U.S., Chinese trade deputies face off in Washington amid deep differences

By David Lawder

WASHINGTON (Reuters) – U.S. and Chinese deputy trade negotiators were set to resume face-to-face talks for the first time in nearly two months on Thursday, as the world’s two largest economies try to bridge deep policy differences and find a way out of a bitter and protracted trade war.

The negotiations, on Thursday and Friday, are aimed at laying the groundwork for high-level talks in early October that will determine whether the two countries are working toward a solution or headed for new and higher tariffs on each other’s goods.

A delegation of about 30 Chinese officials, led by Vice Finance Minister Liao Min, arrived at the U.S. Trade Representative’s (USTR) office near the White House for the talks scheduled to start at 9 a.m. (1300 GMT). Deputy U.S. Trade Representative Jeffrey Gerrish also arrived to represent the United States.

The discussions are likely to focus heavily on agriculture, including U.S. demands that China substantially increase purchases of American soybeans and other farm commodities, a person with knowledge of the planned discussions told Reuters.

Two negotiating sessions over the two days will cover agricultural issues, while just one will be devoted to the strengthening of China’s intellectual property protections and the forced transfer of U.S. technology to Chinese firms.

“Sessions on agriculture will get a disproportionate amount of air time,” the source said, adding that one of these sessions also will include a focus on U.S. President Donald Trump’s demand that China cut off shipments of the synthetic opioid fentanyl to the United States.

The president is eager to provide export opportunities for U.S. farmers, a key Trump political constituency that has been battered by China’s retaliatory tariffs on U.S. soybeans and other agricultural commodities.

U.S. Commerce Secretary Wilbur Ross, in an interview on Fox Business Network on Thursday, said it remained unclear what China wanted and that “we will find out very, very shortly in the next couple of weeks.”

“What we need is to correct the big imbalances, not just the current trade deficit,” Ross said. “It’s more complicated than just buying a few more soybeans.”

CURRENCY ON TABLE

U.S. Treasury Secretary Steven Mnuchin, who will participate in the October talks along with USTR Robert Lighthizer and Chinese Vice Premier Liu He, has said that currency issues will be a focus of the new rounds of talks.

Mnuchin formally declared China a currency manipulator last month after the yuan weakened against the dollar, accusing Beijing of reducing the strength of its currency to gain a trade advantage.

Trump has said that China failed to follow through on agricultural purchase commitments made by its president, Xi Jinping, at a G20 leaders summit in Osaka, Japan as a goodwill gesture to get stalled talks back on track. China has denied making such commitments.

When such purchases failed to materialize during U.S.-China trade talks in late July, Trump quickly moved to impose 10% tariffs on virtually all remaining Chinese imports untouched by previous rounds of tariffs.

But in an easing of tensions last week, Trump delayed a scheduled Oct. 1 tariff increase on $250 billion worth of Chinese imports until mid-month, as China postponed tariffs on some U.S. cancer drugs, animal feed ingredients and lubricants.

White House officials signaled warming negotiations as the deputies were set to begin their sitdown.

U.S. Vice President Mike Pence, in a Fox Business Network interview that aired on Thursday, said: “The atmospherics are improving but … President Trump is going to stand firm.”

“There’s a little softening in the air,” White House adviser Larry Kudlow said in a separate interview on the television network Thursday morning.

Beijing also is seeking an easing of U.S. national security sanctions against telecom equipment maker Huawei Technologies, which has been largely cut off from buying sensitive U.S. technology products.

The trade war, which has dragged on for 14 months, has rattled financial markets as policymakers and investors worry about the broadening global economic fallout of the dispute.

The specter of a global recession has prompted central banks around the world to loosen policy in recent months. The Federal Reserve on Wednesday cut rates for the second time this year, saying the reduction provided “insurance against ongoing risks,” including weak world growth and resurgent trade tensions.

Trade experts, executives and government officials in both countries say that even if the September and October talks produce an interim deal that includes purchases and a reprieve for Huawei, the U.S.-China trade war has hardened into a political and ideological battle that runs far deeper than tariffs and could take years to resolve.

Jon Lieber, a principal in PwC’s national tax services practice, said a “very narrow agreement” in October would do little to solve fundamental differences between the two countries.

To keep markets steady, the two sides could well “string along the talks for a longer period of time,” he added.

(Additional reporting by Andrea Shalal and Susan Heavey; Editing by Shri Navaratnam, Steve Orlofsky and Alex Richardson)

U.S. Congress to advance ‘Hong Kong Human Rights and Democracy’ bill

By Patricia Zengerle

WASHINGTON (Reuters) – U.S. congressional committees are due to start voting next week on legislation supporting human rights in Hong Kong, with measures under consideration including annual reviews of the Chinese territory’s special economic status and the imposition of sanctions on those who undermine its autonomy.

House of Representatives Speaker Nancy Pelosi held a news conference on Wednesday with House members – Republicans and her fellow Democrats – as well as Joshua Wong, Denise Ho and other Hong Kong democracy activists to back the “Hong Kong Human Rights and Democracy Act of 2019.”

The activists have spent much of this week in Washington making their case for U.S. support, including testifying at a congressional hearing on Tuesday.

“Democrats and Republicans in the House and the Senate enthusiastically support this legislation,” Pelosi said. “We stand with … all who are fighting for a peaceful, hopeful future.”

