MNI EXCLUSIVE: Xi, Trump May Sign Deal At APEC: China Advisors

By Wanxia Lin

     BEIJING (MNI) - Chinese President Xi Jinping and U.S. counterpart Donald

Trump could sign a preliminary trade deal during the APEC meeting in Chile in

mid-November, perhaps opening the way to a second-phase deal including

guidelines on managing the yuan, government advisors told MNI.

     "It is very likely that the two heads of state will meet next month, and

sign the phase-one agreement," said Mei Guanqun, deputy researcher at the China

Center for International Economic Exchange, a think tank managed by the National

Development and Reform Commission. The U.S. and China have agreed to divide

negotiations over their trade dispute into three phases, with the first phase

containing the overall outline for talks, Mei said on Thursday.

     Trump said last Saturday that the two countries have reached a "substantial

phase one" agreement which would take several weeks to prepare and be signed by

November.

     A more detailed trade accord, building on phase one, would follow, Mei

said, although he added that differences on how to ensure its implementation

could delay this second-phase accord until the middle or second half of 2020.

     --ENFORCEMENT

     China will never accept an enforcement mechanism imposed by another

country, said Mei, adding that a new reference in accounts of talks to "dispute

resolution", which replaced the earlier "enforcement mechanism", was a positive

step, and that ideally the two sides would set up a joint committee for mutual

supervision. Trump's electoral calculations may also prompt him to drag out the

second phase, he added.

     Yu Miaojie, a veteran trade expert advising several government departments,

said on Thursday an extension of the phase-one deal, including specific

guidelines on how China manages its currency, could feasibly be signed by the

end of December. If this were to occur, the yuan, currently trading at about

7.08 to the dollar, could strengthen as far as 6.9 before 2020 is out, added Yu,

also deputy dean of the National School of Development at Peking University.

     Both advisors saw a possible significant stumbling block from the U.S.

threat to impose an additional round of tariffs on Dec 15. While Trump, who

delayed an earlier round of tariff increases due in October following the recent

talks, could once again order a postponement, but he will not easily lay his

tariff weapon aside, the advisors said.

     China's Ministry of Commerce renewed calls for progress towards reversing

U.S. tariffs on Chinese goods at a briefing on Thursday.

     Without the removal of tariffs imposed during the dispute, China will not

cede to U.S. demands for it to reduce industrial subsidies, Yu said, adding that

subsidies provided in a transparent way are in line with WTO rules.

     Trump could choose other levers with which to pressure China, according to

Mei, suggesting that the U.S. might continue to threaten measures such as

banning Chinese listings on U.S. exchanges, or imposing sanctions on tech firms.

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

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

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