MNI EXCLUSIVE: China Could Make G20 Concessions; Not On WTO

     BEIJING (MNI) - China could make concessions to the U.S. to lower the

temperature in their trade dispute, including further opening its markets to

foreign companies, but will not budge on demands relating to World Trade

Organisation rules covering subsidies for state enterprises and China's status

as a developing economy, two sources close to the Chinese government told MNI

ahead of the G20 summit.

     Recent public statements by Chinese officials offer some "meat" to the

U.S., which is trying to push China towards freer markets and has criticised the

World Trade Organisation for failing to check Beijing's subsidies for

state-owned enterprises, said one source, who asked not to be named due to the

sensitivity of the issue. U.S. President Donald Trump has also said it is unfair

that China continues to draw benefit from its WTO status as a developing

country.

     "There is actually some room for negotiation", the source said, referring

to Vice Commerce Minister Wang Shouwen's comment at a press briefing last week

that China is "willing to shoulder obligations in the WTO which match with our

development level and capability."

     But China will not give up on the special rights guaranteed to developing

countries under the current WTO framework, the source stressed, echoing Wang.

     While China could move towards further opening its markets, perhaps by

measures involving free trade zones, it would be harder for Beijing to make

concessions on policies regarding the role of SOEs in the economy, tech

development or structural reform, the source said.

     --WTO PROPOSAL

     Another source, with knowledge of discussions inside government

departments, made a similar point.

     "China could make concessions on matters of specific interest, but not on

WTO rules" that will impact the country's economy in the long term, said the

second source, also requesting anonymity. China may promise limited reforms of

state-owned enterprises to permit greater competition from foreign companies,

but is not likely to agree to significant changes to a system which has placed

SOEs at the centre of economic development and has delivered rising living

standards and social stability, the source said.

     China, together with other big economies including the European Union,

India and Australia, has submitted a proposal to reform the WTO's dispute

settlement mechanism in response to criticism from U.S. President Donald Trump.

Their move comes as the U.S. has blocked appointments to the WTO's Appellate

Body, which arbitrates on trade disputes.

     Observers in China contacted by MNI have largely been cautiously optimistic

ahead of much-anticipated talks between China's President Xi Jinping and Trump

at the G20 in Buenos Aires at the end of the week although the second source

said the Chinese government was trying to lower expectations ahead of the

meeting. State media coverage ahead of the event has also been low key.

     "If there's a joint statement announced at the G20, that would be a

success," the first source said.

     While observers in China do not expect a major breakthrough at the summit,

they are hoping for a framework indicating both sides' willingness to deescalate

the trade row. Another source told MNI earlier that China has already handed the

Trump administration a list of specific items Beijing is willing to discuss at

the G20.

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

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

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