By Trevor Hunnicutt and Mei Mei Chu
BEIJING, May 14 (Reuters) - China's Xi Jinping told President Donald Trump that trade talks were making progress at the start of a two-day summit on Thursday but warned that disagreement over Taiwan could send relations down a dangerous path.
The Chinese leader's remarks, reported by the official Xinhua news agency, set the stage for what Trump described as possibly the "biggest summit ever" following a pomp-filled reception at Beijing's imposing Great Hall of the People.
With Trump's approval ratings dented by his Iran war, the first visit by a U.S. president to America's main strategic rival since his last trip there in 2017 has taken on added significance.
After an opening ceremony that featured an honour guard and throngs of children excitedly waving flowers and flags, Xi opened the summit by telling Trump that stable relations between the world's two biggest economies benefit the entire world.
"When we cooperate, both sides benefit; when we confront each other, both sides suffer," he said in brief remarks that were open to media.
"You're a great leader, sometimes people don’t like me saying it, but I say it anyway," Trump responded. "There are those who say this may be the biggest summit ever," he added.
Behind closed doors, Xi said negotiations between economic and trade teams on Wednesday had reached an "overall balanced and positive outcome", according to a readout by China's state-run Xinhua news agency.
The latest round of negotiations aimed to maintain the trade truce struck between Trump and Xi last October and establish mechanisms to support future trade and investment, officials with knowledge of the matter said.
Xi also broached the subject of Taiwan, the democratically governed island claimed by China and armed by the United States.
The Chinese leader told Trump that Taiwan was the most important issue in U.S.-China relations and if handled poorly could lead to conflict and an extremely dangerous situation, according to the Chinese readout of the talks , which concluded after a little over two hours.
Joining Trump on the trip are a group of CEOs looking to resolve issues with China, including Elon Musk and Nvidia CEO Jensen Huang, a late addition. Trump has said his first request to Xi will be to "open up" China to U.S. industry.
Musk, Huang and Apple's Tim Cook were present during the opening talks between the leaders, with Musk telling reporters they were "wonderful" as he left the Great Hall.
This week's leaders' meetings will provide plenty of face time between Xi and Trump: after their initial talks, they will tour the UNESCO heritage site Temple of Heaven and attend a state banquet on Thursday, before taking tea and lunch together on Friday, according to the White House.
POWER DYNAMICS HAVE SHIFTED
The power dynamics have changed since Trump's last visit to Beijing when China went out of its way to lavish Trump and buy billions in U.S. goods, said Ali Wyne, senior adviser for U.S.-China relations at International Crisis Group.
"This time around it's the United States, unprompted, of its own volition, that is acknowledging that status," Wyne said, pointing out Trump revived the term 'G2', referring to a superpower duo, when he last met Xi on the sidelines of an APEC meeting in South Korea in October.
Trump enters the talks with a weakened hand.
U.S. courts have hemmed in his ability to levy tariffs at will on exports from China and other countries. The Iran war has also boosted inflation at home and escalated the risk that Trump's Republican Party will lose control of one or both legislative branches in November's midterm elections.
Though the Chinese economy has faltered, Xi does not face comparable economic or political pressure.
Nevertheless, both sides are eager to maintain a trade truce struck last October in which Trump suspended triple-digit tariffs on Chinese goods and Xi backed away from choking global supplies of rare earths, vital in making items from electric cars to weapons.
They are also expected to discuss forums to support mutual trade and investment and dialogue on AI issues.
Washington looks to sell Boeing airplanes, farm goods and energy to China to cut a trade deficit that has long irked Trump, while Beijing wants the U.S. to ease curbs on exports of chipmaking equipment and advanced semiconductors, officials involved in the planning said.
IRAN, TAIWAN IN FOCUS
Aside from trade matters, Trump is expected to encourage China to convince Iran to make a deal with Washington to end the conflict. But analysts doubt that Xi will be willing to push Tehran hard or end support for its military, given Iran's value to Beijing as a strategic counterweight to the U.S.
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 are stuck in the Gulf and a slowdown in the global economy would hurt Chinese exporters.
For Xi, U.S. arms sales to Taiwan are a top priority.
China reiterated on Wednesday its strong opposition to the sales, with the status of a $14-billion package awaiting Trump's approval still unclear. The U.S. is bound by law to provide Taiwan with the means to defend itself, despite a lack of formal diplomatic ties.
Xi has a reciprocal visit tentatively planned for later this year, which would be his first visit to the United States since Trump re-took office in 2025.
(Reporting by Trevor Hunnicutt and Mei Mei Chu in Beijing and Ben Blanchard in Taipei; Additional reporting by Beijing newsroom; Writing by John Geddie; Editing by Don Durfee, Sanjeev Miglani and Lincoln Feast.)
