LDN - Business

China threatens corporate hit-list on eve of new tariffs on U.S. imports

[May 31, 2019] By Stella Qiu and Dominique Patton

BEIJING (Reuters) - China threatened on Friday to unveil an unprecedented hit-list of "unreliable" foreign firms, groups and individuals that harm the interests of Chinese companies, as a slate of retaliatory tariffs on imported U.S. goods was set to kick in at midnight.

The commerce ministry did not single out any country or company, but the threat could further heighten tensions after Washington this month put Huawei on a blacklist that effectively blocks U.S. firms from doing business with the Chinese telecoms equipment giant.

Beijing's "unreliable entities list" would apply to those who violate market rules and the spirit of contracts, block supplies to Chinese companies for non-commercial reasons, "seriously damage the legitimate rights and interests" of Chinese companies and harm China's national security, the ministry said.

A deluge of sharply worded commentaries, criticism and warnings from China in the last two weeks has intensified a battle of words with the United States that could complicate the run-up to any meeting between their respective leaders next month.

Earlier this month, Washington slapped additional tariffs of up to 25% on $200 billion of Chinese goods, accusing Beijing of reneging on its previous promises to make structural changes to its economic practices. That prompted Beijing to hit back with additional levies on the majority of U.S. imports on a $60 billion target list - due to take effect on Saturday.

U.S. President Donald Trump has said he plans to meet his counterpart, Xi Jinping, during the G20 summit, set for June 28-29 in Osaka, though China has not formally confirmed this.

Xi and Trump are likely to find it "difficult" to make major progress toward ending the trade war, a former top Chinese official said.

The U.S. approach to trade talks had been "bullying and America First", whereas the principles of China's approach to negotiations were equality and cooperation, said Dai Xianglong, who headed the People's Bank of China from 1995-2002 and remains an influential figure in China.

"I expect that at next month's meeting of the leaders in Japan it will be difficult to achieve major progress," Dai said, later adding that he was not confirming that the meeting would take place, but that he hoped it would.

Dai also said he did not rule out stronger retaliation by China. He said heavy sales of U.S. Treasuries by China were a less likely option for retaliation as they would hurt China's own interests.

PUBLIC RELATIONS BATTLE

Since the latest round of U.S. tariffs, which caught Beijing by surprise, Chinese state media has gone on the offensive.

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Containers are seen at a logistics center near Tianjin Port, in northern China, May 16, 2019. REUTERS/Jason Lee

The People's Daily, the ruling Communist Party's flagship newspaper, warned that China was ready to use its dominance of rare earths, crucial minerals used in electronics, to strike back in the trade war.

Speaking at a separate briefing, Chinese Foreign Ministry spokesman Geng Shuang took umbrage at Trump comments on Thursday that China was becoming a "very weakened nation" due to companies leaving China because of the tariffs.

"This is neither the first nor second time the U.S. side has said these lies," Geng said. "But the U.S. side seems to be very persistent, even obsessed with it, and is still repeating these lies."

At the Beijing seminar on Friday, former Chinese vice commerce minister Wei Jianguo said initiating a trade war with China might be the biggest strategic mistake made by the United States since World War II or even its founding.

There was a need to prepare for the likelihood for the trade war to ratchet up tensions to geopolitical areas including the South China Sea, said Wei, adding that the trade conflict might last for 30 years or even half a century.

He suggested that China had many countermeasures it could take, including rare earths and against Boeing Co. or U.S. software.

"There are lots of Chinese countermeasures, and, speaking honestly, we hope not to use them, because we always negotiate with the United States with sincerity and hope to achieve results," Wei said.

Dong Yang, a former executive director at the China Association of Automotive Manufacturers, said at the seminar that U.S. auto parts suppliers could also be hit.

"U.S. car components companies have presence in China, and set China as a global manufacturing base. The escalation of the trade war between China and the United States will seriously affect their development in China and the world," Dong said.

Other parts suppliers from countries such as Germany, Japan, South Korea and France could also provide strong substitutes for U.S. components, he said.

All those who spoke at the seminar were former, albeit senior, officials. The government has not organized media appearances for top leaders or trade negotiators to answer questions on the trade talks. Chinese officials rarely take questions from foreign media.

(Reporting by Stella Qiu, Cheng Leng, Yilei Sun and Dominique Patton; additional reporting by Cate Cadell; Writing by Ryan Woo and Ben Blanchard; Editing by Paul Tait, Simon Cameron-Moore and Nick Macfie)

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