China, US Trade Talks End With 'big Differences'

China and the US ended the second day of high-stakes trade talks on Friday with "big differences", Beijing said, leaving the world's two largest economies on the brink of a trade war that could have knock-on effects on the global economy.

"Both sides recognise there are still big differences on some issues and that they need to continue to step up their work to make progress," Beijing said in a statement released by the official Xinhua state news agency.

The discussions promised a potential way out of a trade conflict – US President Donald Trump has threatened to levy new tariffs on US$150 billion of Chinese imports while Beijing shot back with a list of US$50 billion in targeted US goods.

"The two sides exchanged views on expanding US exports to China, trade in services, bilateral investment, protection of intellectual property rights, resolution of tariffs and non-tariff measures," Xinhua said.

It added that they had reached "a consensus in some areas", without elaborating. The countries agreed to establish a "working mechanism" to continue talks, it said.

Liu He, vice premier in charge of the economy, led the discussions for China.

The announcement followed comments by US Treasury Secretary Steven Mnuchin earlier in the day that the two sides were having "very good conversations". However, American officials declined to give further details of the discussions.

China is confused about what the US actually wants, said Zhang Monan, a researcher at the influential think-tank China Centre for International Economic Exchanges.

The American pressure on Beijing has heightened, she said, even as Beijing has taken several steps to liberalise its markets.

Those reforms include a timeline to lift foreign ownership restrictions for automakers, permitting foreign investors to take controlling stakes in some financial firms, and on Friday, allowing foreign companies to trade iron futures on domestic exchanges.

But a list of demands presented to Beijing before the negotiations got under way showed such piecemeal reforms fell far short of US expectations. The document, divided into eight sections, was presented as a starting point for negotiations, according to Bloomberg News.

The demands included cutting China's trade surplus with the US by at least US$200 billion by the end of 2020, lowering all tariffs to match American levels, eliminating technology transfer practices, and cutting off support for some industries fostered by China's industrial policies, Bloomberg reported.

For Beijing, recent moves by Washington to ban US sales of telecom giant ZTE and the reported opening of a similar probe into goliath Huawei, have reinforced the wisdom of the policy.

A spokesperson for the Ministry of Commerce said China had taken up the ban with the US delegation.

"The Chinese side made solemn representations with the US in respect of the ZTE Corporation case" the commerce ministry statement said, adding that the Americans said they would relay the issue to Trump. (AFP)