China lowers expectations for US trade talks

Talks between world's two largest economies may end in deadlock

BEIJING/WASHINGTON: Surprised and upset by the US blacklisting of Chinese companies, China has lowered expectations for significant progress from this week's trade talks with the United States, Chinese government officials told Reuters, even as President Donald Trump on Wednesday expressed fresh optimism.

While Beijing theoretically wants to end the trade war, Chinese Communist Party officials are not optimistic about the size or scope of any agreement with Washington in the short term, the Chinese officials said.

Top US and Chinese trade and economic officials were to meet in Washington on Thursday and Friday to try to end a 15-month-old trade war that is slowing the global economy and threatens to upend decades-old trade systems. Chinese Vice Premier Liu He, US Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin are due to take part.

Without significant progress, Trump is set to hike the tariff rate on $250 billion worth of Chinese goods to 30% from 25% next Tuesday.

Speaking to reporters in Washington, Trump said "If we can make a deal, we're going to make a deal, there's a really good chance."

"In my opinion, China wants to make a deal more than I do," Trump added.

Based on the current situation, there is a possibility that this week's talks between the world's two largest economies could end in a deadlock, according to a Chinese official briefed on preparations for the talks who spoke on condition of anonymity. Asked about the probability of reaching an agreement, the official said, "This is not an easy task. It requires a lot of preparation work and consensus on both sides."

For trade relations or overall ties between the two countries to improve, more time is needed, Chinese officials said.

While previous lower-level talks between US and Chinese officials aimed to create a good atmosphere for the upcoming meeting, the US blacklisting of 28 Chinese companies has generated a negative atmosphere instead, Chinese officials said.

The US Department of Commerce on Monday blacklisted video surveillance firm Hikvision and 27 others, days ahead of the talks. The Commerce Department barred the technology and artificial intelligence companies from doing business with US firms, citing human rights violations of Muslim minority groups in Xinjiang. Chinese officials said the action interfered with China's sovereignty.

Both sides should not escalate disputes or they will drift apart, said a second Beijing-based Chinese official briefed on the talks this week.