To add quotes

The US president is visiting China for the first time since 2017.

Chinese President: Trade talks are making progress

Xi warns that the Taiwan issue could lead to conflict

Trump, damaged by the war with Iran, seeks economic gains

BEIJING, May 14 (Reuters) - Chinese President Xi Jinping told his U.S. counterpart Donald Trump on Thursday that trade talks were making progress at the start of a two-day summit, but warned that the dispute over Taiwan could send relations down a dangerous path.

Xi’s remarks, carried by China’s Xinhua news agency, paved the way for what Trump described as possibly “the biggest summit ever,” following a grand reception at the Great Hall of the People in Beijing.

With his approval ratings declining due to his involvement in the Middle East war, Trump's visit to China is of great importance, being the first by a US president to the United States' main strategic rival since his last visit in 2017.

After a ceremony that included a guard of honor and crowds of children waving flowers and flags, Xi opened the summit, telling Trump that a stable relationship between the two countries would benefit the entire world.

"When we cooperate, both sides benefit; when we confront each other, both sides suffer," he said in brief remarks carried by the media.

Trump responded, "You're a great leader. Sometimes people don't like me saying that, but I say it anyway." He added, "Some people are saying this could be the biggest summit ever."

According to a report from Xinhua, Xi also said that preliminary talks held by South Korea's economic and trade teams on Wednesday had reached "a generally positive and balanced outcome".

Officials said the aim of the latest round of negotiations was to maintain the trade truce agreed upon last October and to put in place mechanisms to support trade and investment in the future.

Xi also touched on the issue of Taiwan, the democratically governed island that China claims as part of its territory and which is armed by the United States.

A Chinese statement on the talks, which concluded after just over two hours, said that Xi told Trump that Taiwan was the most important issue in US-China relations, and that mishandling it could lead to conflict and a very dangerous situation.

Trump is accompanied on this visit by a group of CEOs seeking to resolve issues with China, including Elon Musk and Nvidia CEO Jensen Huang, who joined the trip at the last minute. Trump said his first request to Xi would be to "open up" China to American industry.

Musk, Huang, and Apple CEO Tim Cook attended the opening talks between the two leaders, which Musk described to reporters as he left the Great Hall of the People as "fantastic".

The White House said the two leaders' meetings this week will provide a great opportunity for direct contact between them after the initial talks. They will tour the Temple of Heaven, a UNESCO World Heritage site, and attend a state banquet on Thursday before having tea and lunch together on Friday.

* Changes in power mechanisms

Ali Wein, senior adviser on US-China relations at the International Crisis Group, said that the power dynamics have changed since Trump’s recent visit to Beijing, when China went to great lengths to woo Trump and buy billions of dollars’ worth of American goods.

Wayne added, "At that time, China was trying to convince the United States of its growing status... This time, it is the United States that is recognizing this status of its own volition."

They noted that Trump revived the term “G2,” or the Group of Two, referring to the two superpowers, when he last met Xi on the sidelines of the Asia-Pacific Economic Cooperation (APEC) forum meeting in South Korea in October.

Trump enters the negotiations from a position of weakness. US courts have limited his ability to impose tariffs at will on exports from China and other countries. Furthermore, the trade war with Iran has fueled inflation domestically and increased the likelihood that Trump's Republican Party will lose control of one or both houses of Congress in the November midterm elections.

Despite the Chinese economy's struggles, Xi does not face similar economic or political pressures.

However, both sides are keen to maintain the trade truce, under which Trump suspended hefty tariffs on Chinese goods, and Xi backed down from choking off global supplies of rare earth minerals, which are vital to the manufacture of products ranging from electric cars to weapons.

They are also expected to discuss holding forums to support mutual trade and investment and dialogue on artificial intelligence issues.

Officials said Washington is looking to sell Boeing aircraft, agricultural goods and energy products to China to reduce the trade deficit that bothers Trump, while Beijing wants the United States to ease restrictions on exports of advanced chip-making equipment and semiconductors.

Iran and Taiwan

Aside from trade issues, Trump is expected to urge China to persuade Iran to reach an agreement with Washington to end the conflict. However, analysts doubt Xi is willing to pressure Tehran or end support for its military, given Iran's importance to Beijing as a strategic counterweight to the United States.

U.S. Secretary of State Marco Rubio told Fox News aboard Air Force One that it was in China's interest to help resolve the crisis, as many of its ships were stuck in the Gulf, and a slowdown in the global economy would hurt Chinese exporters.

China reiterated its strong opposition to the sales on Wednesday, while the fate of a $14 billion deal awaiting Trump's approval remains unclear. The United States is legally obligated to provide Taiwan with the means to defend itself, despite the absence of formal diplomatic relations between the two countries.

Xi is tentatively scheduled to visit the United States later this year, which would be his first visit to the country since Trump returned to power last year.