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Since 1st March, 1999
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China adds fuel to US row

Shanghai, Nov. 26 (Reuters): China said today it had found fungus in a soybean cargo from the US, potentially adding fuel to a simmering trade row between the economic giants marked more by its bark than its bite.

Japan said the row was unlikely to blow up into anything worse since both China and the US had too much to lose.

“I don’t think it’s for real, they would both lose out,” Japanese trade and industry minister Shoichi Nakagawa said on the sidelines of a forum in Tokyo. “It’s more that the issue for the US is intellectual property rather than goods.”

An official with the quarantine bureau at the southern Chinese port of Shenzhen said the discovery of the fungus, which had been talked about in the markets, had nothing to do with the wider dispute and the cargo had in fact been long since unloaded.

“It’s not related to what’s happening to US-China trade relations, that’s a separate issue,” the official said. “This is not the first time we’ve found fungus in some cargoes.”

The cargo of 60,500 tonnes of US soybeans had been unloaded earlier this month, he added.

“It (the fungus) is common both in the US and China. It’s not a big issue. But if you wanted it to be a big issue, it will become a very big issue,” said an industry source in Beijing.

But the wider dispute was unlikely to stray beyond symbolic salvoes and it was in the interests of both countries to keep economic disputes from marring political cooperation, economists and political analysts said.

But one political issue — Taiwan — was sufficiently charged to exacerbate the trade battle, they said. Chinese Premier Wen Jiabao’s visit to the US next month would be a major test.

The rhetoric heightened this year with US complaints about China’s pegged yuan currency, which it said was unreasonably cheap and gave Chinese goods an unfair trade advantage at the cost of US jobs.

Last week, the US moved to limit Chinese textile imports. Days later, Beijing announced it would raise duties on some American goods, but said that was in response to US steel tariffs imposed a year-and-a-half ago.

Then on Monday, the US commerce department ruled that televisions from four Chinese firms were being dumped in the US — sold at less than fair value — and slapped provisional duties on the sets.

China fired back at the TV duties, calling them discriminatory and unfair and saying it was “gravely concerned”.

“This is more bark than bite on the US side,” said Hong Liang, a China economist at Goldman Sachs in Hong Kong. “And I think whatever response comes from the Chinese side will be the same. It’s more symbolic than real.”

Still, the friction has stoked fears of what could happen if the tiff were to escalate into a trade war between the world’s biggest economy and its most populous country. At its worst, such a confrontation could hurt cooperation on North Korea and the US-led war on terror.

“The economic relationship is always separated from the political and security relationship between these two countries,” said Yan Xuetong, a professor of international relations at Beijing's Tsinghua University.

But he did not rule out Chinese retaliation on the trade front. A group of Chinese business leaders scheduled to travel to the US with Wen had received no new information about the visit, he said, meaning it had been put on ice.

If Wen fails to win clear support from Washington over the thorny issue of Taiwan, which Beijing considers a wayward province to be brought back to the fold, by force if necessary, the trade spat could deepen.

Washington shifted its diplomatic recognition to Beijing from Taipei in 1979 and has repeatedly said it views Taiwan as being part of China.

US secretary of state Colin Powell reaffirmed Washington’s “one China” policy earlier this month.

Nevertheless, the US remains Taiwan’s biggest ally and arms supplier.

“I think the Chinese need the US on the Taiwan issue and the US needs China on North Korea and Iraq,” said Liang.

“They have been able to overcome major hurdles much bigger than this in the past, so I think at the end of the day pragmatism may overcome any ideology or other political posturing.”

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