(Adds detail on Chinese foreign investment in U.S.)
By Andrea Shalal and Cate Cadell
WASHINGTON/BEIJING, Jan 16 (Reuters) - From Huawei to the
South China Sea, deep political rifts between Beijing and
Washington are set to persist, despite a trade relations
breakthrough, as the United States pushes back against an
increasingly powerful and assertive China.
Relations between the world's two largest economies have
deteriorated sharply since U.S. President Donald Trump imposed
punitive tariffs in 2018, igniting a trade war.
"The broader, darkening picture is not going to be
brightened much by this deal," Bates Gill, an expert on Chinese
security policy at Macquarie University in Sydney, said of the
initial trade deal signed on Wednesday. This backdrop spans China's militarization of the South
China Sea; rising tensions over Taiwan, which Beijing claims as
its own; U.S. criticism over human rights in Hong Kong and
Xinjiang, and a backlash against telecoms gear provider Huawei.
While the initial deal defuses an 18-month row that has hit
global growth, experts say it is unlikely to provide much balm
for broader frictions rooted in U.S. fears over an economically
and technologically powerful China with a modernising military.
"We can see Phase 1 as an emergency treatment to lower the
temperature, but it has not addressed the fundamental problems,"
said Wang Heng, a professor at the University of New South Wales
in Sydney, who studies the China-U.S. economic relationship.
HOSTILITY
Washington is increasingly alarmed about the security
implications of Chinese technology, and has tightened its rules
to keep better tabs on the acquisition of key technology by
China, setting in motion changes to the global supply chain.
"The Chinese leadership are not naive about this," said
Gill. "They are already making moves to be more autonomous and
thinking about a future... in an environment of hostility."
The Trump administration put Chinese telecoms equipment
giant Huawei Technologies Co HWT.UL on a trade blacklist on
national security concerns in May, banning it from buying
supplies from American firms without U.S. government approval.
It has also taken measures to crimp exports of artificial
intelligence software. New U.S. rules tightening scrutiny of foreign investment go
into effect on Feb. 13, extending the powers of the Committee on
Foreign Investment in the United States (CFIUS), which has
increasingly flexed its muscle against Chinese firms.
Intervention by CFIUS, which reviews mergers and stock
purchases to ensure they do not harm national security, has
dramatically slowed Chinese investment in the United States.
Chinese foreign direct investment into U.S. fell 90% to $1.9
billion in 2019 from its peak in 2016, according to Refinitiv
data.
The two countries are also at odds over Taiwan, which counts
the United States as its biggest weapons supplier but which
China sees as one of its provinces.
Taiwan's President Tsai Ing-wen was re-elected on Saturday,
vowing not to submit to Chinese pressure or control. Tsai's campaign was helped by seven months of
anti-government protests in Hong Kong, which Beijing accuses
Washington of helping to foment, eroding China's case for a "one
country, two-systems model" similar to Hong Kong's for Taiwan.
U.S. Army Secretary Ryan McCarthy said last week that China
"will emerge as America's strategic threat" and that the United
States planned to deploy two task forces to the Pacific over the
next two years capable of information, electronic, cyber and
missile operations against Beijing. Treasury Secretary Steven Mnuchin told CNBC on Wednesday
that the United States was concerned about other issues
involving China but these should be dealt with separately.
"You have to negotiate different pieces at different times,"
he said.