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>>> US-Beijing relations sink over trade, weapons sales and North Korea-linked sanctions


Financial Times

June 30, 2017

by: Demetri Sevastopulo in Washington and Tom Mitchell and Charles Clover in Beijing



https://www.ft.com/content/4bd30636-5d72-11e7-9bc8-8055f264aa8b?segmentId=ea1dd4c0-c7c8-c198-8a10-2ba258aa73e0


China lashed out at the US on Friday in protest at an apparent sea change in the Trump administration’s policy towards Beijing as the White House prepared to slap punitive restrictions on Chinese steel imports, agreed an arms deal with Taiwan, and sanctioned a Chinese bank.Cui Tiankai, the Chinese ambassador to Washington, criticised the $1.4bn Taiwanese weapons deal and what he called the “long-arm jurisdiction” of the US in sanctioning Chinese companies. Mr Cui said the US actions undermined the mutual confidence built up by both sides and that they were “counter to the spirit of the Mar-a-Lago summit”.

The deteriorating relations come less than 100 days since Mr Trump hosted Mr Xi at his Mar-a-Lago estate and said the leaders would have a “very great relationship”. Since then, the White House has become frustrated China was not doing enough to pressure North Korea to abandon its ballistic missile and nuclear programmes.The White House had held off approving arms for Taiwan and sanctioning Chinese entities helping North Korea in the hope that Beijing would greatly ramp up pressure on Pyongyang after what Mr Trump interpreted as positive signals from Mr Xi.

But while US officials concede that China has done more than before, including halting coal imports, they are increasingly frustrated that it has not gone even further.“Early optimism on the US side has been dashed by what Trump thought he heard at Mar-a-Lago,” said Dennis Wilder, a former top White House Asia official. “This was a classic case where Trump heard what he wanted to hear, but it wasn’t actually the message that Xi intended to send.”A move to impose tariffs or restrict imports on steel would be viewed as the most aggressive measure to date. The White House had a set a self-imposed deadline to decide on the steel imports by the end of June, but officials said the deadline would be missed.

Still, Mr Trump signalled his readiness to spark a trade dispute with China and other steel producers like Germany and Canada by telling a visiting South Korean president on Friday “to stop enabling the export of dumped steel”.Mr Trump’s commerce secretary Wilbur Ross has argued foreign steel imports are hurting US national security — a determination that would allow Washington to trigger tariffs that some believe could spark a trade war.Cecilia Malmström, EU trade commissioner, threatened retaliation should the US introduce a generalised tariff on steel, while EU leaders have been at pains to put on a show of unity in defence of the international trading system ahead of next week’s G20 meeting in Germany.

In addition to approving a $1.4bn weapons package for Taiwan — the first arms sales to the island that China considers part of its territory since 2015 — the US announced it would cut off Bank of Dandong, a Chinese bank near the border with North Korea, from the US financial system for helping Pyongyang engage in money laundering. It also imposed sanctions on a Chinese firm and two individuals over their ties with North Korea.The proposed US sanctions would target Bank of Dandong, which is a relatively small financial institution but a significant symbol. The last time the US government targeted a Chinese bank for its alleged dealings with North Korea was in 2005, when the Bush administration barred US companies from dealing with Banco Delta Asia in Macau.

While such moves were always going to anger Beijing, they were particularly pointed because they were announced as Mr Xi was arriving in Hong Kong to preside over ceremonies on Saturday to commemorate the 20th anniversary of the return of the British colony to China. They also came one week before Mr Trump and Mr Xi will meet on the sidelines of the G20 in Hamburg.“The Chinese side has seen these things coming but is probably exasperated by the timing,” said Yanmei Xie at Gavekal Dragonomics, a Beijing-based consultancy. “Beijing wants the international media to focus on the pomp and ceremony of Xi Jinping’s visit to Hong Kong, not its failure to rein in North Korea.”Unlike previous presidents, Mr Trump has explicitly linked Sino-US security talks with trade and economic disputes. In April, he said he had promised Mr Xi a “far better” trade deal if Beijing applied more pressure on North Korea, which is trying to develop nuclear missiles capable of reaching the continental US.

Chinese analysts say the linkage increases the chance Beijing could respond to slights on security issues with retaliation on trade and economic matters. “Unilateral actions like these are not going to work and could backfire,” said He Weiwen at the Center for China and Globalisation, a Beijing think-tank. “They will cast a shadow over future co-operation between China and the US.”“China will only implement sanctions approved by the UN Security Council,” added Mr He, a former Chinese diplomat.

“China should not be blamed for not applying extra sanctions against North Korea.”Paul Haenle, a former Asia adviser to both Barack Obama and George W Bush, said US expectations had been too high after the Mar-a-Lago summit.“The Chinese have been confident in their ability to handle Trump,” he said. “Their strategy has been to dole out small concessions here and there, but they never changed their fundamental approach on North Korea.”Shi Yinhong, a foreign relations expert at Renmin University in Beijing, argued that the Chinese government would only impose “the ultimate sanction” on North Korea — a long-term suspension of oil and fuel supplies — if Pyongyang carries out a new nuclear test. “China has already done a lot,” Prof Shi said. “But China does not control North Korea.”Additional reporting by Xinning Liu in Beijing and Jim Brunsden in Brussels

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