China's largest mobile and telecommunications company.

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Xi said Wednesday that China must firmly control major technologies and rely on domestic innovation, echoing comments from days earlier when he used a visit to a semiconductor company in Wuhan to say the industry must make major breakthroughs.

China's official Xinhua News Agency said in a commentary Wednesday that the U.S. should show sincerity in trade talks instead of making unreasonable demands. China will take retaliatory steps of the same intensity if the U.S. puts tariffs on its goods after the talks, Xinhua said.

Graham Allison, a Harvard professor who advised the Pentagon under Ronald Reagan and author of the 2017 book “Destined for War: Can America and China Escape Thucydides's Trap?” also doesn't have high expectations for the meeting. The U.S.-China relationship is likely “to get worse before it gets worse” as the Asian nation stakes its claim as a global power, he said Thursday in a Bloomberg Television interview.

“From an American perspective, all this is about a China that's rising in our face, in our space, everywhere, a rival, now a strategic adversary as the Trump administration calls it,” Allison said. “On the Chinese side they think the Americans are trying to hold them down.”

--With assistance from Paul Allen

To contact Bloomberg News staff for this story: Miao Han in Beijing at mhan22@bloomberg.net, Peter Martin in Beijing at pmartin138@bloomberg.net, Dandan Li in Beijing at dli395@bloomberg.net.

To contact the editors responsible for this story: Jeffrey Black at jblack25@bloomberg.net, Jeff Kearns, Emma O'Brien

©2018 Bloomberg L.P.

With assistance from Miao Han, Peter Martin, Dandan Li