U.S. trade mission seeks structural changes to China’s economy: Mnuchin

By Ben Blanchard and David Lawder

BEIJING/WHISTLER, British Columbia (Reuters) – The United States wants trade talks in Beijing this weekend to result in structural changes to China’s economy, in addition to increased Chinese purchases of American goods, U.S. Treasury Secretary Steven Mnuchin said on Saturday.

U.S. Commerce Secretary Wilbur Ross arrived in Beijing on Saturday with an interagency team of U.S. officials for talks on long-term purchases of U.S. farm and energy commodities, just days after Washington renewed its threats to impose tariffs on Chinese goods.

The purchases are partly aimed at shrinking the $375 billion U.S. goods trade deficit with China.

Mnuchin, speaking at a G7 finance leaders meeting in Canada where he was the target of U.S. allies’ anger over steel and aluminum tariffs, said the China talks would cover other issues, including the Trump administration’s desire to eliminate Chinese joint venture requirements and other policies that effectively force technology transfers.

“I want to be clear, this isn’t just about buying more (U.S.) goods, this is about structural changes,” Mnuchin said. “But I also fundamentally believe that if there are structural changes that allow our companies to compete fairly, by definition, that will deal with the trade deficit alone.”

Ross, who was preceded by more than 50 U.S. officials in Beijing, met Chinese Vice Premier Liu He for dinner on Saturday night and the two were due to meet again on Sunday, a U.S. official said. Ross declined to speak to reporters when he arrived at his hotel in Beijing.

The United States and China have threatened tit-for-tat tariffs on goods worth up to $150 billion each.

After it had appeared a trade truce between the two economic heavyweights was on the cards, the White House this week warned it would continue to pursue tariffs on $50 billion worth of Chinese imports, as well as impose restrictions on Chinese investments in the United States and tighter export controls.

The U.S. team also wants to secure greater intellectual property protection and an end to Chinese subsidies that have contributed to overproduction of steel and aluminum.

“I think we have very broad objectives that are across a rebalancing of the trade relationship and the trade deficits,” Mnuchin said. “There’s an acknowledgement on both sides to deal with this issue.”

METALS TARIFFS ANGER

G7 countries generally share the U.S. frustration with Chinese trade and economic practices, but their anger was directed at Mnuchin over new U.S. tariffs of 25 percent on steel and 10 percent on aluminum.

The normally harmonious group of wealthy industrial countries devolved into a “G6 plus one” as some officials put it, calling on Mnuchin to send a message of their “regret and disappointment” to President Donald Trump.

Mnuchin nonetheless said there was still G7 agreement on the need for policy change in China.

“We had very productive discussions in the G7 about certain non-market issues, certain technology transfers and other issues with China that we all share the same common objectives on,” Mnuchin said.

As the G7 summit ended, Trump wrote on Twitter: “The United States must, at long last, be treated fairly on Trade. If we charge a country ZERO to sell their goods, and they charge us 25, 50 or even 100 percent to sell ours, it is UNFAIR and can no longer be tolerated. That is not Free or Fair Trade, it is Stupid Trade!”

While U.S. officials have sent conflicting signals during the dispute with China, one person familiar with planning for Ross’ visit said his aim was to keep dialogue going.

Ross is “going there to tread water”, the person said, declining to be identified due to the sensitivity of the matter.

“The more Trump is irritating allies and asking Chinese to buy stuff, the better off they are, because he’s not sitting there and attacking the hard issues,” the person said.

Those hard issues include what the U.S. complains is rampant theft of intellectual property, as well as Beijing’s support for cutting-edge technologies under its Made in China 2025 policy.

TECH ON TENTERHOOKS

On Friday, China’s markets regulator said it was still reviewing San Diego-based Qualcomm Inc’s $44 billion acquisition of NXP Semiconductors.

Some people familiar with the matter have told Reuters that approval may depend on progress of broader talks and a reprieve from a U.S. government ban on sales by U.S. companies to China’s ZTE Corp, penalized for illegally supplying telecommunications gear to Iran and North Korea.

The Trump administration may soon fine ZTE as much as $1.7 billion as it looks to punish and tighten control over the firm before allowing it back into business, people familiar with the matter told Reuters.

Reuters reported last Sunday that Qualcomm was expecting to meet this week in Beijing with China’s antitrust regulators in a final push to secure clearance for the deal, but the meeting never materialized. The San Diego-based firm is now waiting to see the outcome of the Ross talks before executives travel to China, a person familiar with the matter said on Saturday.

(Reporting by Ben Blanchard and Michael Martina in BEIJING and David Lawder in WHISTLER, Brititsh Columbia; Additional reporting by Matthew Miller and Stella Qiu in BEIJING; Writing by David Lawder, Brenda Goh and Tony Munroe; Editing by Robert Birsel, Shri Navaratnam)