US envoys pressed China on Monday to cut excess steel production that is flooding global markets and to reach a diplomatic settlement to territorial disputes in the South China Sea as the two sides opened a high-level dialogue.

Washington is asking Beijing to move faster with plans to shrink a bloated steel industry that its trading partners complain is flooding their markets with unfairly cheap exports, hurting foreign producers and threatening jobs. The US has responded by imposing anti-dumping tariffs on steel, and European officials say they have launched a trade investigation.

"Excess capacity has a distorting and damaging effect on global markets," US Treasury Secretary Jacob Lew said at the opening of the two-day event, "and implementing policies to substantially reduce production in a range of sectors suffering from overcapacity, including steel and aluminum, is critical to the function and stability of international markets."

The annual Strategic & Economic Dialogue rarely produces agreements on major issues, but provides what officials on both sides say is a valuable setting to air disputes, clear up misunderstandings and share experiences.

John Kerry,the US secretary of state, called on China to reach a diplomatic settlement to solve the territorial disputes in the South China Sea  [Reuters]

Beijing announced plans this year to slash the size of its state-owned steel and coal industries at a cost of millions of jobs. But plans for other bloated sectors, including aluminum, glass and solar panels, have yet to be announced.

Speaking at the event's opening ceremony, Chinese President Xi Jinping promised action on reducing overcapacity but announced no new initiatives.

"China will redouble efforts to promote supply-side structural reform," Xi said.

The annual Strategic & Economic Dialogue rarely produces agreements on major issues, but provides what officials on both sides say is a valuable setting to air disputes, clear up misunderstandings and share experiences.

This year's event is led by Secretary of State John Kerry and Lew on the US side, and Vice Premier Wang Yang and State Councilor Yang Jiechi on the Chinese side.

Amid deepening US concern that China is militarising the South China Sea, Kerry said that he would "make it clear that we are looking for a peaceful resolution to the disputes".


READ MORE - US, not China, militarising the South China Sea: FM


Beijing and neighbours including Vietnam and the Philippines have conflicting claims to portions of the sea and possible oil and gas resources. China's military is building outposts on man-made islands to enforce its claims.

Beijing said over the weekend that it would ignore an upcoming international arbitration decision in a dispute with the Philippines. China also has conflicting claims with Taiwan, Indonesia, Vietnam and Brunei, who all want American help. Further complicating matters are reports that the Chinese may soon establish an air defence zone over part of the sea, which Washington opposes.

"We have taken no position on any of the claims," Kerry said. "The only position we have taken is, let's not resolve this by unilateral action. Let's resolve this by rule of law, by negotiation, by diplomacy."

Xi warned against allowing diplomatic tensions to disrupt mutually beneficial trade and other relations. He acknowledged that differences "are hardly unavoidable", but called on Washington to help manage them in a "pragmatic and constructive fashion".

"What is important is to refrain from taking differences as excuses for confrontation," Xi said.

Source: Agencies