In Beijing Talks, US And China Pledge To Work Together To Solve Steel Glut, But Little Progress On South China Sea Dispute

SHANGHAI — An annual, high-level meeting between U.S. and Chinese officials in Beijing ended with pledges from China to cut overcapacity in its steel industry and allow some trading of the Chinese yuan in the United States. But no obvious progress was made on the contentious issue of China’s island reclamation and territorial claims in the South China Sea.

The annual U.S.-China Strategic and Economic dialogue is designed to give the two countries a platform to exchange views and achieve better understanding. Recent tension centers on U.S. naval and air operations close to islands China has claimed in disputed waters in the South China sea. But talks between U.S. officials — including Secretary of State John Kerry, Treasury Secretary Jacob Lew and China’s President Xi Jinping, along with the country's vice-premier, finance minister and central bank governor — may have had at least a temporary impact in cooling the hostile mood.

President Xi called on the opening day for the two sides to “manage” their differences and said in a closing meeting with Kerry and Lew that the key was “always to bear in mind that our common interests outnumber our differences,” according to Associated Press. Kerry, meanwhile, said the countries’ relationship was “absolutely vital ... It may well be the most consequential bilateral relationship of nations in the world."

And some of the mood music in Beijing was positive. Lew said at a closing ceremony that though the talks “cannot resolve our concerns, they do represent progress.” On the issue of China’s steel glut — which recently led the U.S. to impose tough anti-dumping tariffs on some Chinese steel products — China again pledged to reduce overcapacity and close more “zombie companies,” Lew said. And he added Beijing was willing to participate in global steel talks to discuss the problems that he earlier described as “distorting” and “damaging” global markets.

But China has also criticized the U.S. for "protectionist" measures and seeking to shore up what it calls the U.S.' own "uncompetitive" steel industry. And Finance Minister Lou Jiwei said Monday during talks that while China had reduced capacity by some 90 million tons last year, the country was “no longer a planned economy.” And with more than half of China’s steel companies now privately owned, it could not give them all numerical production targets and would have to rely on market forces to bring change.

Lew praised China for promising to open its financial sector wider to U.S. companies. China pledged to allow U.S. investors an annual quota of $38 billion to buy Chinese shares and bonds — the largest given to any territory other than Hong Kong — and said one U.S. bank and one Chinese bank would be allowed to carry out yuan transactions in the U.S.

It was among some 60 agreements signed, according to Lew. Officials pointed to cooperation on climate change as an example of what they can achieve when they work together.

China has also said it will submit a revised “negative list,” detailing sectors of the economy that will remain closed to foreign investment — and allowing investment in all others — ahead of further talks on a long-awaited Bilateral Investment Treaty in Washington next week.

But analysts say the two sides have not bridged the gaps on this issue, with Chinese experts calling the U.S. “too sensitive” toward some Chinese investments, particularly in high-tech sectors, while the American Chamber of Commerce in China recently highlighted China’s “unclear laws and inconsistent interpretation” as an obstacle to U.S. investment in the country.

And while China and the U.S. pledged to work together to ensure implementation of sanctions imposed on China’s ally, North Korea, for its nuclear tests earlier this year, there was no pledge by Beijing to take additional action against Pyongyang. Last week, China welcomed a high-level delegation from North Korea’s ruling party, and the International Atomic Energy Agency said Monday that North Korea appeared to have restarted work on processing plutonium at a nuclear power plant that was closed under a previous international agreement.

And on the South China Sea, dispute there was little sign of a breakthrough. The U.S. has said it will not take sides in the rival claims to all or part of the region by countries including China, Vietnam and the Philippines. But it has urged all sides to exercise restraint and resolve the issue through talks — and reserves the right to sail through what it says are international waters, including in areas claimed by China .

Chinese State Councilor Yang Jiechi said that Beijing would seek a peaceful settlement, but he emphasized that any talks should be between "the countries involved.” Chinese officials previously accused Washington of interfering in a matter that does not concern it and seeking to stir up trouble in the region to boost its own influence over other Asian countries. And Yang added that China “has every right to uphold its territorial sovereignty," according to AP.

Secretary Kerry, meanwhile, expressed continuing concerns about human rights issues in China, including a new law on NGOs that requires them to be registered with and scrutinized by China’s police.

But Yang said the rules were necessary to protect "legal rights." And the official Global Times newspaper — a hawkish tabloid published by government mouthpiece the People's Daily — this week accused the U.S. of seeking to stir trouble in China with its emphasis on human rights and what it called "its mounting support of China's anti-system forces."

It said many Chinese people were "tired of U.S. rhetoric against China's human rights issue and believe it is just a tool used by Washington to compete with China."

It warned that such criticisms were causing a "sense of insecurity" in China, suggesting that "the more aggressive U.S. policy toward China is," the more this would force Beijing to step up military development, including in the South China Sea.