The first minister-level meetings in more than 2 months between the world's two biggest economies are set to begin on Thursday.
The offshore yuan was yanked lower before mainland markets opened after the South China Morning Post (SCMP) reported no progress at deputy-level trade talks and that the Chinese delegation planned to leave Washington a day early.
Chinese Vice Premier Liu He, U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin will seek to narrow differences enough to avoid a scheduled October 15 tariff rate increase on $250 billion worth of Chinese goods.
But the atmosphere surrounding the talks was soured by the U.S. Commerce Department's decision on Monday to blacklist 28 Chinese public security bureaus, technology and surveillance firms, citing human rights violations of Muslim minority groups in China's Xinjiang province. The US also placed visa bans on officials linked to the mass detention of Muslims from the region.
China is downplaying expectations for progress on its trade talks with the USA, despite President Trump's optimistic remarks on Wednesday.
"The US has previously stressed that it wants a comprehensive trade deal covering a range of issues including IP protection and market access, which remain key points of contention", they said in a note on Thursday.
China refused to talk about forced technology transfer and also skirted the issue of state subsidies during the deputy-level meetings, SCMP said, citing a source with knowledge of the meetings.
At the same time, a fight over free speech between China and the US National Basketball Association (NBA), triggered by a tweet by the Houston Rockets general manager backing Hong Kong's protesters, has underscored the tensions.
Trade talks between the United States and China cooled off before they even started.