China Warns It Won’t Trade Away Core Interests

* Chinese, U.S. officials scheduled to meet on Thursday and Friday in Washington.

* Talks come as U.S. Commerce Department explores “alternative remedies” to ban on American companies from selling components to ZTE Corp.

(Beijing) — China will not budge on its “core interests” in negotiations with the U.S. to settle their trade disputes, the Ministry of Commerce said Thursday, striking a tough tone just hours before officials from the two countries start a new round of talks in Washington.

A Chinese delegation, headed by President Xi Jinping’s top economic policy adviser, Vice Premier Liu He, is scheduled to meet on Thursday and Friday with U.S. officials, including Treasury Secretary Steven Mnuchin, Commerce Secretary Wilbur Ross, and Trade Representative Robert Lighthizer. The meetings follow negotiations in Beijing earlier this month that made little headway.

“We do not want the Sino-U.S. trade frictions to escalate, though we are certainly prepared to deal with any change in circumstances,” Commerce Ministry spokesman Gao Feng told reporters at a regular briefing. He added that his government hopes the talks will generate “positive and constructive” outcomes following the principles of “mutual respect” and “consultation on an equal footing.”

In a gesture to ease heightened tensions, U.S. President Donald Trump pledged on Sunday to help Chinese technology company ZTE Corp. “get back into business, fast” after the U.S. banned American suppliers from selling components to the firm for seven years as punishment for shipping its products to Iran and North Korea. The Commerce Department has subsequently said it is exploring “alternative remedies” to the ban.

The Wall Street Journal reported earlier this week that the two countries were working on a deal that would grant ZTE a reprieve in exchange for China holding back tariffs on American agricultural products and easing roadblocks in the country for U.S. chipmaker Qualcomm’s acquisition of Dutch firm NXP Semiconductors NV.

When asked whether the report was true, Gao simply said: “We will resolutely defend our interests and will not trade away any of China’s core interests.”

But he urged the U.S. to “take concrete actions as soon as possible” to honor its promise on the ZTE case.

Trump tweeted Wednesday that “nothing has happened with ZTE except as it pertains to the larger trade deal.”

He also indicated that the U.S. will play hardball with China in the trade talks. “The U.S. has very little to give, because it has given so much over the years. China has much to give!” he said.

The Trump administration has threatened to impose tariffs on up to $150 billion of Chinese goods to punish China over alleged unfair trade practices, such as theft of the intellectual property rights of American companies. The U.S. tariffs specifically target products that benefit from “Made in China 2025,” a blueprint announced in 2015 that aims to build the country into a global leader in advanced technology. China has denied the accusations and published a tit-for-tat plan to impose its own tariffs on imports from the U.S., such as soybeans and aircraft, if the American duties are implemented.

In their last round of negotiations in Beijing, the American contingent offered a long list of demands, including one that China cut its trade surplus with the U.S. by $200 billion by the end of 2020. Chinese officials have dismissed the demand as “unfair,” according to previous foreign media reports.

Contact reporter Fran Wang (fangwang@caixin.com)