China tells Donald Trump that it does not want a trade war – and that US firms 'would lose' if there was

China and the US should 'sit down and talk to each other', says Li Keqiang

China's Premier Li Keqiang speaking during a news conference after the closing ceremony of China's National People's Congress (REUTERS/Jason Lee)

China’s Premier said his country does not want a trade war with the US, but he warned that American firms will lose out unless common ground can be found.

"Our hope on the Chinese side is that no matter what bumps this relationship hits, we hope it will continue to move forward in a positive direction," Li Keqiang told a news conference.

He added: "We do not want to see any trade war breaking out between the two countries. That would not make our trade fairer."

He was speaking ahead of a highly anticipated meeting between Donald Trump and Chinese President Xi Jinping next month.

The US leader has called China a “currency manipulator” and accused the country of underhand trading and economic tactics.

He has also criticised China for its perceived lack of interest in reining in nuclear-armed North Korea.

Despite tensions between the two countries, Mr Li said that he believed China’s relationship with the US could continue to move “in a positive direction”.

He added that he wanted to reassure investors that China’s economy is strong and stressed Beijing's support for globalisation and free trade at a time of rising protectionism.

His comments came ahead of a visit by US Secretary of State Rex Tillerson, who has previously advocated a US naval blockade of artificial Chinese islands in the South China Sea.

But Mr Li, who recognised the two countries' extensive common interests, said China and the US should “sit down and talk to each other” to overcome differences and find solutions.

China’s Premier also said that trade and investment ties between the world's two largest economies created up to one million American jobs last year.

“Should a trade war break out between China and the United States, it would be foreign-invested companies, in particular US firms, that would bear the brunt of it,” he said.

Mr Li admitted there are risks to China's economy but said talk of a sharp slowdown should stop.

"But I believe that our economic performance in the past several years ... should suffice to put a full stop to such prophesies of a hard landing,” he said.

Last year, China’s economy grew by 6.7 percent but this year growth target was cut to around 6.5 per cent.

Analysts have said the country's reliance on credit-fueled growth and its rising debt are increasing the chances of a financial crisis in the future.