China pledges action on tech transfer as Trump plans tariffs

Bloomberg

China made further promises to protect the intellectual property of foreigners investing in its economy, addressing a long-standing grievance as US President Donald Trump plans new tariffs aimed at Beijing.
Speaking at the end of the annual National People’s Congress, Premier Li Keqiang said that China wants to avoid a trade war and that the government plans to further open the manufacturing sector—and that it won’t force foreign companies to transfer technology to domestic ones while doing so.
Li’s comments followed reports in Washington that the White House plans to impose tariffs worth as much as $60 billion on Chinese products as one outcome of an investigation by US Trade Representative Robert Lighthizer, extracting recompense for theft of intellectual property and investment policies that make technology transfer a precondition for doing business in China.
“Businesses are very much in a position that they want to see China take action, and talking about it isn’t sufficient anymore,” John Frisbie, president of the US-China Business Council, said of Li’s speech. “And it has to be tangible actions that matter.”
The administration is said to be considering wide-ranging tariffs on everything from consumer electronics to shoes and clothing made in China, as well as restrictions on Chinese investments in the US, according to people briefed on the matter.
That’s one of the administration’s lines of attack to deal with the lopsided bilateral trade account, which according to US data, the trade deficit with China reached a record $375 billion in 2017, with China’s accounting considerably lower.
“A large deficit is not something we want to see,” Li said. “We want to see balanced trade. Otherwise this kind of trade would not be sustainable.”
The exact size and makeup of the sanctions could still change, said two people who spoke on condition of anonymity because the discussions aren’t public. While Trump has repeatedly singled out China as a key trade violator, his toughest actions such as withdrawing from an Asia-Pacific trade pact—which excluded China—and slapping tariffs on steel have undermined relations with allies more than with the world’s second-biggest economy.
While China presents measures to make its massive internal market more accessible to outsiders as part of its 40-year “reform and opening-up” process, the current emphasis directly answers complaints that Trump and his advisers use to support their claim that the US is being taken advantage of in trade. Li repeated a suggestion that the US ease restrictions on exports of high-technology goods to China as a way to even the balance.
“Intellectual property rights will be fully protected,” he said. “We hope this important means to balance China-US trade will not be missed because that would be missing the good opportunity for making more money.”
Li spoke at the conclusion of a two-week meeting that included amending the constitution to scrap term limits for President Xi Jinping, the biggest overhaul of financial regulation since 2003 and the appointment of Yi Gang as the first new central bank chief in 15 years. Communist Party leaders also elevated Xi’s chief economic adviser Liu He to vice premier, giving him greater sway over policy areas that were traditionally the domain of the premier.
US companies from Walmart Inc. to Amazon.com Inc. warned Trump that any sweeping trade action against China could raise consumer prices, increase costs for businesses and hurt stock prices. Broad tariffs on Chinese goods would “trigger a chain reaction of negative consequences for the US economy,” a coalition of more than 40 business groups led by the Information Technology Industry Council said in a letter to Trump.
The coalition includes groups of retailers and makers of everything from toys to wine, while the council represents companies including Amazon, Alphabet Inc.’s Google, Facebook Inc. and Microsoft Corp.
The impact of US trade actions will be manageable because much of China’s exports to the US are American-branded or from supply chains involving US firms, constraining tariffs, especially for technology, electronics and telecommunications products, according to Louis Kuijs, chief Asia economist at Oxford Economics in Hong Kong.