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Commerce Secretary Ross Warns China Over Its Industrial Policies Posing a Threat to US

U.S. Commerce Secretary Wilbur Ross singled out China’s drive for industrial automation as an emerging threat to the U.S. economy, according to media reports.

Ross said, speaking to reporters in Hong Kong on Wednesday after talks with top Chinese officials, including Premier Li Keqiang in Beijing, that the threat of creating overcapacity is a problem that already exists and could become worse. He said the Made in China 2025 plan implemented in 2015 to upgrade its manufacturing sector toward higher-value goods from the image of cheap consumer products, and the subsidies that it contemplates for many industries, “may result in future overcapacity.”

“For example, in robotics there apparently are something like 400 robotics companies in China right now and people in the industry tell me their estimate is that maybe 360 of those are in it to get the subsidies and tax breaks, and are not really that serious about products,” Ross told reporters.

The apparel industry has also begun to incorporate robotics and automation to achieve greater efficiency and cut costs as technology becomes available.

The Commerce Department said in a statement on Tuesday that Ross had pressed China on the “need to rebalance bilateral trade and investment relations” and urged it to take “meaningful action” on trade issues.

The Commerce Department also said recent meetings have provided opportunities to prepare the ground for President Trump’s planned visit to Asia later this fall, where the hope is that both the president and leaders in China will engage in a friendly and honest exchange of views on a range of issues, including the need to rebalance bilateral trade and investment relations, protect intellectual property, lower tariffs and non-tariff barriers, and guarantee fair and reciprocal treatment for U.S. firms.

China’s relationship with the U.S. has been strained by the Trump administration’s criticism of China’s trade practices and by demands that Beijing do more to restrain North Korea’s nuclear ambitions. Trump has threatened to close off all trade with any country doing business with North Korea–China is North Korea’s largest trading partner–although he did praise China most recently for its Central bank’s move to cut off financing to North Korea.

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The Commerce Department said Ross highlighted his intention to lead a senior level trade mission to China in November and to reduce the trade deficit through increased exports of high-value U.S. goods and services to China and improved market access for U.S. firms. Commerce said Chinese officials committed to further market opening and welcomed participation by U.S. firms.

Both sides expressed the view that bilateral trade frictions should be resolved through negotiation and commitment to high standards and good economic governance. Chinese officials also expressed concern about U.S. export controls and the Section 301 investigation into China’s intellectual property rights protections being conducted by the U.S. Trade Representative.

[Read more about China trade relations: Trump Risks Trade Escalation with China over IP]

In response, Ross relayed the ongoing concerns of the U.S. business community over forced technology transfers, data localization and other intellectual property rights issues. Chinese officials asked Ross to inform them of any such issues as they arise, saying they would seek to resolve these challenges.

Officials in China also stressed that dialogue is preferable to unilateral action, saying they would have to respond in kind to any potential action by the U.S. Ross stressed the need for concrete action to address the concerns of U.S. businesses, and said the U.S. would take action to defend American workers and businesses if cooperative efforts bear no fruit.

“The most important thing to push for with China is better market access for companies operating there physically and for companies exporting there,” Ross said Wednesday in Hong Kong. “Ranking equal with that would be less protectionist behavior.”

Ross said the Trump administration did not take issue with China’s desire to achieve self-sufficiency in key technologies from robotics to semi-conductors, but with the way it was attempting to do so.

“If the way they get there is through a free and open, level playing field and it’s a fair match, we’re fine with that,” he said. “We’d be not comfortable with that being accomplished through disrespect for intellectual property rights, through forced localization, through forced technology transfers. Those are very big issues.”