China has expressed “grave concern” at the Trump administration’s probe into whether China steals intellectual property and discriminates against US technology companies.
After Mr Trump signed a presidential order to start the probe, which could lead to sanctions, China’s commerce ministry hit back saying the United States “should not become a destroyer of the multilateral rules” of world trade.
Mr Trump has directed US Trade Representative Robert Lighthizer to examine if China’s trade policies discriminated or harmed US intellectual property and technology development.
US technology giants, among others, have long complained about Chinese policies requiring foreign companies to hand over intellectual property to Chinese joint venture partners.
The Chinese commerce ministry statement urged Mr Lighthizer to “act cautiously”.
“If the US side disregards the facts, disrespects the rules of multilateral trade, and takes action which damages economic and trade relations between the two sides, China will never sit back, and will take all appropriate measures to resolutely safeguard the legitimate rights and interests of China,” the ministry said.
In a July report, Australia’s Productivity Commission concluded a trade war between the US and China would have little impact on Australia in the long term, but would damage both of the sparring countries if China retaliated.
Such a trade war would “unleash a significant reorganisation of world trade” that would hit Australian jobs and investment in the short term, the report said.
The commission’s modelling showed long term the US and China would lose five and four months of economic growth each year, respectively.
A Chinese response to the Trump Administration acting on Mr Trump’s election campaign threats and imposing trade penalties was difficult to predict, the commission said. China could doing nothing in order to show global leadership, or retaliate in-kind because of the need for Mr Xi to show strength in the lead-up to the 19th congress of the communist party, due in October or November.
The US probe, which is likely to take several months, is being conducted under section 301 of the US trade act, which allows the US president to retaliate against a foreign government that restricts US commerce by imposing tariffs.
The Chinese commerce ministry claimed on Tuesday that China has been active in opening up its markets and improving foreign investment and business conditions.
Mr Trump’s first step towards taking action on trade sanctions against China comes as the US steps up its campaign of diplomatic and economic pressure against North Korea.
Mr Trump had earlier linked China’s cooperation on North Korea with the US going easier on China on trade.
China’s foreign ministry on Monday said “a trade war will lead nowhere and neither side will win”.
By Kirsty Needham
Sydney Morning Herald