Chinese and U.S. officials have met in Beijing for talks on tough issues dividing the two largest economies, as trade and tariffs increasingly draw attention in the runup to the U.S. presidential election.

China’s Ministry of Finance said Beijing raised objections to higher tariffs on Chinese exports, two-way investment restrictions and other limits on trade and technology during the talks by the countries’ Economic Working Group. In a statement, it characterized the Monday-Tuesday talks as “constructive.”

The talks sent a “positive signal,” the Global Times, a newspaper of China’s ruling Communist Party, said in an article published late Tuesday.

“This positive trend, despite lingering disputes, offers much-needed reassurance for businesses of the two countries as well as the international community amid rising global challenges,” it said.

The U.S. Treasury Department said U.S. officials reiterated concerns over Chinese industrial policy practices and overcapacity, and the resulting impact on U.S. workers and firms.

That reflects worries that as China’s economy slows, partly due to a prolonged crisis in its property market but also longer term trends such as an aging population, its leaders are likely to rely more heavily on boosting export manufacturing to make up for weak demand at home.

Given China’s already huge market shares in many industries, that could boost capacity to unsustainable levels and crowd foreign manufacturers out of many industries, some economists say.

One example: photo-voltaic solar panels, where massive investment means that China controls about 80% of the market share for all manufacturing stages, according to a recent report by the International Energy Agency. The rapid ascent of Chinese suppliers has raised proposals in Europe for import controls, but those could slow the region’s progress in combating climate change but cutting carbon emissions.

The two sides said the talks in Beijing also touched on issues such as debt problems in developing countries, financial cooperation and economic policies.

“U.S. officials reaffirmed that the U.S. is not seeking to decouple the two economies and instead seeks a healthy economic relationship that provides a level playing field for American companies and workers,” the Treasury Department said.

It said both sides agreed to meet again in April.

Exchanges between the two powers picked up last year, gaining momentum after President Joe Biden met with Chinese leader Xi Jinping at a November summit in San Francisco, California.

But despite the slight improvement in relations, tensions remain high, particularly over Taiwan. Biden has kept in place most of the tariffs on Chinese imports that former President Donald Trump imposed when he launched a trade war in 2018.

His administration has also tightened controls on Chinese access to advanced computer chips and the technology to make them, along with other strategically sensitive know-how.

Reports that Trump would raise tariffs even higher if he is elected have shaken fragile investor sentiment in China, where the financial markets are in the midst of a prolonged slump.

The Economic Working Group’s meeting was its third since it was established in September and its first in Beijing. A Treasury delegation met with Chinese Vice Premier He Lifeng while in Beijing and conveyed a message that Yellen hoped to visit China at an “appropriate time.”

(AP)