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What's At Stake: China, U.S. Tech Firms Meet in Seattle

Before the president of China meets with Barack Obama in Washington, Xi Jinping will sit down with Bill Gates in Seattle -- a meeting that
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With the possibility of sanctions looming, Chinese President Xi Jinping could ruffle feathers in Washington this week by meeting with American tech CEOs in Seattle before visiting Barack Obama in the nation's capital.

Xi will speak before executives from Apple, Amazon, IBM and other U.S. companies at a roundtable hosted by the Paulson Institute on Wednesday, which will also be attended by the CEOs of large Chinese tech firms including Baidu and Alibaba.

The Chinese leader will meet with other tech-industry leaders, according to the Wall Street Journal and New York Times, before flying to Washington, D.C., on Thursday. Aside from causing traffic problems in Seattle, Xi's visit is raising some eyebrows as tensions rise over cyber-attacks against U.S. agencies and corporations.

What Beijing wants from Xi's Seattle visit

Last week, Beijing denounced U.S. claims of cyber-espionage as "groundless accusations." That came after a draft cybersecurity law introduced in July by China's parliament that calls for tighter control of the Internet within the country's borders— a move that some U.S. businesses have complained is about protecting Chinese firms from competition.

Still, U.S. businesses want to be in China, and Beijing will likely try to use that to influence U.S. policy, according to David Bachman, professor of international studies at the University of Washington.

"China's best-case scenario is driving a wedge between tech companies and the U.S. government," Bachman told NBC News. "They want the U.S. companies to lobby for the government to not punish China severely and maintain business as usual."

Not that Beijing wants to upset Washington. With its economy slowing, China doesn't want to damage its relationship with its top trading partner, as tensions could hurt economic growth and, consequently, create political unrest at home.

"I think that this forum matters more to China than it does to the United States," Tom Nagorski, executive vice president of the non-profit Asia Society, told NBC News.

Ultimately, Xi wants what politicians everywhere want: to have his cake and eat it too. In this case, that would involve quelling tensions with Washington while not making any major concessions.

"I'm not sure they are going to get what they want," Bachman said.

Still, even if China doesn't get its way, the tech forum gives Chinese officials a great opportunity to score photo ops with respected tech executives and look pro-active, Nagorski said, which could help boost their profiles back home.

What the White House wants

In May, the U.S. government charged six Chinese citizens with stealing trade secrets from American companies. Several government officials have accused China of carrying out what could be the largest cyber-attack in U.S. history -- the background data breach of the U.S. Office of Personnel Management, which affected 21.5 million people.

"We are preparing a number of measures that will indicate to the Chinese that this is not just a matter of us being mildly upset," Obama told a group of executives at the Business Roundtable in Washington last week.

Those measures could include sanctions against Chinese companies, though the White House said Tuesday it does not expect to level economic sanctions ahead of Xi's visit.

With such a tricky diplomatic road ahead of them, White House officials might not appreciate the input of powerful tech executives they can't control, Bachman said.

"The U.S. doesn't like the timing and they don't like China's attempt to create a mixed message," he told NBC News.

Ultimately, Obama wants the same things that many in Silicon Valley want -- a more welcoming atmosphere for American tech companies and fewer cyber-attacks against U.S. targets.

The problem is that tech companies haven't always seen eye-to-eye with Washington lawmakers. In February, CEOs from Yahoo, Facebook and Google all declined an invitation to Obama's cybersecurity summit amid tensions over the data collection policies of the U.S. government.

The White House is hoping that tech companies can convince Chinese officials that Obama isn't the enemy, Bachman said, especially as Republican presidential candidates take a harder line against China during primary season.

One step forward could be what the New York Times has called "the first arms control accord for cyberspace," a potential U.S.-China deal that doesn't address all of Washington's concerns, but at least provides a starting point for further negotiations over cyber-espionage.

What tech companies want

The Chinese market represents a treasure trove of potential customers -- just ask Apple. In the first nine fiscal months of 2015, more than 25 percent of the company's sales (which comes out to $182.2 billion) came from mainland China, Hong Kong and Taiwan.

The country has around 649 million Internet users, according to its own statistics, which is larger than the entire population of the United States.

That lucrative market is why many companies are careful when criticizing China for corporate espionage, protectionist policies, and censorship laws that have kept some tech companies, including Google and Facebook, out of the country.

"The tech companies have to think about the optics of sitting down with the guy responsible for censoring the Chinese Internet," Bachman said.

So what do tech companies do when they want to grow their business in China but don't like Chinese policies?

They could end up trying to get on Beijing's good side while hoping that Obama scares them into changing their ways, Bachman said. "A sort of good cop, bad cop approach, with the White House being the bad cop."

An outcome along those lines might prevent an unpleasant choice for tech companies: either stay away from China or agree to restrictive policies that could damage their reputations in other parts of the world.

"They want to meet with Xi Jinping and they want to cultivate a Chinese business market," Bachman said, "but they have their own concerns about China's policies."