U.S., China upbeat on trade talks, but S.China Sea tensions weigh

(Adds comments from White House economic adviser Kevin Hassett)

By Michael Martina and David Lawder

BEIJING/WASHINGTON, Feb 11 (Reuters) - U.S. and Chinese officials expressed hopes on Monday that a new round of talks would bring them closer to easing their seven-month trade war, but a U.S. Navy mission through the disputed South China Sea cast a shadow over the negotiations in Beijing.

The world's two largest economies are trying to hammer out a deal before a March 1 deadline, after which U.S. tariffs on $200 billion worth of Chinese imports are scheduled to increase to 25 percent from 10 percent.

Washington is expected to keep pressing Beijing on long-standing demands that it make sweeping structural reforms to protect American companies' intellectual property, or IP, end policies aimed at forcing the transfer of technology to Chinese companies, and curb industrial subsidies.

White House economic adviser Kevin Hassett said the Trump administration was pleased that the talks were moving forward but cautioned that March 1 is a "real deadline" for reaching a deal.

The talks kicked off in Beijing with discussions among deputy-level officials on Monday before minister-level meetings later in the week. A round of talks at the end of January ended with some progress reported - but no deal and U.S. declarations that much more work was needed.

"You know, the juniors are working on something now that they're going to present to the seniors later in the week," Hassett told Fox Business Network. "And, absolutely, you know, we've put everything on the table, including IP theft and forced technology transfer and so on."

Hassett, who chairs the Council of Economic Advisers, added that the White House is "very much looking forward to what the senior people come up with this week."

Chinese Foreign Ministry spokeswoman Hua Chunying also struck an upbeat tone about the talks, telling a news briefing: "We, of course, hope, and the people of the world want to see, a good result."

DESTROYER PATROL

However, Hua expressed anger about two U.S. warships sailing on Monday near islands claimed by China in the South China Sea, saying this was creating tensions in the area.

Asked if the ships' passage would impact trade talks, Hua said that "a series of U.S. tricks" showed what Washington was thinking. But Hua added that China believed resolving trade frictions through dialogue was in the interests of both countries' people and of global economic growth.

China claims a large part of the South China Sea, and has built artificial islands and air bases there, prompting concern around the region and in Washington.

U.S. President Donald Trump said last week he did not plan to meet with Chinese President Xi Jinping before the March 1 deadline, dampening hopes that a trade pact could be reached quickly.

White House senior counselor Kellyanne Conway said a meeting was still possible soon, telling Fox News Channel that Trump wants a deal with China, but it must be "fair to Americans, and American workers and American interests."

Asked if the United States and China were getting close to a trade agreement, she said, "It looks that way, absolutely."

But U.S. stock markets were less enthusiastic about prospects for a deal, with any optimism overshadowed by concerns about another government shutdown and a diminished 2019 U.S. corporate earnings outlook. The S&P 500 and the Nasdaq Composite eked out nominal gains on Monday while the blue-chip Dow Industrials edged lower. (Additional reporting by Ben Blanchard in Beijing and Susan Heavey in Washington; Editing by Nick Zieminski and Jonathan Oatis)

First Published: 2019-02-11 10:19:50
Updated 2019-02-11 23:19:08