Tue | Sep 26, 2017

Business group: China preparing to retaliate on trade

Published:Friday | January 20, 2017 | 1:00 AM
Chinese President Xi Jinping delivers a speech during a high-level event in the Assembly Hall at the United Nations European headquarters in Geneva, Switzerland, Wednesday, January 18, 2017. (Denis Balibouse/ Pool via AP)

China is preparing to retaliate if United States President-elect Donald Trump raises duties on Chinese goods and already has toughened its stance, an American business group said on Wednesday.

Trump, who is due to be inaugurated today, Friday, threatened during his campaign to raise import duties on Chinese goods to 45 per cent.

American companies are frustrated by Chinese market barriers and want Washington to take a tougher stance towards Beijing, but worry reckless action might trigger retaliation.

Already, China has ordered unusually high anti-dumping penalties against a US-made agricultural chemical.

"China has indeed threatened to and is preparing to take steps in retaliation if such actions take place," said Lester Ross, a board member of the American Chamber of Commerce, at a news conference.

In an implicit rebuke to Trump, Chinese President Xi Jinping emphatically defended free trade in a speech on Tuesday at the World Economic Forum in Davos, Switzerland. A "trade war" would harm all countries involved, he said.

Xi is the first Chinese leader to attend the Davos forum.

On January 11, China's Ministry of Commerce raised duties on DGGS, an additive for livestock feed, to up to 53.7 per cent, nearly double the 33.8 per cent rate it recommended in September before Trump was elected.

The ministry did not immediately respond to a request for comment.

Officials have not said publicly that China is preparing retaliatory measures but state media have emphasised its importance as a market for US soybeans and other exports and warned against starting a 'trade war'.

Asked at a January 6 news conference whether Beijing would retaliate by hiking import duties on US goods, a deputy Chinese commerce minister, Wang Shouwen, said, "I believe mutually beneficial Sino-US economic and trade relations will be further developed in the future and no one will destroy the win-win relationship."

The United States and China have one of the world's biggest and most complex trading relationships but American companies increasingly complain Beijing is blocking access to technology and other promising industries.

While Beijing has promised to open more industries to foreign companies, they also have issued new rules on electric car manufacturing, data security, internet censorship and other fields.

In a reflection of companies' concerns, the American chamber's chairman, William Zarit, said it plans to send seven or eight businesspeople to Washington in February to meet lawmakers and Trump administration officials. Zarit said that is in addition to a delegation that makes an annual visit to Washington in April or May because this year is "special in many ways."

"We certainly are not going there to lecture the administration but we will share our ideas on a win-win path forward," Zarit said.

In a report released on Wednesday, the chamber said a survey found American companies are increasingly unhappy with what they see as unfair treatment in China.

"We would recommend that the US be more aggressive in talks," Zarit said. However, he said, "We don't want to do things that are counterproductive to both countries."

The chamber said 81 per cent of companies that responded to a survey feel "less welcome" in China, up from 77 per cent last year. It said one in four is shifting operations to other countries due to concern about the regulatory environment, higher costs and other reasons.

"Most respondents say China's environment now discourages investment," the report said.

China's leaders have promised to make the state-dominated economy more productive by opening more industries to private and foreign competitors. In December, the Cabinet promised to open fields including banking and motorcycle manufacturing.

Zarit and Ross said foreign companies welcomed such announcements but have yet to see significant changes in operating conditions.

Beijing also faces US and European complaints it is threatening thousands of jobs abroad by exporting steel, aluminium, solar panels and other goods at improperly low prices.

The American chamber said its survey found 83 per cent of companies expect US-Chinese ties "to remain the same or to deteriorate in 2017." It said the "big question" for them is "what steps both governments will take to ensure a positive business environment."

For their part, European companies also are increasingly frustrated with Chinese trade policy. They complain they are blocked from acquiring assets in China at a time when Chinese companies have bought leading brands, including German robot maker Kuka in a multibillion-dollar global acquisition spree.

On Tuesday, German Ambassador Michael Clauss urged Chinese leaders to make good on promises to open wider to foreign investment and give foreign companies a "level playing field."

"Many companies keep telling us that their difficulties in these areas have increased," Clauss said in a statement. "It often appears that somewhere down the line, political assurances of equal treatment give way to protectionist tendencies."

- AP