published Jan 22nd 2017, 10:01 am, by Bloomberg News

(Bloomberg) —
Confronted by the challenge of a Donald Trump-led White House, China is signaling it’s ready to work with the new administration and has already taken a handful of policy steps that may help fend off criticism over access to its markets.

The official Xinhua News Agency congratulated Trump on his inauguration and said it hoped for “win-win” cooperation between the two nations. An editorial run by state-backed newspaper China Daily took a similar tone, saying the world’s two largest economies should work together toward “an updated, more desirable version of globalization.”

That follows tangible measures last week, such as a plan to relax restrictions on foreign investment in long-closed areas of the economy including banking, securities, futures, mutual funds and insurance. A senior official last week said China is prepared to enhance cooperation with other countries to protect intellectual property rights, a bug-bear of U.S. and European firms who have complained their technologies are copied and brands faked.

Ning Jizhe, China’s statistics chief and deputy head of the top economic planning body, used his Friday briefing on 2016 economic data to congratulate Trump and say he hoped the new president keeps moving Sino-American cooperation forward. The Ministry of Commerce last week said it’s willing to work with the new U.S. administration to help promote healthy trade development and economic ties, echoing President Xi Jinping’s speech to the World Economic Forum in Davos that warned against trade wars and protectionism.

But it’s not all olive branch. Xinhua’s article congratulating Trump also laid out the areas China regards as off limits: “China’s resolve to safeguard its defining core interests in Taiwan and the South China Sea islands has always been strong,” it said.

Read More: China Said Prepared to Retaliate If Trump Raises Trade Barriers

Xi has a strong domestic imperative not to appear weak before a twice-a-decade Communist Party congress late this year, when several top leaders are due to be replaced. Policy makers also have pledged more focus on ensuring financial stability.

Trump opened his presidency with an “America first” appeal, saying the U.S. will “bring back our jobs. We will bring back our borders. We will bring back our wealth.”

“For many decades, we’ve enriched foreign industry at the expense of American industry; subsidized the armies of other countries, while allowing for the very sad depletion of our military,” he said.

He didn’t mention China by name in his inaugural address, in contrast to his campaign rhetoric in which he accused it of raping America and cheating on trade.

Trump has already walked back from some criticisms and so far hasn’t followed up on his pledge to label China a currency manipulator on his first day in office. His pick for Treasury Secretary, Steven Mnuchin, agreed during a Senate confirmation hearing that China has shifted recently from efforts to weaken the yuan. He did say, however, he is willing to apply the manipulator label if warranted.

Read More: U.S. Firms in China Slow Investment as Worries Grow, AmCham Says

China doesn’t want a trade war with the U.S., said Chen Wenling, chief economist at the Beijing-based China Center for International Economic Exchanges, a think tank led by retired senior officials. But China isn’t afraid of a trade war and will not give in or compromise should the U.S. wage one, she added.

“A trade war is a lose-lose for both sides, but the U.S. will be harder hit,” she said.

China will take a positive approach to its relationship with the U.S., said Paul Haenle, a China adviser to President George W. Bush who’s now director of the Carnegie-Tsinghua Center for Global Policy in Beijing. “The question is, can they do that quickly enough and effectively enough to avoid the negative dynamics of a looming trade war?”

To contact Bloomberg News staff for this story: Miao Han in Beijing at mhan22@bloomberg.net ;Yinan Zhao in Beijing at yzhao300@bloomberg.net To contact the editors responsible for this story: Malcolm Scott at mscott23@bloomberg.net Jeff Kearns

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