Leaders of the House Foreign Affairs Committee said the committee was due to mark up – debate and vote on – the bill next week. It is expected to pass, which would send it for a vote by the full House.

A spokeswoman for the Senate Foreign Relations Committee said that committee was also working on its version of the legislation, hoping to hold its markup next week.

The bill’s text will not be final until it passes both houses of Congress, and it must be signed by President Donald Trump to become law.

The current version of the House bill calls for annual evaluations of whether Hong Kong still meets the conditions – including remaining autonomous – of the 1992 U.S. law granting it special economic status.

It also would require the Trump administration to identify and sanction anyone responsible for human rights abuses in Hong Kong, Republican Representative Chris Smith, one of the bill’s lead sponsors, told the news conference.

Trump has sent some mixed signals on the Hong Kong protests. In early August, he caused alarm among those sympathetic to the movement by describing the street demonstrations as riots.

Trump has since called on China to end the discord in a humanitarian way and said a crackdown could make his efforts to end a damaging trade war “very hard.”

Some industry groups worry that the legislation could threat then delicate trade talks. Backers rejected that concern.

“We cannot let commercial interests drive our policy,” Pelosi said.

(Reporting by Patricia Zengerle; Editing by Tom Brown)

Size matters. Big U.S. farms get even bigger amid China trade war

By Mark Weinraub

HAZELTON, N.D. (Reuters) – As the 2018 harvest approached, North Dakota farmer Mike Appert had a problem – too many soybeans and nowhere to put them. Selling was a bad option. Prices were near-decade lows as U.S. President Donald Trump’s trade war with China weighed heavily on the market. Temporary storage would only buy him a little bit of time, particularly in an area where cold weather can damage crops stored in plastic bags.

So Appert, who farms 48,000 acres (19,425 hectares), cut a check for $800,000 to build eight new permanent steel bins. That allowed him to hold onto his bumper crop and wait for prices to recover.

He sold half of the 456,000 bushels stored on his farm throughout the following summer, earning about $1 more per bushel and avoiding storage at nearby CHS elevators or an Archer Daniels Midland Co. processor in the area.

But most farmers do not have $800,000 to spend on steel bins, and many are going under. The number of U.S. farms fell by 12,800 to 2.029 million in 2018, the smallest ever, as the trade war pushes more farmers into retirement or bankruptcy.

Roger Hadley, who farms 1,000 acres in Indiana, was unable to plant any corn and soybeans this year after heavy rains added to farmers’ woes.

He spent most of the summer trying to plant a combination of grasses, a so-called cover crop, so he could apply for government aid and try again next year.

“The guys that got rich are getting richer,” Hadley said. “It has frustrated a lot of guys.”

In farming, size does matter. The farms left standing after the trade war will likely be some of the biggest in the business. Appert’s operations are more than 100 times bigger than the average American farm and the advantages provided by that magnitude are becoming even more critical as the trade war stretches into a second year.

The declining number of U.S. farmers could hurt the world’s top grain merchants such as ADM and Bunge, who will have fewer suppliers. Additionally, farmers will have less need to rent space in the merchants’ grain silos as big farmers like Appert have plentiful storage on their own farms.

ADM said it would continue changing to meet the needs of its customers. Bunge did not respond to an email seeking comment.

By the end of 2018, the average U.S. farm size rose to 443 acres, a 12-year high and up from 441 million in 2017, according to the latest U.S. Department of Agriculture data.

And the biggest farmers are growing their operations even more as retiring farmers choose to lease their land rather than selling it.

When land becomes available for lease, only the biggest farmers can readily shoulder the costs needed to expand.

The size of the loans smaller farmers would need to buy equipment, for example, are too big for applicants with little collateral, said Dave Kusler, president of the Bank of Hazelton in Hazelton, North Dakota.

“It is almost impossible with what the costs are,” Kuslersaid. “In this area, you can’t make a living on 1,000 acres.”

Critics say the Trump administration’s policy of compensating growers for lost sales due to the trade war pays the bigger farm operations more since payments are calculated by acres farmed.

The Environmental Working Group, a conservation organization, said in a recent study the top 1% of aid recipients received an average of more than $180,000 while the bottom 80% were paid less than $5,000 in aid.

Appert said that big farmers receive bigger outright payments but less per acre than small farms because of a $500,000 cap per farm.

‘BOOM, BOOM, BOOM’

Big farms can reap the full benefits of new high-tech equipment that boosts farm yields.

Doug Zink, who farms 35,000 acres near Carrington, North Dakota, said he likes to trade in his fleet of four combines and planters nearly every year to ensure that his equipment is under warranty, which saves thousands of dollars in maintenance costs and helps avoid breakdowns during key seeding and planting periods.

They also receive deep discounts – as much as $40,000 for some combine harvesters that can cost as much as $400,000 – allowing them to upgrade more often.

Manufacturers are increasingly willing to cut such deals to keep clients as the number of customers falls. Deere & Co <DE.N> said that it will reduce production by 20% at its facilities in Illinois and Iowa in the second of half of the year. Rival agricultural machine makers AGCO Corp <AGCO.N> and CNH Industrial <CNHI.N> have also slashed production to keep inventory in line with retail demand.

