The trade war has exposed a split within China, with liberal economists arguing the pressure on the economy offers a chance for Beijing to implement much needed reforms. However, advocates of a strong centrally planned state, who have gained influence across much of China’s bureaucracy since President Xi Jinping took control of the Communist party six years ago, are digging in for a prolonged confrontation.
“Over the weekend, the Chinese seemed determined to hit back and also pull out of the talks. But the tone seems different now,” said a person briefed on discussions about a possible visit to Washington by Wang Shouwen, the vice commerce minister, to renew talks. “They are trying to see if there is a way to work with the US before things get more ugly.”
Mr Li acknowledged that the Chinese economy had been “under pressure” in recent years. Private companies have been squeezed by the diversion of bank credit to the public sector, with many forced to close or sell out to state companies. But Mr Li said the State Council, which he heads, would open more channels for direct financing to private companies.