China's Xi Jinping pledges to cut auto tariffs amid USA trade clash

Posted April 10, 2018

China also has issued a $3 billion list of USA goods including pork and apples for possible retaliation.

China's stock markets rallied on Tuesday as President Xi Jinping's vow to further open up the economy soothed fears of a trade war with the United States.

But even as Trump cozied up to Xi and pressed China for help with derailing North Korea's nuclear ambitions, he has ratcheted up the economic pressure and threatened tariffs, a move opposed by many fellow Republicans.

"This speech did not represent a major shift in Chinese policy and it is likely the US-China trade dispute will require more negotiation", said JP Morgan's Zhu.

Mr Trump's move last week to threaten China with tariffs on $50 billion in Chinese goods was aimed at forcing Beijing to address what Washington says is deeply entrenched theft of USA intellectual property and forced technology transfers from U.S. companies. The U.S. bought more than $500 billion in goods from China previous year and now is planning or considering penalties on some $150 billion of those imports.

He also pledged to strengthen the protection of intellectual property inside China, which has been a focal point of criticism from the Trump administration, and increase China's imports from other countries by lowering some tariffs.

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Beijing charges that Washington is the aggressor and spurring global protectionism, although China's trading partners have complained for years that it abuses World Trade Organization rules and practices unfair industrial policies that lock foreign companies out of crucial sectors with the intent of creating domestic champions.

"Clearly, he prefers a cool-headed approach toward the dispute", said Larry Hu, a China-focused economist at investment bank Macquarie Capital.

"We look forward to seeing these strategies elaborated, implemented and bearing fruit", said Lee, according to a transcript issued by his office.

Xi gave no details on how those conditions might change, leaving it unclear whether that might mollify Washington.

They now are limited to a 50% stake in joint ventures, and are not allowed to establish wholly owned factories. "President Xi has ignited a rally in risk assets that might have some legs if the USA can keep a lid on the protectionist rhetoric for a while", said Sean Callow, FX strategist for Westpac in Sydney. Business groups welcomed the commitment but said breaking into China's state-dominated financial industries would be hard for new competitors and Beijing might impose restrictions that would make such an effort unprofitable.

"Ultimately, U.S. industry will be looking for implementation of long-stalled economic reforms, but actions to date have greatly undermined the optimism of the U.S. business community", said Parker in an email.

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Xi, speaking at the Boao Forum for Asia in Hainan province, said that China will take measures to sharply widen market access for foreign investors, raise the foreign ownership limit in the automobile sector and protect intellectual property of foreign firms.

The biggest beneficiaries of a cut in China's 25 percent tariff on most auto imports will be the small number of automakers such as electric vehicle brand Tesla that have no factory in China. Other automakers such as General Motors and Volkswagen that assemble vehicles in China with local state-owned partners could offer additional models. China reported a global trade surplus of $423 billion past year - about two-thirds of that with the United States.

"China does not seek a trade surplus", said Xi in comments that were broadcast on national television. "Xi's apparent desire to balance out his country's global payments is clearly great news for countries and companies selling goods to China".

"We will not bully our neighbors", the president said.

He also said "Cold War mentality" and isolationism would "hit brick walls".

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