Large farms also have the easiest access to capital, with bankers still eager to provide loans to growers with plenty of collateral. “The ag trend is going to larger farms,” Kusler, the bank president in Hazelton, North Dakota, said, “The loans get much larger.”

Appert had no problem getting a loan to finance expansion.

“If you want to get a mortgage and buy a piece of land it is just boom, boom, boom,” he said.

(Reporting by Mark Weinraub; Editing by Caroline Stauffer and Marguerita Choy)

Hong Kong reopens after weekend of clashes, protests

By Jessie Pang

HONG KONG (Reuters) – Hong Kong’s businesses and metro stations reopened as usual on Monday after a chaotic Sunday when police fired water cannon, tear gas and rubber bullets at protesters who blocked roads and threw petrol bombs outside government headquarters.

On Sunday what began as a mostly peaceful protest earlier in the day spiraled into violence in some of the Chinese territory’s busiest shopping and tourist districts.

Thousands of anti-government protesters, many clad in black masks, caps and shades to obscure their identity, raced through the streets, engaging in cat-and-mouse tactics with police, setting street fires and blocking roads in the heart of Hong Kong where many key business districts are located.

The demonstrations are the latest in nearly four months of sometimes violent protests. Protesters are furious over what they see as creeping interference by Beijing in Hong Kong’s affairs despite promises by Beijing to grant the city wide-ranging autonomy and freedoms denied in mainland China.

Dozens of university students rallied peacefully on Monday afternoon urging authorities to listen to public demands. Dressed in black, some of them donning face masks, students sang “Glory to Hong Kong” a song that has become a rallying cry for more democratic freedoms in the semi-autonomous Chinese hub.

At Baptist University hundreds of students also marched to demand the university’s management offer support to a student reporter arrested on Sunday.

The initial trigger for the protests was a contentious extradition bill, now withdrawn, that would have allowed people to be sent from Hong Kong to mainland China for trial.

The protests have since broadened into other demands including universal suffrage and an independent inquiry into allegations of excessive force by the police.

Hong Kong, a former British colony, returned to China in 1997 under a “one country, two systems” formula that guarantees freedoms not enjoyed on the mainland – including a much-cherished independent legal system.

89 ARRESTS IN WEEKEND VIOLENCE

Kung Lui, a third-year university student majoring in sociology, said the protests would continue until all five demands were met. “The protests have revealed lots of social problems and proved that democracy and freedom are the core values of Hong Kong people.”

Police on Monday said 89 people were arrested over the weekend after “radical protesters” attacked two police officers on Sunday evening, hurling petrol bombs, bricks, and threatening the safety of the officers.

Nearly 1,500 people have been arrested since the protests started in June.

Authorities moved quickly to douse the fires and police fired volleys of tear gas to disperse them, including in the bustling shopping and tourist district of Causeway Bay.

At least 18 people were injured, three of them seriously, during Sunday’s violence, according to the Hospital Authority.

The protests have weighed on the city’s economy as it faces its first recession in a decade, with tourist arrivals plunging 40 percent in August amid some disruptions at the city’s international airport.

By Sunday evening, the running battles between anti-government protesters and police had evolved into street brawls between rival groups in the districts of Fortress Hill and North Point further east on Hong Kong island. There, men in white T-shirts – believed to be pro-Beijing supporters and some wielding hammers, rods and knives – clashed with anti-government activists.

On a street close to North Point, home to a large pro-Beijing community, a Reuters witness saw one man in a white T-shirt sprawled on the ground with head wounds.

Hong Kong media reported that groups of pro-Beijing supporters had attacked journalists.

Police eventually intervened and sealed off some roads to try to restore order, and they were seen taking away several men and women from an office run by a pro-Beijing association.

Democratic lawmaker Ted Hui was arrested for allegedly obstructing police, according to his Democratic Party’s Facebook page, as he tried to mediate on the streets in North Point.

(Additional reporting by Twinnie Siu; Writing by Farah Master; and James Pomfret; Editing by Simon Cameron-Moore and Mark Heinrich)

Taiwan says China meddling with elections after Solomon Islands cuts ties

By Yimou Lee

TAIPEI (Reuters) – Taiwan accused China on Monday of trying to influence its presidential and legislative elections after the Solomon Islands cut off ties with Taipei.

The Solomon Islands was the sixth country to switch allegiance to China since President Tsai Ing-wen took office in Taiwan in 2016. Its decision on Monday dealt her a new blow in her struggle to secure re-election in January amid criticism of her handling of Beijing and rising tension with China.

Self-ruled Taiwan now has formal relations with only 16 countries, many of them small, less developed nations in Central America and the Pacific, including Belize and Nauru.

China claims Taiwan as its territory and says it has no right to formal ties with any nation.

Speaking to reporters in Taipei, Tsai said Taiwan would not bow to Chinese pressure, describing the Solomon Islands’ decision as new evidence that Beijing is trying to meddle in the January elections.

“Over the past few years, China has continually used financial and political pressure to suppress Taiwan’s international space,” Tsai said, calling the Chinese move “a brazen challenge and detriment to the international order.”

“I want to emphasize that Taiwan will not engage in dollar diplomacy with China in order to satisfy unreasonable demands,” she said.

China’s foreign ministry did not immediately respond to a request for comment.

