World

US waters down demand China cut subsidies in push for deal: Report

WASHINGTON/BEIJING: US negotiators have tempered demands that China curb industrial subsidies as a condition for a trade deal after strong resistance from Beijing, according to two sources briefed on discussions, marking a retreat on a core US objective for the trade talks.

The world's two biggest economies are nine months into a trade war that has cost billions of dollars, roiled financial markets and upended supply chains.

US President Donald Trump's administration has slapped tariffs on US$250 billion (S$338 billion) worth of imports of Chinese goods to press demands for an end to policies - including industrial subsidies - that Washington says hurt US companies competing with Chinese firms. China responded with its own tit-for-tat tariffs on US goods.

INDUSTRIAL SUBSIDIES

The issue of industrial subsidies is thorny because they are intertwined with the Chinese government's industrial policy. Beijing grants subsidies and tax breaks to state-owned firms and to sectors seen as strategic for long-term development. Chinese President Xi Jinping has strengthened the state's role in parts of the economy.

In the push to secure a deal in the next month or so, US negotiators have become resigned to securing less than they would like on curbing those subsidies and are focused instead on other areas where they consider demands are more achievable, the sources said.

Those include ending forced technology transfers, improving intellectual property protection and widening access to China's markets, the sources said. China has already given ground on those issues.

"It's not that there won't be some language on it, but it is not going to be very detailed or specific," one source familiar with the talks said in reference to the subsidies issue.

A representative for the White House referred Reuters to the US Trade Representative's Office, which did not respond to a request for comment. - REUTERS

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