RPT-U.S. to press China on trade as Beijing eyes 'fiscal cliff'

Doug Palmer
Reuters Middle East

* China is the United States' largest creditor

* Obama, Republicans remain at odds in budget talks

* Leadership changes in China could pave way for reform

WASHINGTON, Dec 16 (Reuters) - The United States will press

senior Chinese officials this week for action on longstanding

trade problems, and may face a rebuke from Beijing over the

haphazard way it is managing its finances.

A Chinese delegation led by Vice Premier Wang Qishan will be

in Washington on Tuesday and Wednesday for talks with U.S. Trade

Representative Ron Kirk, acting U.S. Commerce Secretary Rebecca

Blank and U.S. Agriculture Secretary Tom Vilsack.

"I don't think we should be expecting sweeping changes, but

I do think we will see tangible progress on some specific

issues," said John Frisbie, president of the U.S.-China Business

Council. "China is definitely prioritizing its U.S. relations

and they are also discussing economic reforms back at home that

could impact some of the issues that matter to U.S. companies."

Kirk and his colleagues have said they are pushing China to

drop restrictions on U.S. livestock and farm products, to take

stronger action to stop counterfeiting and piracy of U.S. goods

and to reduce pressure on U.S. companies to transfer valuable

technology to do business in China.

Wang in turn is expected to convey Beijing's strong interest

in a deal in Washington to avoid the $600 billion in spending

cuts and tax hikes set to take hold at the start of the year,

widely known as the "fiscal cliff."

Economists warn that failure to avert that outcome could

send the United States back in recession, which would threaten

growth in China and around the world. President Barack Obama and

Republican leaders have so far made little visible progress

toward a deal.

Given that China is the United States' largest creditor, it

has a deep interest in Washington's management of its budget.

Chinese officials are also expected to press on a range of

other issues - from concerns about U.S. anti-dumping measures on

their exports, to restrictions on China's ability to import U.S.

high-technology products and the often strong political

resistance to Chinese investment in the United States.


The annual U.S.-China Joint Commission on Commerce and Trade

meeting comes during a transition for both governments.

Obama is expected to bring in a new economic team for his

second term. Chinese Vice President Xi Jinping took helm of the

Chinese Communist party in November and will take over as head

of state in March at the annual parliament meeting.

"We're either going to get nothing, meaning just details, or

we might get a change," said Derek Scissors, a senior research

fellow at the Heritage Foundation in Washington.

One reason to be optimistic that concrete progress could be

made is a trip Xi made last week to southern Guangdong, where he

echoed calls for market reforms and strengthening the rule of

law that reformist senior Chinese leader Deng Xiaoping made 20

years ago in the same province.

Outgoing Chinese President Hu Jintao's ten-year tenure is

generally associated with a retreat from market liberalization

and the rise of Chinese "state capitalism" that favored domestic

national champions over foreign firms.

In that sense, this week's JCCT meeting could mark the start

of the Xi era in U.S-China relations, but there remains a lot of

uncertainty about how much reform the new Chinese administration

will pursue, Frisbie said.

Wang is seen as a reform advocate and has been promoted to a

new senior Communist party position, but he also will be giving

up his responsibility for economic policies to head up an

anti-corruption campaign.

Wang's sensitive new party position means he won't say much

that is bold, so "what I'm hoping is that he brings his

successor" even though one hasn't been named, Scissors said.

One U.S. business official, speaking on condition he not be

identified, said he was hoping for progress on troublesome

"indigenous innovation" policies that put pressure on U.S.

companies that want to do business in China to transfer

technology to Chinese partners.

U.S. companies are also increasingly concerned about Chinese

cyberattacks and other attempts to steal trade secrets, he said.

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