As China Presents Economic Plan, U.S. Trade Spat Raises New Risk

(Bloomberg) -- As Chinese Premier Li Keqiang opens the national parliament's annual session Monday with the release of economic targets, the prospect of a trade clash with the U.S. has emerged as a growing risk.

Vice Foreign Minister Zhang Yesui sought to defuse some of that tension Sunday, announcing that China would host U.S. officials for a new round of dialogue on trade issues. Zhang, who's also spokesman for the National People's Congress, said lawmakers were preparing measures to promote and protect foreign investment.

Zhang said China doesn't want a trade war, but wouldn't allow its interests to be harmed. He gave no details on timing for the talks or who might be included. The rubber-stamp parliament is expected to enact sweeping changes during its two-week session that would allow President Xi Jinping to rule indefinitely and give him greater control over the levers of money and power.

A trade flare-up with the U.S. is one event that could complicate plans by China's policy makers to tackle domestic priorities without disrupting steady economic growth. Li is expected to kick off the legislative session by presenting his annual report, including this year's expected increase in gross domestic product.

Last year's 6.9 percent growth beat the target and marked the first acceleration since 2010, but economists have forecast a moderation to 6.5 percent in 2018, amid the ongoing deleveraging drive and trade tensions with the U.S.

On Thursday, President Donald Trump said the U.S. would slap tariffs on steel and aluminum imports to protect national security, drawing threats of retaliation from Asian and European countries. China has sharply criticized the U.S. move on tariffs, saying it would hurt the global economy.

Washington Meetings

The exchanges would follow a trip by Xi's top economic adviser, Liu He, last week to Washington, where he met with U.S. business leaders, as well as White House economic adviser Gary Cohn, Treasury Secretary Steven Mnuchin and U.S. Trade Representative Robert Lighthizer. 

Liu called for a collaborative instead of confrontational approach in dealing with trade frictions, China's Ministry of Foreign Affairs said in a statement Sunday. Ensuring stable development of China-U.S. economic and trade ties conforms with the interests of both countries and global economic prosperity, Liu said, according to the statement.

The U.S. Embassy in Beijing didn't respond to a request for comment about the status of trade talks.

During the trip, Liu promised a group of U.S. business leaders in Washington that he'd take on oversight of China's financial policy as part of a cabinet reshuffle this month and that he would take steps to reform China's economy, according to a person familiar with the situation. Liu said that he had three requests for the Trump administration: Establish a new economic dialogue, name a point person on China issues and hand over a specific list of demands, the person said.

Protecting Investment

At Sunday's briefing, Zhang said Chinese policy makers planned to consolidate three previous laws into new legislation aimed at promoting and protecting foreign investment. He said China would create a transparent, stable and predictable environment while widening market entry for foreign investors.

Trump's tariffs may yet prompt retaliation from China. Xi's government has already launched a probe into U.S. imports of sorghum, and is studying whether to restrict shipments of U.S. soybeans -- targets that could hurt Trump's support in some politically important farming states.

“Trump is in a rush for quick results, and his reckless trade remedy measures could turn out badly for both sides,” said Erlend Ek, agriculture and trade research manager at China Policy, a consulting firm based in Beijing. “However, China does not see any need to panic, as the volume of disputed trade cases is quite small. And Trump is largely not supported by major U.S. companies.”

--With assistance from Dandan Li

To contact Bloomberg News staff for this story: Ken Wills in Beijing at kwills3@bloomberg.net, Peter Martin in Beijing at pmartin138@bloomberg.net.

To contact the editors responsible for this story: Brendan Scott at bscott66@bloomberg.net, Daniel Ten Kate

©2018 Bloomberg L.P.

With assistance from Ken Wills, Peter Martin