Sino-American reset fraught with disagreements

TOSHIKI YAZAWA, Nikkei staff writer

The talks, led by Kerry and Vice Premier Wang Yang, made little progress on key issues.

BEIJING -- China and the U.S. made some headway on economic and climate issues in the round of annual policy talks that wrapped up Thursday. But rifts remain on topics ranging from market and currency reform to territorial spats.

     In a speech at the opening ceremony of the sixth Strategic and Economic Dialogue on Wednesday morning, Chinese President Xi Jinping said both nations must respect each other's sovereignty and territorial integrity, tacitly urging Washington not to involve itself in Beijing's disputes with neighbors.

     President Barack Obama, who did not travel to Beijing, also issued a statement, stressing that the U.S. "welcomes the emergence of a stable, peaceful and prosperous China." It was a thinly veiled swipe at Beijing, signaling that provocations in resource-rich seas in Asia will not be tolerated.

     Secretary of State John Kerry seemed receptive to the new type of major-powers relationship advocated by Xi, but stressed that bilateral ties must be based on trust. The consensus in Washington is that China under Xi is pushing the U.S. to gradually cede its dominant position in the Pacific.

     Assistant Secretary of State Daniel Russel explained in a Congressional hearing that Beijing is now treating territorial disputes and the issue involving the Uighur ethnic minority -- matters of great U.S. interest -- as domestic problems that should be shielded from outside interference. Cooperating with China is important, but concern is growing among policymakers that acknowledging the country as an equal will feed its ego.

     The U.S.'s primary goal is to reap economic benefits by boosting exports to China and expanding its service industry there. Its show of economic collaboration at the talks was largely aimed at not irritating the Chinese too much on the security front.

     The two sides agreed to fast-track an investment treaty, high on the wish list of U.S. business interests. They plan to solidify a broad framework within the year and discuss specifics in 2015. They will also work together to set greenhouse gas emissions targets.

     But China is unlikely to readily agree to opening its markets.

     For example, the U.S. pressed for the removal of tariffs on new types of chips, but intent on protecting its own chipmakers, Beijing resisted. The National Development and Reform Commission has in a number of cases used antitrust laws to block business investment by American companies.

     Meanwhile, Chinese investment in the U.S. has grown with each passing year, particularly in oil and other energy companies by state-owned enterprises. They are looking to gain not just resources, but also cutting-edge technology, according to a senior official at the Congressional Research Service.

     Beijing is also keen to invest in information technology and other high-tech manufacturing, raising serious national security concerns in Washington. So both sides will likely continue to wait for the other's next move, wary of investing or opening markets too quickly.

     Discussion of the yuan ended at an impasse as well. People's Bank of China Gov. Zhou Xiaochuan showed some understanding toward American demands for greater flexibility in the yuan's trading but nonetheless took a defensive stance.

     "When the market is calm and peaceful, the pace of exchange rate reform will move faster," he said.