Taiwan’s foreign minister, Joseph Wu, said Taipei would immediately close its embassy in the Solomon Islands and recall all its diplomats.

“The Chinese government attacked Taiwan purposely before our presidential and legislative elections, obviously aiming to meddle with the voting. The government strongly condemns this and urges people to hold on to its sovereignty and the value of freedom and democracy,” said Wu, whose resignation was rejected by Tsai.

“Taiwan has never bowed to pressure from one single setback, and it won’t be defeated by this blow,” Wu said, urging support from allies in the region to defend Taiwan’s freedom and democracy.

“AT ANY COST”

China has been trying to secure allies from Taiwan, and Burkina Faso, the Dominican Republic, Sao Tome and Principe, Panama and El Salvador had already cut off ties with Taipei.

Beijing has stepped up pressure to squeeze the island, which have included regular Chinese bomber patrols around Taiwan, since Tsai took office. China suspects Tsai of pushing for Taiwan’s formal independence, a red line for Beijing.

Tsai said the Chinese move could be an “attempt to divert attention” from months of protests in Chinese-ruled Hong Kong, and that China was forcing Taiwan to accept a formula similar to Hong Kong’s “one country, two systems” arrangement, which guarantees certain freedoms.

“I am confident that the 23 million people of Taiwan have this to say in response: not a chance.”

A senior official familiar with Taiwan’s security planning told Reuters Beijing had issued an “urgent order” to secure the Solomon Islands’ allegiance “at any cost” on Sunday night, and called it a move to distract domestic attention from the Hong Kong issue before the 70th anniversary of the founding of Communist China on Oct. 1.

The protests in Hong Kong pose the biggest challenge for Communist Party rulers in Beijing since President Xi Jinping took power in 2012.

The source said the rupture in ties had prompted expressions of concern from countries including the United States, Australia and New Zealand, who had been involved in efforts to help Taiwan secure ties with the Solomon Islands.

The Solomon Islands’ decision followed a months-long review of the pros and cons of a switch to Beijing, which was offering $8.5 million in development funds to replace support from Taiwan.

In a cabinet vote on Monday, there were 27 votes to shift ties and six abstentions, creating an “overwhelming” majority, a Solomon Islands member of parliament told Reuters. The prime minister’s office did not immediately respond to questions.

(Reporting By Yimou Lee; additional reporting by Ben Blencher in BEIJING and Jonathan Barrett in SYDNEY; Editing by Timothy Heritage)

Trump favors ‘whole deal’ with China, two sides prepare for trade talks

By Jeff Mason and Chris Prentice

WASHINGTON (Reuters) – President Donald Trump said on Thursday he preferred a comprehensive trade deal with China but did not rule out the possibility of an interim pact, even as he said an “easy” agreement would not be possible.

“I’d rather get the whole deal done,” Trump told reporters at the White House. “I see a lot of analysts are saying an interim deal, meaning we’ll do pieces of it, the easy ones first. But there’s no easy or hard. There’s a deal or there’s not a deal. But it’s something we would consider, I guess.”

The president’s remarks came as the world’s two largest economies prepare for new rounds of talks aimed at curbing a more-than-year-long trade war that has hurt global economic growth and rattled financial markets.

The two sides have been making conciliatory gestures ahead of the talks, lowering the temperature between them and cheering investors.

China renewed purchases of U.S. farm goods, which the United States welcomed, and Trump delayed a tariff increase on certain Chinese goods by two weeks in honor, he said, of Chinese President Xi Jinping.

Lower-level U.S. and Chinese officials are expected to meet next week in Washington ahead of talks between senior trade negotiators in early October. Top-level negotiators last met face-to-face in China in July.

Washington is pressing China to end practices it considers unfair, including intellectual property theft, industrial subsidies, currency manipulation, and forced technology transfer from U.S. companies to Chinese counterparts.

Trump has made clear he wants such elements to be part of a deal and has demonstrated his resolve through tariff increases, even when they dented gains in the stock market.

Meeting U.S. demands would require structural change in China, which so far it has been unwilling to make. The two sides came close to a deal in May, but Chinese officials balked at requirements that Chinese laws be altered as part of the deal.

ECONOMIC IMPACT

The trade war is affecting the global economy. The International Monetary Fund on Thursday forecast that U.S. and Chinese tit-for-tat tariffs could reduce global GDP in 2020 by 0.8% and trigger more losses afterward.

Still, global stocks rose on Thursday after the conciliatory gestures from both sides.

China importers bought at least 10 cargoes, or 600,000 tonnes, of U.S. soybeans for October-December shipment, the country’s most significant purchases since at least June, U.S. traders with direct knowledge of the deals said.

That came after Trump on Wednesday announced his delay in the increase in tariffs on some Chinese goods by two weeks and China exempted some U.S. drugs and other goods from tariffs.

While welcoming China’s overtures, U.S. Treasury Secretary Steven Mnuchin sought to temper optimism in markets that the gestures might lead to a trade deal. He told CNBC that Trump was prepared to keep or even raise tariffs on Chinese imports and that Beijing had asked for more concessions beyond the removal of tariffs.

“The next month is important,” Mnuchin said at a later event hosted by the New York Times. “We’re hopeful we’ll make progress. If we can get the right deal, we’ll do a deal.”

