MNI EXCLUSIVE: China Could Absorb $550Bn U.S. Levies: Advisor

--China Equipped To Deal With Latest Trump Threat: Advisor

By Iris Ouyang

     BEIJING (MNI) - China has already studied and started to prepare for

potentially "extreme" scenarios in its developing trade war with the U.S.,

including President Donald Trump's threat to eventually expand the value of

Chinese goods subject to U.S. tariffs to $550bn, a researcher at the Chinese

Academy of International Trade and Economic Cooperation under China's Ministry

of Commerce, told MNI in an interview on Friday.

     Based on China's "style of doing things," when Beijing says it is ready for

a trade war, it means that it is well prepared to tackle a range of possibly

drastic situations, said Mei Xinyu, whose comments are regularly published in

Chinese state media and are thus seen as a good gauge of official thinking.

     After Washington imposed levies on $34 billion worth of Chinese imports on

Friday, Trump suggested that the U.S. could go much further -- potentially

targeting as much as $550 billion of Chinese products -- more than the total

value of goods shipped to the U.S. by China in 2017. In reference to Trump's

statement, Mei said that he feels relatively unconcerned as Beijing is equipped

to deal with such a situation.

     The Chinese government illustrated its resolve by responding immediately to

the U.S. move on Friday, placing levies on an equivalent value of U.S. goods,

China's Ministry of Foreign Affairs (MFA) confirmed at a press briefing.

     --U.S. CREDIBILITY GAP

     "The biggest barrier for the two countries (in resuming talks) isn't

whether or not the U.S. trade demands are met," Mei commented, but rather

whether Washington can convince Beijing of the "value" of holding such talks

given their lack of success to date. He followed this up by saying that the U.S.

has lost credibility following its flip-flops in reversing the agreements it

reached with China during trade talks between the two sides in Washington.

     Mei added that mutual tariffs of $34 billion between the two economic

powerhouses will not have a significant impact on either country, given the

relatively small share of total economic output for which they account.

Moreover, he pointed out, the negative ramifications of any hostile trade action

against Beijing would not be felt by China alone, but would also hurt the U.S.

economy.

     Once the U.S. starts to feel such impacts, it will likely then restrain

from taking further hostile action, Mei said.

     In interviews with MNI, other trade advisors to the Chinese government

echoed Mei's view that there would be no advantage for either side in elevating

trade tensions further.

     --NO WINNERS

     "China will not unilaterally initiate any escalation in the trade war,"

because economic development is still China's key goal, said Wang Haifeng,

Director of International Trade and Investment at the Chinese Academy of

Macroeconomic Research, which is affiliated with the National Development and

Reform Commission.

     Wang said in an interview with MNI that both countries should formulate

plans on specific concessions that they could make in order to reach a

compromise. However, he believes that such action is currently unlikely to be

taken unless both nations face substantially more pressure from the public and

business community.

     "There's no winner in a trade war," Wang concluded, adding that he is

"afraid" the situation could nonetheless get out of control "once nationalism

becomes a major factor."

--MNI Beijing Bureau; +86 (10) 8532-5998; email: iris.ouyang@marketnews.com

--MNI London Bureau; +44 207-862-7489; email: ukeditorial@marketnews.com

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

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