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Japan and China vow to avoid trade war

Economic talks light on results as Beijing brushes off Tokyo's pleas on steel

TOKYO -- Monday's economic dialogue between Japan and China generated more talk than action as both sides agreed on the importance of avoiding a trade war but remained far apart on such issues as a global oversupply of steel.

The event here was the first of its kind in eight years, marking a return to the negotiating table after a period of bilateral tension. But Chinese Foreign Minister Wang Yi and Japanese counterpart Taro Kono, the meeting's co-chairs, seem to have spent their time talking past one another.

Tokyo "picked up steel as an issue," telling Beijing that it "must address excess production capacity," Kono told a news conference. China had the capacity to make 1.15 billion tons of crude steel in 2016, roughly double the figure of a decade earlier, but consumed only around 800 million tons. The rest flowed onto the global market, depressing international prices and rattling steelmakers elsewhere.

Kono and other officials urged China to curb state-owned banks' cheap financing for steelmakers and end regional government subsidies that help keep money-losing producers in business. Japanese, American and European governments have called out these policies repeatedly.

Japan also urged steps toward intellectual property protections, a special concern of the U.S., "so that we can have fair and free transfers of technology and sharing of intellectual property," Kono said. Beijing has been lax on this front in the past. In cases where Japanese and Chinese companies have teamed up on joint ventures developing and building electric vehicles, for example, Chinese partners have continued to use licenses held by Japanese partners even after their agreements end. China also lets its companies revamp licenses belonging to foreign enterprises and take all income flowing from the improved versions.

On Monday, China "explained what steps they have taken so far," according to a Japanese government source, but pledged no further action. Wang and his team said that China has cut 120 million tons of steel output capacity, meeting its goal of cutting between 100 million tons and 150 million tons by 2020. They apparently gave a similar response to intellectual property concerns, saying a response is underway.

China has made much of its recent push to liberalize markets, such as through expanding access to foreign companies. President Xi Jinping told the Boao Forum for Asia this month that Beijing plans to loosen restrictions on foreign investment and strengthen intellectual property protections. But the reforms Beijing now proposes are little more than warmed-over versions of policies already announced, and only a few of the plans are fleshed out with detail.

Monday's economic talks may have been doomed to irrelevance from the start. China approached Japan on reopening the dialogue as soon as Wang was granted a seat on the country's State Council in March, leaving the two sides only three weeks to prepare.

Tokyo wanted to hold the meeting in May. But Beijing sought talks as quickly as possible, looking to gain leverage in its intensifying trade spat with Washington by confirming with key American ally Japan the importance of free trade. With Japanese Prime Minister Shinzo Abe visiting the U.S. from Tuesday, Beijing saw an opportunity to have him convey to U.S. President Donald Trump the perils a Sino-American trade war would hold for the international economic order.

China also aimed to make a show of rapprochement over the economy, where agreement comes relatively easily for the two countries, ahead of Premier Li Keqiang's planned trip to Japan in May. But the accelerated timeline left no time to prepare for reaching agreements at the meeting. Those who would ordinarily co-chair the economic talks -- Japanese Finance Minister and Deputy Prime Minister Taro Aso and Liu He, China's vice premier in charge of economic affairs -- were not in attendance.

Only four cabinet-level officials from each side took part, compared with Japan's six and China's nine in the previous round of dialogue. While the two sides did agree to continue talks next year in China, no joint statement came of the meeting, and onlookers have observed that the talks' power to improve ties remains weak.

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