NO CHANGE ‘ON THE FUNDAMENTALS’

The Wall Street Journal reported that China was seeking to narrow the scope of negotiations to trade matters by excluding national security issues. National security issues have not, however, been a key topic in the trade talks so far.

The soybean purchases sent benchmark prices of the commodity, of which China is the top buyer, soaring. They were the largest by private Chinese importers since Beijing raised import tariffs on the U.S. oilseed by 25% in July 2018 in retaliation for U.S. duties on Chinese goods. Duties were raised an additional 5% this month.

U.S. farmers, a core component of Trump’s political base, have been among the hardest hit by the tariff battle that began more than a year ago and has escalated in recent weeks.

Earlier in the day in Beijing, Commerce Ministry spokesman Gao Feng said Chinese firms have started to inquire about prices for U.S. farm goods. He also said that China welcomed the U.S. delay to its scheduled tariff hike on billions of dollars worth of Chinese goods.

“(China) hopes both sides would continue to meet each other half way and adopt concrete actions to create favorable conditions for negotiations,” Gao told a briefing, noting that possible purchases included pork and soybeans, both of which are still subject to hefty Chinese duties.

China has bought U.S. pork despite tariffs of 62% in place since last year because huge numbers of pigs have been culled across the country as Beijing struggles to contain an outbreak of African swine fever. The world’s biggest pork consumer has hiked imports to make up the shortfall.

China said it would reduce purchases of U.S. farm products in August after Trump vowed to impose new tariffs on around $300 billion of Chinese goods.

On Wednesday Trump announced a delay in increasing tariffs on $250 billion worth of Chinese imports to Oct. 15 from Oct. 1. The tariffs on those goods were set to increase to 30% from 25%.

Earlier that day China announced it was exempting 16 types of U.S. products from tariffs, including some anti-cancer drugs and lubricants, as well as animal feed ingredients whey and fish meal.

William Reinsch, a former senior U.S. Commerce Department official, said the goodwill gestures should help, but big hurdles remained.

“Both sides are trying to find a way out of the box,” he said. “Short term, that’s good. But I don’t think anything’s changed on the fundamentals, and once they get back to the table, they’ll discover that.”

(Additional reporting by Stella Qiu, Ben Blanchard, Michael Martina, and Dominique Patton in Beijing, and Andrea Shalal in Washington; Editing by Sandra Maler)

Lantern-waving Hong Kong protesters take to hills, as leader pledges housing reform

By Jessie Pang and Lukas Job

HONG KONG (Reuters) – Hong Kong pro-democracy protesters took to the hills to form flashlight-carrying human chains on Friday, using the colorful Mid-Autumn Festival as a backdrop to the latest in more than three months of sometimes violent unrest.

The peaceful protests, on a day when families traditionally gather to gaze at the moon and eat mooncakes while children swing colorful lanterns from the end of sticks, came after Hong Kong leader Carrie Lam promised to focus on housing and jobs to try to end the turmoil.

Lam, who said she caused “unforgivable havoc” by igniting the crisis and would quit if she had the choice, said in a Facebook post her government would increase the supply of housing in the Chinese-ruled city.

“Housing and people’s livelihoods are the main priorities,” Lam said. “The government will add to housing supply measures which will be continuously put in place and not missed.”

Hong Kong has some of the world’s most expensive real estate and many young people say the city’s housing policy is unfair, benefiting the rich while forcing the less well-off to live with their parents or rent “shoe box” apartments at exorbitant prices.

Sun Hung Kai Properties, which reported its earnings on Thursday, said the current unrest was a wake-up call to both the government and private companies to build more housing.

Financial Secretary Paul Chan told reporters a new vacancy tax aims to push developers to launch completed apartments on to the market as soon as possible.

As darkness fell on Friday night, protesters armed with flashlights, mobile phones and lanterns gathered at Victoria Peak and Lion Rock.

They lined the path running along the north face of the Peak, looking across the harbor to Lion Rock in the distance, with mainland China beyond.

Protesters gathered in their hundreds across the territory, singing and chanting, in contrast to the violence of many previous weekends when police have responded with tear gas, rubber bullets and water cannon.

“Today, there’s not many here because we have an event in every district, and because this area is not a residential area, it’s a working area full of offices,” said protester Jason Liu in the Admiralty district of government offices and hotels.

The spark for the protests was a now-withdrawn extradition bill and concerns that Beijing is eroding civil liberties, but many young protesters are also angry at sky-high living costs and a lack of job prospects.

The demonstrations started in June in response to a bill that would have allowed people to be sent to mainland China for trial in Communist Party-controlled courts, but have broadened into calls for greater democracy.

The former British colony returned to China in 1997 under a “one country, two systems” formula that guarantees freedoms not enjoyed on the mainland – including a much-cherished independent legal system.

At lunch on Friday, hundreds of pro-Beijing supporters packed into a shopping mall waving China flags and singing the Chinese national anthem.

Sit-ins at shopping malls are also planned over the weekend.

Activists also plan to gather outside the British consulate on Sunday to demand that China honors the Sino-British Joint Declaration that was signed in 1984, laying out Hong Kong’s post-1997 future.

China says Hong Kong is now its internal affair. It denies meddling in Hong Kong and has accused the United States, Britain and others of fomenting the unrest.

