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US Navy ship sails near disputed islands in South China Sea

08 January 2019

The move comes amid the first round of trade talks between the USA and China since both countries agreed to a 90-day ceasefire in the on-going trade war that saw both sides slapping tariffs on each other's imports.

Members of the delegation to China leave a hotel in Beijing on January 7, 2019.

The trade talks are the result of an agreement last month between U.S. President Donald Trump and Chinese President Xi Jinping to halt the tit-for-tat tariff conflict between the two countries for 90 days starting on New Year's Day. China has said it could consider a deal that involves increasing its purchases of USA goods.

The official Chinese media highlighted that the negotiations came at a time when the two countries toned down mutual criticism, offering hope of a possible agreement.

Instead, the meeting of deputy-level negotiators will give each side a chance to take stock and serve as a litmus test for whether a deal can be achieved before March 1, when Trump has threatened to impose another round of tariffs and to raise duties on imports to 25% from 10%.

Last year, Trump imposed tariff hikes of up to 25 percent on $250 billion of Chinese goods, with China retaliating with its own tariff increases on $110 billion of US exports.

The talks are occurring as Chinese growth - 6.5 percent in the July-to-September period - fell to its lowest point in a decade.

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China and the United States have in the past repeatedly traded barbs over what Washington says is Beijing's militarisation of the South China Sea by building military installations on artificial islands and reefs.

China on Friday cut bank reserve requirements amid slowing growth at home and pressure from the United States tariffs. The incident could have caused a collision, US officials said at a time. Weak real estate sales are forcing developers to cut prices.

"The Chinese side immediately sent military vessels and aircraft to conduct verification and identification on the USA ship and warned it to leave", Lu told the briefing.

Speaking at a conference on China organized by the Swiss bank UBS, former Goldman executive Fred Hu said that China not only could not but should not dismantle its economic system in favor of a market-based economy, according to Bloomberg. But surveys show consumer confidence is weakening because of concern that growth will slow this year.

But observers fear the time constraints and substantial range of prickly issues, including those Beijing considers core to its development, will make it hard to reach a deal. Both Taiwan and Vietnam also claim the Paracel Islands, and the US has contended that its ships passed through only worldwide waters, which Chinese officials refuted.

American companies like Apple and FedEx have already attributed lowered revenue estimates to the trade war with China.

These two nations had been locked in a tariff war for much of the 2018, inflicting agonizing wounds and disrupting the flow of hundreds of billions of dollars, while both of the countries had suffered awful, alongside the global economy.

US Navy ship sails near disputed islands in South China Sea