MNI EXCLUSIVE:China Advisors: US Dispute To Last Months, Years

By Iris Ouyang

     BEIJING (MNI) - Some Chinese government advisors expect trade war

hostilities to flare again between Beijing and Washington and to last years

despite the 90-day truce agreed by presidents Xi Jinping and Donald Trump,

although others hoped the acute phase of the dispute might be drawing to a

close.

     While the deal, under which China has offered to buy more American products

and the U.S. will hold off from boosting tariffs on $200 billion in Chinese

imports during a 90-day negotiation period, reinforces hopes that both sides are

willing to seek a solution, the Chinese government should nonetheless prepare

for a re-initiation of hostilities, several advisors told MNI.

     "I'm 70% positive and 30% worried," Wang Haifeng, director of international

trade and investment at the Institute for International Economic Research,

affiliated with the National Development and Reform Commission told MNI. "The

G20 talk (between Xi and Trump over dinner in Buenos Aires) showed both sides'

willingness to further negotiate, which is a good sign, but it's very hard to

resolve all the problems in 90 days."

     --PREPARE FOR LONG HAUL

     Wang expected the dispute, centred on China's state-driven economic model

and what the U.S. sees as theft of technology, to drag on for about another two

years. Mei Xinyu, a researcher at the Chinese Academy of International Trade and

Economic Cooperation under the Ministry of Commerce, told MNI that it could take

as long as five years, and that China should prepare for the possibility that

the U.S. will boost tariffs on all Chinese exports.

     Their comments came as some of the initial optimism with which financial

markets greeted the Xi-Trump deal wore off. The yuan strengthened and Asian

stocks were mainly weaker on Tuesday.

     Differences between U.S. and Chinese accounts of the meeting highlighted

tough issues, advisors told MNI.

     While a Chinese communique said the U.S. would not impose tariffs on

additional Chinese products and that both sides would work towards eliminating

punitive levies, these points went unmentioned in a White House statement, which

only referred to the decision to leave U.S. tariffs on some Chinese goods at 10%

for now. The U.S. said China would "immediately" start purchasing agricultural

products, but Beijing only stated that it was willing to open its markets and

increase imports based on the pace of its economic reforms and the needs of its

domestic markets and people.

     The White House also said China had agreed to negotiate on sweeping

structural changes in matters such as forced technology transfer, intellectual

property protection, and non-tariff barriers, as well as services and

agriculture. While Beijing is unlikely to agree to fundamental changes to an

economic model which has powered decades of development, the absence from the

U.S. statement of any reference to the "Made in China 2025" -- a state-backed

initiative aimed at closing the technology gap with advanced nations -- leaves

more room for talks, advisors said.

     --COSTS OF TRADE WAR

     Liu Hong, a director of the Ministry of Commerce's China Association of

International Trade, said both countries are increasingly aware of the costs of

the trade war, and that tensions could be significantly reduced over the next

three to six months.

     "It depends on how big are the compromises that China is willing to make,"

Liu noted. "There's some room for (negotiations), which China is actually doing,

but the problem is to what degree (China is willing to make concessions and the

U.S. is willing to accept)."

     Yu Miaojie, an American-educated trade expert who advises the Ministry of

Commerce, Ministry of Finance and the State Council's Counsellors' Office, said

it was possible that the Trump administration could further postpone the rise in

tariffs on $200 billion Chinese goods to 25% from 10%.

     While frictions would take years to dissipate, the trade war could be over

in six months, he said.

--MNI London Bureau; +44 203 865 3829; email: jason.webb@marketnews.com

[TOPICS: M$A$$$,M$Q$$$,MT$$$$,MX$$$$,MGQ$$$]