Britain says it has a legal responsibility to ensure China abides by its obligations under the Joint Declaration.

Hong Kong is facing its first recession in a decade as a result of the unrest. A surge in migration applications suggests more locals are making plans to leave.

China has called on its biggest state firms to take a more active role in Hong Kong, including stepping up investment and asserting more control over companies.

Multiple Hong Kong events and conferences have been canceled and the number of visitors plunged 40 percent in August. The city’s premier women’s tennis event scheduled for October has been postponed.

Organizers also called off the Royal Shakespeare Company’s “Matilda the Musical”, due to run from Sept. 20 to Oct. 20.

Police on Tuesday set up an “anti-violence hotline” on which people could call in giving intelligence on planned unrest.

On Friday they announced it had been shut down because of “different opinions”.

(Reporting by Twinnie Siu, Clare Jim, Noah Sin, Marius Zaharia, Poppy McPherson, Lukas Job, Amr Abdallah and Farah Master; Writing by Nick Macfie; Editing by Giles Elgood and Alex Richardson)

U.S., China grant trade concessions as fresh talks loom

By Jeff Mason and Yawen Chen

WASHINGTON/BEIJING (Reuters) – U.S. President Donald Trump on Wednesday welcomed China’s decision to exempt some U.S. anti-cancer drugs and other goods from its tariffs and announced a short delay to scheduled tariff hikes on billions worth of Chinese goods.

Stock markets in Asia rose on the news in early Thursday trade, as the concessions came days ahead of a planned meeting aimed at defusing the escalating trade war between the world’s two largest economies.

China’s decision to exempt some U.S. goods was a “big move” by Beijing and a positive gesture before trade negotiators from both countries meet in Washington, Trump told reporters at the White House.

China on Wednesday announced its first batch of tariff exemptions for 16 types of U.S. products, including some anti-cancer drugs and lubricants, as well as animal feed ingredients whey and fish meal, according to a Ministry of Finance statement on its website.

“They made a couple of moves … that were pretty good,” Trump said at an unrelated event on vaping. “I think it was a gesture, okay? But it was a big move.”

On Wednesday, Trump wrote in a post on Twitter that the United States had agreed to delay increasing tariffs on $250 billion worth of Chinese imports from Oct. 1 to Oct. 15 “as a gesture of goodwill.” The tariffs were set to increase to 30% from 25% on the goods.

Trump said he hoped to reach a trade agreement with China following more than a year of tit-for-tat exchanges of tariffs that have roiled global markets.

“I deal with them and I know them and I like them,” he said. “I hope we can do something.”

Asian stocks rose on Thursday, while China’s yuan currency was also up 0.27 percent in offshore trade, as investors hoped for a thaw in U.S.-China trade frictions.

Deputy trade negotiators are due to meet in Washington in mid-September, with minister-level talks to follow in October. Exact dates for the meetings have not been released.

The gestures may ease tensions ahead of the negotiations, but some analysts don’t see it as a signal that both sides are readying a deal.

“The exemption could be seen as a gesture of sincerity towards the U.S. ahead of negotiations in October but is probably more a means of supporting the economy,” ING’s Greater China economist Iris Pang wrote in a note.

“There are still many uncertainties in the coming trade talks. An exemption list of just 16 items will not change China’s stance,” she said.

Indeed, the exempted list pales in comparison to over 5,000 types of U.S. products that are already subject to China’s additional tariffs. Moreover, major U.S. imports, such as soybeans and pork, are still subject to hefty additional duties, as China has ramped up imports from Brazil and other supplying countries.

Beijing has said it would work on exempting some U.S. products from tariffs if they are not easily substituted from elsewhere. The United States is by far China’s largest supplier of whey, which is an important ingredient in piglet feed and difficult to source in large volumes from elsewhere.

Analysts say that with its duties on soybeans and U.S.-made cars, China is taking aim at a key political support base of Trump, mainly the factories and farms across the Midwest and South at a time of receding momentum in the world’s top economy.

China has imposed several rounds of duties on U.S. goods in retaliation against U.S. Section 301 tariffs, beginning last year in July and August with a 25% levy on about $50 billion of U.S. imports.

In all, the United States and China have slapped tariffs on hundreds of billions of dollars worth of goods in a bitter trade war that has raised the specter of a global recession, with further tariffs slated to take effect in coming months.

The items on the two tariff exemption lists – posted on the ministry’s website – will not be subject to additional duties imposed by China on U.S. goods “as countermeasures to U.S. Section 301 measures,” the ministry said in its statement.

The exemption will take effect on Sept. 17 and be valid for a year through to Sept. 16, 2020, it said. Beijing said in May that it would start a waiver program, amid growing worries over the cost of the protracted trade war on its already slowing economy.

ING’s Pang noted the United States had also exempted imports of 110 Chinese products from tariffs in July, including high-value items such as medical equipment and parts.

TALKS

Chinese Vice Premier Liu He, U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin are expected to meet in early October in the U.S. capital, but key officials are tamping down expectations for a major accord.

For two years, the Trump administration has sought to pressure China to make sweeping changes to its policies on intellectual property protection, forced transfers of technology to Chinese firms, industrial subsidies and market access.

Beijing and Washington were close to a deal last spring but U.S. officials said China backed away from an agreed text over a reluctance to change laws to address U.S. complaints.

