LDN - Business

China warns U.S. not to open Pandora's Box, unleash trade ills on world

[March 29, 2018] By Se Young Lee and Yawen Chen

BEIJING (Reuters) - China warned the United States on Thursday not to open Pandora's Box and spark a flurry of protectionist practices across the globe, even as Beijing pointed to U.S. goods that it could target in a deepening Sino-U.S. trade dispute.

China could target a broad range of U.S. businesses from agriculture to aircraft, autos, semiconductors and even services if the trade conflict escalates, the official China Daily newspaper said in an editorial on Thursday.

President Donald Trump's move last week to slap up to $60 billion in tariffs on some Chinese imports has since provoked a warning from Beijing that it could retaliate with duties of up to $3 billion of U.S. imports.

China's biggest U.S. imports are aircraft and related equipment, soybeans and autos, with the total bill about $40 billion last year.

"The malicious practices of the United States are like opening Pandora's Box, and there is a danger of triggering a chain reaction that will spread the virus of trade protectionism across the globe," a commerce ministry spokesman said.

The official line from China continues to be stern even as Beijing says it is all for dialogue and negotiations. The feedback from U.S. and Chinese officials on the nature and extent of trade talks remains mixed, media reports show.

The Financial Times reported only on Monday that China had offered to buy more U.S. micro-chips and move more quickly to finalize rules allowing foreign firms to take majority stakes in Chinese securities firms, citing people briefed on the negotiations.

Chinese customs data shows the U.S. accounted for just $2.6 billion, or 1 percent, of China's total semiconductor imports last year by value, with suppliers in South Korea, Taiwan and Japan commanding a bigger share.

But a source in the U.S. semiconductor industry said U.S. companies have slightly more than 50 percent of China's market for chips, though export data does not reflect that because much of the product is sent offshore for low value added processing.

The source said the U.S. semiconductor industry had not asked the Trump administration to urge China to buy more U.S. chips and had been told by senior U.S. officials that the U.S. government had not made such a request to Beijing.

"We don't need China to buy more chips," the source said, adding that U.S. industry was concerned about being targeted by Chinese non-tariff barriers.

"It's more about (Chinese) subsidies, IP protection, and cyber rules," the source said, referring to concerns over Chinese retaliation.

China has long said it would like to import more U.S. high-tech goods, including high-end chips, but has been stymied by U.S. export controls set on national security grounds.

The Trump administration is accusing Chinese firms of stealing intellectual property and forcing U.S. firms to share commercial secrets - allegations that China denies.

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Container boxes are seen at the Yangshan Deep Water Port, part of the Shanghai Free Trade Zone, in Shanghai, China September 24, 2016. REUTERS/Aly Song/File Photo

On Thursday, China's State Council, or cabinet, said transfers of Chinese intellectual property rights to foreign investors will be reviewed if national security is determined to be at stake, or if core technological innovations are involved.

Government approval will also be needed for intellectual property transfers involving semiconductors, software and agriculture.

SERVICES MAY BE TARGETED

China's commerce ministry said on Thursday the U.S. approach to trade could trigger a domino effect and U.S. trade protectionism will only hurt U.S. consumers.

While China hopes the U.S. will resolve trade conflicts with China through dialogue, it will take all possible steps to protect its interests, ministry spokesman Gao Feng told a regular briefing in Beijing.

"Negotiations must be equal, and China will not accept any consultation under unilateral coercion," Gao said.

On Wednesday, Trump's top trade envoy said he would give China a 60-day window before tariffs on Chinese goods take effect, but added that it would take years to bring the two countries' trading relationship "to a good place."

The tariff list is expected in the next several days.

The China Daily on Thursday quoted Premier Li Keqiang as telling a U.S. Congressional delegation this week that China was open to dialogue but "fully prepared with countermeasures".

It warned that if the conflict continued to escalate "China could consider taking reciprocal measures against U.S. imports of agricultural products besides soybeans, as well as aircraft, automobiles and semiconductors."

"And should the Trump administration further obstruct Chinese investments in the U.S., even tougher measures such as restrictions on imports of U.S. services and similar investment reviews would likely be on the table," it said.

Separately, Hong Kong's South China Morning Post reported on Thursday that U.S. and Chinese officials had been holding talks to shield American soybeans and other agricultural products from trade sanctions.

China is still considering import curbs on U.S. soybeans, U.S. Soybean Export Council Asia director Paul Burke said on Thursday, following a meeting with the Ministry of Agriculture.

(Reporting by Se Young Lee and Yawen Chen in BEIJING; Additional reporting by Michael Martina, John Ruwitch, Dominique Patton and Stella Qiu; Additional writing by Ryan Woo; Editing by Shri Navaratnam and Kim Coghill)

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