In China, Suspicions Cloud Trade Dispute Involving Tech Companies

BEIJING — At an elegant guesthouse here recently, China’s top Internet regulator entertained ambassadors and diplomats with platters of tempura and roast on a spit, unusual lavishness in an era of official austerity in China, to celebrate the Chinese New Year.

But the graciousness came with a warning: Foreign companies had to behave if they wanted to stay in China’s $450 billion technology market.

In Washington on the same day, more than two dozen American tech industry executives and trade association officials gathered at an emergency meeting at the pre-Civil War building of the Office of the United States Trade Representative. They told the deputy trade representative that it was time for the United States to get tough with Beijing.

The stern words at the dueling gatherings underscored how a routine trade disagreement had quickly escalated into a complex political fight. On Friday, the battle lines became even more clear, when a top United States official criticized China for the new regulations on American tech companies.

The conflict has escalated sharply for months. Now, it pits a confident Chinese leadership, alarmed by evidence of online espionage by the United States, against an awkward alliance between the Obama administration and Silicon Valley — which itself is wary of Washington but is also salivating over the huge Chinese market.

China also argues the United States has engaged in restrictions similar to those pursued by the Chinese. The American tech official said that Mr. Lu cites the instructions by Gary Locke, then secretary of commerce, to Sprint Nextel in 2010 to not buy equipment from Huawei, the Chinese telecommunications equipment maker, because of security concerns.

One potential option to help defuse the situation, said Jon M. Huntsman Jr., a former American ambassador to China, is trying to tie the technology trade issues to broader trade talks between the countries. The Obama administration is in the middle of negotiating a bilateral investment treaty with China that covers industries like financial services and energy but not technology.

“There needs to be a pathway to develop rules of the road,” Mr. Huntsman said. “These are complicated issues.”

Jane Perlez reported from Beijiing, and Paul Mozur from Hong Kong.

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The New York Times