The South China Morning Post reported, citing an unidentified source, that China was expected to buy more agricultural products in hopes of a better trade deal with the United States.

Senior White House adviser Peter Navarro this week urged investors, businesses and the public to be patient about the trade dispute.

Earlier on Wednesday, a survey by a prominent American business association showed the trade dispute was souring the profit and investment outlook for U.S. companies operating in the world’s second-biggest economy.

(Reporting by Se Young Lee, Judy Hua, Dominique Patton, Yawen Chen, Huizhong Wu and Ben Blanchard in Beijing and Jeff Mason in Washington; Additional reporting by Makini Brice and Doina Chiacu; Writing by Yawen Chen and Andrea Shalal; Editing by Sam Holmes & Shri Navaratnam)

Hong Kong protesters pause to mark Sept. 11

By Jessie Pang

HONG KONG (Reuters) – Hong Kong activists called off protests on Wednesday in remembrance of the Sept. 11, 2001 attacks on the United States and denounced a Chinese state newspaper report that they were planning “massive terror” in the Chinese-ruled city.

Hong Kong has been rocked by months of sometimes violent unrest, prompted by anger over planned legislation to allow extraditions to China, but broadening into calls for democracy and for Communist rulers in Beijing to leave the city alone.

“Anti-government fanatics are planning massive terror attacks, including blowing up gas pipes, in Hong Kong on September 11,” the Hong Kong edition of the China Daily said on its Facebook page, alongside a picture of the hijacked airliner attacks on the twin towers in New York.

“The 9/11 terror plot also encourages indiscriminate attacks on non-native speakers of Cantonese and starting mountain fires.”

The post said “leaked information was part of the strategy being schemed by radical protesters in their online chat rooms”.

The former British colony of Hong Kong returned to China in 1997 under a “one country, two systems” formula that guarantees freedoms not enjoyed on the mainland, including an independent legal system, triggering the anger over the extradition bill.

Hong Kong leader Carrie Lam has said she will withdraw the bill but many Hong Kong residents fear Beijing is steadily eroding the autonomy of the Asian financial hub.

China denies meddling and has accused the United States, Britain and others of fomenting the unrest.

“We don’t even need to do a fact check to know that this is fake news,” said one protester, Michael, 24, referring to the China Daily post. “The state media doesn’t care about its credibility. Whenever something they claimed to have heard on WhatsApp or friends’ friends, they will spread it right away.”

The protesters called off action on Wednesday.

“In solidarity against terrorism, all forms of protest in Hong Kong will be suspended on Sept. 11, apart from potential singing and chanting,” they said in a statement.

The China Daily report was worrying, said another protester, Karen, 23. “When they try to frame the whole protest with those words, it alarms me,” she said. “They are predicting rather than reporting. I think people calling it off today is a nice move.”

FAMILY FRICTIONS

The chairwoman of the Hong Kong Federation of Women, Pansy Ho, a prominent businesswoman and daughter of Macau casino operator Stanley Ho, said she was worried about violent extremism.

“Children of all ages are indoctrinated with police hatred and anti-establishment beliefs at school and online mobilized to conduct massive school strikes,” she told the U.N. Human Rights Council in Geneva.

Lam said in a speech on Wednesday that Hong Kong was grappling with significant challenges.

“My fervent hope is that we can bridge our divide by upholding the one country, two systems principle, and the Basic Law, and through the concerted efforts of the government and the people of Hong Kong,” she told business leaders.

The Basic Law is Hong Kong’s mini-constitution.

Hong Kong airline Cathay Pacific Airways Ltd has become the biggest corporate casualty of the unrest after China demanded it suspend staff involved in, or who support, the protests.

Cathay Pacific said on Wednesday inbound traffic to Hong Kong in August fell 38% and outbound traffic 12% compared with a year earlier, and that it did not anticipate September to be any less difficult.

Joshua Wong, one of the prominent leaders of the 2014 “Umbrella” pro-democracy movement which brought key streets in Hong Kong to a standstill for 79 days, said in Berlin that the fight for democracy was an uphill battle.

“I hope one day not only Hong Kong people, but also people in mainland China, can enjoy freedom and democracy,” he said.

The protests spread to the sports field on Tuesday, as many football fans defied Chinese law to boo the national anthem ahead of a soccer World Cup qualifier against Iran.

Several peaceful protests are planned for the next few days, combining with celebrations marking the Mid-Autumn Festival.

(Reporting by Jessie Pang, Farah Master, Jamie Freed, Cecile Mantovani in Geneva and Michelle Martin in Berlin; Writing by Nick Macfie; Editing by Mark Heinrich & Simon Cameron-Moore)

Many U.S. farmers fume at Washington, not Trump, over biofuel, trade policies

FILE PHOTO: A crop scout walks through a soybean field to check on crops during the Pro Farmer 2019 Midwest Crop Tour, in Allen County, Indiana, U.S., August 19, 2019. REUTERS/P.J. Huffstutter

By P.J. Huffstutter and Tom Polansek

ROCHESTER, Minn./CHICAGO (Reuters) – American farmers helped elect President Donald Trump in 2016 on hopes he would shake up Washington and turn around a struggling agricultural economy, but many of his policies have actually stung farmers, notably his trade war with China and biofuel waivers for oil refiners.

