MNI EXCLUSIVE: Huawei Won't Wreck Trade Talks: China Advisors

By Iris Ouyang

     BEIJING (MNI) - U.S. criminal charges against Huawei Technologies and its

CFO will probably sour the atmosphere but not derail trade talks between Beijing

and Washington this week, Chinese trade advisors told MNI, although they noted

that progress in the negotiations is likely only to be partial.

     The charges filed on Monday by the U.S. Justice Department against China's

second-largest smartphone supplier and its CFO Meng Wanzhou, indicated U.S.

"unfriendliness", according to Liu Hong, a director of the Ministry of

Commerce's China Association of International Trade. But they should not prevent

some progress in the talks, which come as a 90-day negotiation period agreed by

presidents Xi Jinping and Donald Trump approaches its final month, he said.

     "There should be advances in intellectual property protection, forced

technology transfers, and reforms of state-owned enterprises," Liu told MNI.

"But they will be limited."

     Lu Jinyong, vice president of the China Association for International

Economic Cooperation, also managed by the Ministry of Commerce, said: "both

sides are focusing on stabilizing economic and trade relations."

     The charges "will have some impact on trade talks this week, but should not

exert fundamental or significance influence," Lu, also a professor at the

University of International Business and Economics, told MNI.

     A Chinese delegation to the Washington talks is being led by Vice Premier

Liu He, and will also include vice ministers for foreign affairs, commerce, and

the National Development and Reform Commission. The presence of officials from

the agriculture department, together with American-educated central bank chief

Yi Gang means the agenda will include increasing U.S. farm imports to China, as

well as deepening market access for foreign investment, according to advisors.

     --HIGH-LEVEL DELEGATIONS

     "This time both sides have higher-level teams," Lu said. "They will speak

frankly about what they want the most and what they can't give up on the basis

of what was discussed by lower-level officials earlier this month in Beijing."

     Any Chinese concessions will be consistent with the country's development

goals, said Li Wei, lead researcher on the Americas at the Ministry of

Commerce's Chinese Academy of International Trade and Economic Cooperation and

formerly with Beijing's mission in Washington.

     "The U.S. request for more intellectual property protection is in line with

China's pursuit of an innovation-driven national model," said Li. But he added:

"China is a socialist country, its economic development model and the leading

role of state-owned enterprises won't change."

     Li added that forced transfers of U.S. technology, another serious bone of

contention in the talks, were not the Chinese government's responsibility, but

rather something that occurred between individual companies.

     A significant sticking point will be the extent to which China increases

imports from the U.S., Lu said, noting that talks in May last year failed over a

similar point, but adding that an even more difficult subject will be that of

addressing the role of state-owned enterprises in the Chinese economy. The U.S.

sees government support for SOEs as unfairly distorting competition. More

substantive talks on cutting SOE subsidies could be left for the next round of

talks in Beijing, Lu said.

     "IP protection would be easier to enforce," Lu said, adding that the

Chinese government is also making efforts to clamp down on forced technology

transfers, and has already included measures to outlaw the practice in a draft

foreign investment law.

--MNI Beijing Bureau; +86 (10) 8532-5998; email: iris.ouyang@marketnews.com

--MNI London Bureau; +44 203 865 3829; email: jason.webb@marketnews.com

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