China warns of retaliation if US harms trade ties

China’s government says it will take action to defend its interests after US President Donald Trump authorised an inquiry into whether Beijing is improperly obtaining foreign technology.

China’s commerce ministry on Tuesday voiced “serious concern” about Trump’s order and warned any US trade protectionism “will definitely harm bilateral trade relations”.

Trump told American trade officials on Monday to look into whether Beijing improperly requires foreign companies to hand over technology in exchange for access to Chinese markets. He has frequently accused China of undermining the US economy.

China’s policy of forcing foreign companies to turn over technology to Chinese joint venture partners and failure to crack down on intellectual property theft have been long-standing problems for several US administrations.

Trump administration officials have estimated that theft of intellectual property by China could be worth as much as $600bn.

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Trade groups for technology companies welcomed the US move, but China’s commerce ministry criticised it as “strong unilateralism” that violates the spirit of international trade agreements.

“If the US side take actions that impair the mutual trade relations, disregarding the facts and disrespecting multilateral trade rules, China will not sit idle,” the ministry said in a statement.

China will adopt  “all appropriate measures to vigorously defend” its rights and interests, it said.

The United States is China’s second-largest trading partner after the European Union.

Intellectual property theft 

The new inquiry joins numerous investigations launched by Washington into Chinese trade practices, notably those concerning steel and aluminium and their national security consequences.

The start of a US inquiry will not immediately result in open confrontation.

US Trade Representative Robert Lighthizer will first need to reach a preliminary finding of unfair practices by China before opening a formal investigation, which could take as much as a year, administration officials said.

Last week, Washington announced preliminary sanctions against Chinese imports of aluminium foil. But so far, the US has not imposed heavier trade measures on Chinese goods.

Trump said in April he was setting aside disputes over market access and currency while Washington and Beijing worked together to persuade North Korea to give up its pursuit of nuclear weapons technology.

Ken Jarrett, president of the American Chamber of Commerce in Shanghai, said the new investigation was a “measured and necessary step”.

Trump’s order reflects growing frustration among American companies about China’s trade policies, he said in a statement on Tuesday.

Chinese companies operating in the US are not pressured to part with technologies and intellectual property in exchange for market access, he noted.