Many farmers are angry, and some are directing their anger not at the Republican president, but at Washington’s bureaucracy.

Trump has faced backlash from agricultural groups, ethanol producers and Midwestern politicians upset that his trade war with China has slashed export sales of U.S. soybeans and other crops. Also, Corn futures tumbled after the government forecast a big crop when a flood-ridden spring stalled plantings. Corn-based ethanol plants shuttered after the administration granted waivers to dozens of exempting oil refineries.

Yet polls show that while Trump’s support in farm country has slipped, it remains substantial.

Instead of directing their anger at Trump, dozens of farmers interviewed by Reuters blasted the U.S. Department of Agriculture (USDA) and other Washington institutions they believe are thwarting his true agenda. Unsubstantiated conspiracy theories involving USDA staff are circulating in farm country and gaining traction online.

USDA did not respond to Reuters’ questions on Monday.

Farmers are struggling with how to emotionally process their pain from the Trump administration’s policies, and anger at the USDA may be a coping mechanism, said Ted Matthews, a Minnesota psychologist who has spent 30 years counseling farmers and rural residents across the Midwest.

“The question I hear from farmers who voted for (Trump) is, ‘We believed him when he said he would help make the farm economy better, that we could save our farms. Now, who do we blame?'” Matthews said.

Many farmers told Reuters they intend to support Trump again in his re-election bid in 2020.

“It’s much easier to be angry at a faceless Washington bureaucracy than at the man you voted for,” said Jere Solvie, 69, grain and hog farmer from west-central Minnesota who voted for Trump and still supports him.

Ahead of Democratic nominating contests, that party’s presidential candidates have been campaigning hard in Iowa and other Midwestern states where farms have lost billions of dollars in crop sales to China.

Still, the latest Reuters/Ipsos poll conducted last month shows five in 10 U.S. adults in rural areas approved of Trump’s performance in office, higher than his 41% approval nationwide.

Trump’s approval rating was 71% as of Aug. 23, down from 79% in July, according to trade publication Farm Journal Pulse’s poll of 1,153 farmers.

Of the farmers who supported the president, 43% said they “strongly approve” – down 10% from July and the first time the number fell below 50%. The farm journal’s poll came as ethanol groups complained that demand was decimated when Trump’s Environmental Protection Agency granted biofuel waivers to dozens of refineries, saving the oil industry hundreds of millions of dollars.

ALREADY FURIOUS

The USDA is a natural scapegoat and a topic of conspiracy theories among farmers suspicious of its sprawling bureaucracy, career employees and its research who sometimes conflicts with what they see on their own farms.

One farmer, enraged by the USDA’s corn crop estimate, threatened an agency employee last month. The threat of violence prompted USDA to pull all staff from a privately run crop tour that surveys Midwest crops.

This is a sharp contrast to the early days in the administration when Agriculture Secretary Sonny Perdue was a reliable point person. His folksy southern charm and his appeals to patriotism helped sell Trump’s policies to farmers, even the trade war.

But Perdue’s honeymoon in farm country has ended. Farmers booed the agriculture secretary in Minnesota last month after he joked: “What do you call two farmers in a basement? A whine cellar.”

“He’s supposed to support us, especially during times of distress,” said Gary Wertish, a fourth-generation Minnesotan who farms 500 acres of corn, soybeans and navy beans, and heard the remarks in person.

Grain farmers were already furious that corn futures prices <Cv1> posted their biggest drop in three years after USDA estimated a bigger-than-expected crop on Aug. 12, despite floods that slowed planting.

Market analysts said farmers have more of a localized view on crop health and are often skeptical of the national focus of USDA forecasts.

Trump voter Byron Heppler, a soybean and corn farmer from Calhoun, Kentucky, said he is open to considering other Republican candidates if any emerge. He said he believes USDA’s research methods are flawed and he feels its employees want to unseat Trump, although he offered no evidence to back up those views.

Other disgruntled farmers have also alleged, without offering evidence, that federal agriculture employees are overestimating corn plantings as part of a plot to hurt Trump in the 2020 election. These farmers said they believe USDA employees are upset the administration is relocating hundreds of economists and other researchers to Kansas City from Washington.

The agency has stood by its forecasts, saying they are in part based on surveys of thousands of farmers. On Trump’s order, the agency has rolled out $28 billion in trade aid support for farmers over the past two years.

Wes Hitchcock, a corn farmer and Trump supporter in Sparks, Nebraska, wrote a 1,700-word paper titled “USDA vs. Trump” and has repeatedly posted it on Facebook in a grain market discussion group with 13,000 members.

Hitchcock said he was unable to plant about 30% of the 2,200 corn acres he had planned to grow because of heavy rains this spring. The corn he did manage to plant is not looking great, either, he said.

“I’m going bankrupt and everybody else will this year too,” he said in a phone interview with Reuters.

His Facebook posts received some skeptical responses.

“To think the USDA deliberately is skewing numbers to make their boss look bad and that people appointed by the president allowed this to happen is delusional,” wrote a user named Zach Alger from Palmyra, Pennsylvania.

(Additional reporting by Rajesh Kumar Singh in Decatur, Illinois; Editing by Caroline Stauffer and David Gregorio)