Stocks rally as Xi calms jitters over US-China trade row

The Chinese version of the Buick Envision is selling

U.S stock futures rallied, Asian equities bounced and the safe haven yen fell on Tuesday as Chinese President Xi Jinping promised to lower import tariffs on products including cars, helping soothe investor jitters over an escalating U.S.

Mr Xi's renewed pledges to open up the vehicle sector come after Mr Trump criticised China for maintaining 25% auto import tariffs compared to 2.5% duties in the United States, calling such a relationship with China not free trade but "stupid trade".

Mr Xi tried to position China as a defender of free trade and cooperation in response to Mr Trump's "America first" calls for import restrictions and an overhaul of trade deals to make them more favourable to the United States.

During an eagerly awaited speech at a development conference on the tropical Chinese island of Hainan, Xi billed the planned cut in vehicle tariffs and a series of other measures as "a new phase of opening up".

Mr Xi said Beijing will "significantly lower" tariffs on vehicle imports this year and ease restrictions on foreign ownership in the auto industry "as soon as possible".

Mr Trump's move last week to threaten China with tariffs on $50 billion in Chinese goods was aimed at forcing Beijing to address what Washington says is deeply entrenched theft of USA intellectual property and forced technology transfers from U.S. companies. Beijing fired back with its own $50 billion list of US goods for possible retaliation.

He also promised to encourage "normal technological exchange" and to "protect the lawful ownership rights of foreign enterprises".

Last month, the United States filed a WTO complaint accusing Beijing of violating its trade pledges by imposing unfair contract terms and allowing companies to use foreign-owned technology after licensing periods expire. -China tariffs will explode into a full-scale trade war in a blow to global growth.

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"This speech did not represent a major shift in Chinese policy and it is likely the US-China trade dispute will require more negotiation", said JP Morgan's Zhu.

Foreign companies complain Beijing is squeezing them out of promising parts of the state-dominated economy to promote the ruling Communist Party's plans to create Chinese global competitors in fields including robotics, electric cars and pharmaceuticals. -China Business Council, which represents companies that deal with China, welcomed Xi's announcement but expressed hope for additional steps such as ending requirements for joint ventures and technology licensing.

They now are limited to a 50% stake in joint ventures, and are not allowed to establish wholly owned factories. "The focus now shifts to the possible USA response", economists at Nomura said.

But Vice Commerce Minister Qian Keming said at the forum on Tuesday that China's economic reforms were driven by domestic factors and not due to external pressures.

Trump has often slammed China's huge surplus in the trade of goods with the United States, which reached $375 billion a year ago, according to USA data. "We have a genuine desire to increase imports and achieve a greater balance of global payments".

"We will not bully our neighbors", the president said. But he stressed the need for tackling problems through dialogue rather than confrontation, warning against adopting a "Cold War mentality". China has pledged to "counterattack with great strength" if Trump decides to follow through on that threat.

Xi's comments prompted a rapid and largely positive reaction in financial markets, which have been rattled over the past week on fears the tit-for-tat U.S.

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