MNI EXCLUSIVE: Midterm Impact On China Trade Spat Seen Small

By Iris Ouyang

     BEIJING (MNI) - The results of the U.S. mid-term elections left Chinese

government advisers little moved, with few implications seen for the trade

dispute between the world's two largest economies ahead of a crucial meeting

between Donald Trump and Xi Jinping in Buenos Aires at the end of the month.

     While U.S. President Trump has lost control of the House of

Representatives, the victorious Democrats share many of his attitudes towards

China, most of the advisers to the Chinese government contacted by MNI said.

     "It should not impact China-U.S. relations and trade negotiations much,"

said Wang Haifeng, director of International Trade and Investment at the Chinese

Academy of Macroeconomic Research, run by the National Development and Reform

Commission. "The Democratic Party and the Republican Party do not have big

differences in their attitudes towards China, only their methods are different

and Trump is just more direct."

     --DOMESTIC FOCUS

     While losing control of the House of Representatives may restrain some of

Trump's domestic agenda, the Republicans increased their Senate majority. Yu

Miaojie, a veteran trade expert who advises the Ministry of Commerce, Ministry

of Finance and the State Council's Counsellors' Office, said he hoped Trump

would be forced to focus more on domestic issues as a result of the elections.

     "He will more urgently want to have trade negotiations with China, so his

attitude to China may not be as harsh as before," Yu told MNI, calling the

election outcome "positive" and saying that tumbling U.S. agricultural exports

to China might have swayed votes against the Republicans in some rural areas.

     But other advisers who spoke to MNI were less optimistic of any easing of

Trump's posture.

     Overall, the result will have little effect on Washington's attitude

towards China as a major global competitor, Mei Xinyu, a researcher at the

Chinese Academy of International Trade and Economic Cooperation under the

Ministry of Commerce, told MNI.

     "The Democrats are even keener on picking fights with China than Trump,"

Mei said, although he noted that the Democrats might put more emphasis on

seeking protection for American companies.

     The congressional split between the two parties could also make it harder

for U.S. authorities to respond to a slowing economy next year, Mei said.

     --LIMITED INFLATION IMPACT

     While some Chinese advisers have argued that a weaker economy in 2019, and

Federal Reserve rate hikes, could make Trump more likely to seek a solution to

the trade dispute, Wang said he did not think that tariffs on Chinese products

would significantly push up U.S. consumer prices.

     "The trade war's impact on U.S. inflation should be limited, as U.S.

consumption is mainly of services," Wang said. "The Fed interest rate rises are

expected and the fluctuation of the U.S. economy is in a normal range, so the

impact on U.S. public opinion may not be big."

     Li Wei, lead researcher on the Americas at the ministry's Chinese Academy

of International Trade and Economic Cooperation and formerly with Beijing's

mission in Washington D.C., agreed that the midterm election result would have

little impact on the trade dispute, although the Democrats may be more reluctant

to use tariffs to intensify the conflict, and might restrain Trump from actions

such as slapping tariffs on foreign auto companies on national security grounds.

     "Inside the Democratic party they also make different accusations against

China regarding bilateral economic cooperation and trade," Li told MNI, adding

that a planned meeting between Trump and Chinese President Xi at the G20 summit

in Buenos Aires, to be held from Nov. 30-Dec. 1, could be more important.

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

--MNI London Bureau; +44208-865-3829; email: Jason.Webb@marketnews.com

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