The leaders of the United States and China have both underscored their desire to sign an initial trade deal and defuse a 16-month tariff war that has lowered global growth, providing a welcome boost to financial markets.
Chinese President Xi Jinping, in rare comments on the trade tensions with Washington, said on Friday Beijing wants to work out an interim or "phase one" trade pact, but is not afraid to retaliate when necessary.
Hours later, US President Donald Trump said a trade accord with China is "potentially very close" although he insisted that any deal would have to be weighted to favour the United States after years of trade imbalances with China.
Speaking on Fox New Channel's Fox & Friends, Trump also urged China and Hong Kong to calm the situation in Hong Kong, racked by months of pro-democracy protests, calling it a complicating factor in the trade talks.
Economists say the prolonged dispute between the world's two largest economies is lowering global growth, disrupting supply chains, curtailing investment and curbing business confidence.
"We want to work for a 'phase one' agreement on the basis of mutual respect and equality," Xi told representatives of the New Economy Forum organised by Bloomberg LP, according to a pool report.
"When necessary we will fight back, but we have been working actively to try not to have a trade war. We did not initiate this trade war and this is not something we want."
Global financial markets retreated this week on fresh fears that the trade talks could flounder, unnerved by reports that Trump could sign into law two bills backing protesters in the Chinese-ruled city of Hong Kong.
Trump did not make clear his intentions during the Fox News interview, saying, "We have to stand with Hong Kong but I'm also standing with President Xi."
Concerns of a broader deterioration in Sino-US ties weighed on markets this week. US Navy warships twice sailed near islands claimed by China in the South China Sea in recent days, angering Beijing.
Completion of a phase one trade deal could slide into next year, trade experts and people close to the White House have told Reuters, with Beijing asking for more extensive tariff rollbacks and Washington countering with increased demands of its own.
Trump said he was troubled by Xi's insistence on "equality", countering that the US had suffered for years due to large Chinese trade surpluses.
"I told President Xi, 'This can't be like an even deal. We're starting off from the floor and you're already at the ceiling,'" Trump said in the Fox News interview.
China's official Xinhua news agency quoted Xi as saying ties between Washington and Beijing were at a pivotal moment.
"Both the United States and China should strengthen their communication over strategic issues and avoid misunderstanding and misjudgement," it quoted Xi as saying during a meeting with former US Secretary of State Henry Kissinger in Beijing.
China has invited top US trade negotiators for a new round of face-to-face talks in Beijing, the Wall Street Journal said, citing unnamed sources. It added that Beijing hoped the talks could take place before next Thursday's US Thanksgiving holiday.
US officials have indicated willingness to meet but have not committed to a date, it added, and they would be reluctant to travel for the discussions unless China made clear that it would make commitments on intellectual property protection, forced technology transfers and agricultural purchases.
Trump told reporters at the White House the US-China trade deal was coming along well, adding, "The question is whether or not I want to make it."
Officials from Beijing had suggested Xi and Trump might sign a deal before December 15, when US tariffs on about $US156 billion in Chinese goods are set to take effect, including holiday gift items such as electronics and Christmas decorations.
Australian Associated Press
