Trump is signaling he’s about to lash out at China — here’s what Beijing is thinking

China is bracing for a clash with the U.S. when President Donald Trump announces potentially aggressive trade measures against Beijing. White House officials told CNBC the president will make a speech on Friday targeting Chinese intellectual property and trade practices. Here is how people in China are reacting.

China’s official response

The official Chinese response has largely been critical but subdued. On Thursday in Beijing, the Chinese Commerce Ministry played up the U.S.-China trade benefits, but dismissed the notion that China has not done enough to protect intellectual property.

“I would like to emphasize that the Chinese government has always put strong emphasis on the protection of intellectual property rights,” ministry spokesman Gao Feng told reporters at a regular press briefing. “The results are obvious to all.”

When asked about the speculation that U.S. Trade Representative Robert Lighthizer could initiate an investigation into Chinese trade practices using Section 301 of the Trade Act of 1974, which allows the president to unilaterally impose restrictions to protect American industries, Gao reiterated China’s position that disputes should be taken to the World Trade Organization.

“Any trade measures taken by WTO members should abide by the rules of the WTO,” Gao said.

Lighthizer and other Trump administration officials have been critical of how the WTO manages international disputes.

China’s unofficial response

Government officials, who spoke on condition of anonymity, told CNBC that China is in wait-and-see mode with the White House.

They want to see if Trump will actually take action and what the details of any measures might be, they said.

So far, despite Trump’s tough talk, Beijing has seen no 45 percent tariff on Chinese goods, no border tax and no quotas on steel.

That said, China has seen action with the Trump administration’s crackdown on certain Chinese entities with business dealings in North Korea. And for their part, officials and government researchers say they are miffed that the U.S. is linking the North Korea nuclear issue with U.S.-China trade.

This week, the country’s vice commerce minister said that the two are “completely different domains.”

One officer told CNBC that, from the Chinese perspective, connecting the two issues makes little sense: Just because China and the U.S. don’t see eye to eye on one issue doesn’t mean the two can’t do business, he explained.

Chinese state media

The Chinese state media tends to be more openly critical, and, on Thursday, the government-backed China Daily attacked Trump’s expected announcement.

In an editorial, the newspaper described the possible restrictions as “worrying” with the potential to “spark a trade war.” The paper argued that, depending on the action, “China will have no choice but to take retaliatory measures.”

It’s important to note that the state media is not the official government reaction, but articles and editorials are vetted by authorities, so the media response helps gauge Beijing’s outlook on various topics.

American companies in China

U.S. companies in China are in a tough spot.

On the one hand, many business executives have told CNBC they want the Trump administration to focus more on intellectual property theft as well as market access instead of manufacturing and the trade deficit.

Scott Palmer, an intellectual property expert at law firm Sheppard, Mullin, Richter & Hampton, said the U.S. needs to press for greater trade secret protection, easier trademark filings and cooperation to fight counterfeits sold online.

However, several American businesses are also feeling vulnerable to retribution in one of their key markets. And since Trump’s election, Chinese officials and the state press have already said that, if need be, China would prepare for tit-for-tat retaliation.

What is also worrying executives in China is the possibility that retaliation could affect entirely different industries. For example, in 2009, the Obama administration slapped a hefty tariff on Chinese tires. Soon after, Beijing imposed penalties on U.S. chicken parts — costing American poultry producers.

The two issues weren’t explicitly linked, but the timing raised eyebrows.

Executives are also concerned that the business climate could get even tougher for U.S. companies more generally. Top corporate complaints these days include tighter controls on the internet and a crackdown on virtual private networks, requirements for data storage on local servers, as well as uncertainty about getting money out of the country.

American companies want the U.S. government to help, but they are nervous about the real impact on their operations.

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