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China-US trade talks begin amid naval tensions
January 7, 2019, 12:30 pm

Both President Donald Trump and Chinese President Xi Jinping have signaled they are willing to reach a deal to resolve trade conflict

Two days of trade talks between China and the US kicked off in Bejing on Monday as both sides sought to narrow the divide following nearly a year of tit-for-tat tariffs threatening both economies.

But the talks were quickly overshadowed by events unfolding some 1,800 kilometers in the South China Sea, which Beijing has long claimed to be largely its own dominion.

Maritime disputes between China on the one hand and the Philippines, Vietnam, Malaysia, Brunei and Taiwan on the other have caused tensions in the region and often led to a war of words between Beijing and Washington.

On Monday, the US guided-missile destroyer USS McCambbell sailed into the South China Sea under the premise of freedom of navigation, and came close to a number of islands contested by the aforementioned nations.

Beijing condemned the US naval “incursion”.

Beijing has long accused Washington of meddling in the South China Sea. The US conducts periodic air and naval patrols near the disputed islands that have angered Beijing.

The maritime region is believed to hold a wealth of untapped oil and gas reserves and through which roughly $4.5 trillion of ship-borne trade passes every year.

Back in Beijing, mid-level Chinese and US officials held what is now the sixth round of trade talks to ease tensions between the two countries.

Earlier, US President Donald Trump said that he was optimistic that China would work toward a deal. Most analysts believe that recent economic data in China showing slowdown indicates that Beijing may be more likely to compromise on a trade deal than just six months ago.

The Chinese Foreign Ministry on Monday said that it was looking to forge a deal with the US on “equal footing”.

But the US economy is under pressure, too, despite positive economic data. Many US manufacturers who have set up shop in China may be forced to relocate.

Furthermore, Chinese invesments in the US tech sector – which reached $3 billion last year – have significantly dwindled in recent months.

In its response to US tariffs, China has been targeting economically important industries such as agriculture, with special emphasis on soybeans (half of all US soybean production is exported to China), crude oil and auto parts.

The Chinese list reached nearly 600 other items, including pork, aircraft parts, meat and fruit processors, and hundreds of other industrial products.

Soybean futures have been trading higher since the Beijing talks were confirmed last week.

Asian markets on Monday were also given a boost as the trade talks began in Beijing.

In Japan, the benchmark Nikkei 225 jumped 2.44 per cent while in Seoul, South Korea, the Kospi closed 1.34 per cent up.

Chinese markets also felt the upswing with the benchmark Shanghai Composite closing up 0.72 per cent.

By Firas Al-Atraqchi with inputs from Agencies