MNI INSIGHT: China Meeting May Endorse Key Trade War Proposals

--Central Economic Work Conference May Endorse Boosting Imports, Opening Up

Finance

--Officials to Support Policies Ending Trade War With The U.S.

--Meeting Likely To Approve Fiscal, Monetary Stimulus

     BEIJING (MNI) - China's leadership is likely to use a crucial meeting next

week to endorse proposals to defuse the trade dispute with the U.S., including

moves to boost imports, open up financial services, enhance intellectual

property protection and improve coordination on global trade rules, MNI

understands from speaking to officials and government advisors.

     While the measures, which have been under discussion for some time, will

not receive final approval at the Central Economic Work Conference and key

details will likely remain ambiguous, officials hope confirmation that they are

on the way to being enacted will help ensure that a 90-day truce reached at a

G20 dinner between Xi and U.S. President Donald Trump leads to a more permanent

ceasefire - something that would be key to stabilizing growth in 2019 -- sources

told MNI.

     "The leadership will introduce some important bargaining chips into the

discussion, including expanding imports, opening up the financial industry,

intellectual property protection and coordination on global trade rules," said a

source close to the government. External trade woes have been recognized as a

factor that disrupts China's stable development, sources said.

     The CEWC, which will set the tone for next year's economic policies and

will be chaired by President Xi Jinping, will also point towards further

targeted monetary easing and a moderate increase in fiscal stimulus, including

further tax cuts, which might take the national budget deficit to 3% of GDP from

this year's 2.6%, they said.

     The key annual policy meeting, the date of which is not made public, has

drawn particular attention this year as growth prospects have been clouded by

increasing uncertainties both within and outside the country.

     --EMPHASIZE STABILITY

     The world's second-largest economy will emphasize stability as the top

priority, a high-ranking source told MNI. This will hark back to the principle

of "six stabilities" -- stabilising employment, finance, foreign trade, foreign

investment, investment and expectations -- proposed by the Politburo in July.

     Sources who spoke to MNI agreed that while policymakers will not pursue a

large-scale stimulus, they will be compelled to further downplay a campaign that

had sought to reduce excessive leverage in the economy.

     "The focus on stability implies a huge stimulus isn't in store, but

monetary policies will further tilt towards easing, and financial regulations

won't be as strict," a source close to the central bank told MNI.

     Policies permitting a targeted expansion of lending should help China's

struggling private sector, sources said.

     --DANGERS

     While the economy may face headwinds in the first half, it should stabilize

from the middle of next year as looser monetary and fiscal policies take

effects, another source said.

     "GDP growth at about 6.5% is in line with our potential as both consumption

and investment, particularly in the private and manufacturing sectors, will

rise, and the property market should be stable as volume and land supply will

both increase next year," the source said,

     Significant concerns for the officials and advisors with whom MNI spoke

were the need to maintain employment levels and the danger that high levels of

debt at state-owned enterprises and local government could muffle the effect of

the stimulus.

     "Even big listed companies are laying off workers, and small businesses,

which supply the majority of the employment, are faced with a much more

difficult operating environment, one policy advisor told MNI.

     State-owned companies and local governments might also take advantage of

easier monetary conditions to roll over maturing debt, mopping up additional

credit and impeding the transmission of stimulus to the broader economy. A wave

of 10-year debt created during the borrowing binge at the time of the financial

crisis is due to mature in 2019, the advisor said.

--MNI Beijing Bureau; +86 10 8532 5998; email: william.bi@mni-news.com

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

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