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MNI (London)
     BEIJING (MNI) - China's dispute with the U.S could drag down its foreign
trade growth by 3 to 5 percentage points this year, but Beijing should be
cautious about hitting back at Washington in way that puts American companies on
a blacklist, a government advisor told MNI in an interview.
     While the Chinese economy is feeling the effects of the trade dispute with
the U.S., Beijing still has room to help its companies through difficult times,
said Zhao Jinping, former Director-General of the Research Department of Foreign
Economic Relations, affiliated with the Development Research Center of the State
Council (DRC).
     Zhao saw little chance of an agreement to end the dispute by the G20 summit
in Tokyo later this month, barring a significant gesture from Washington, but
insisted that China should be measured in its response to the U.S. use of
"extreme pressure." Particular care should be taken with regards to drawing up
the list of "non-reliable entities" damaging to the interests of China or
Chinese companies, which Vice Minister of Commerce Wang Shouwen has said would
be released soon, Zhao explained, noting the caution was necessary as Beijing
continues to open up the economy.
     "China should minimize the use of such a blacklist," he said, adding that
American companies are also "victims" of the U.S. policies.
     The best outcome would be for China to use the list as a deterrent, without
reaching the point of having to name any company, he said.
     In the meantime, China could consider further tax and fee reductions to
support its own firms which are suffering as a result of the dispute, in
addition to increasing financial and credit supports, said Zhao, now a research
fellow at the DRC.
     "It would be possible to remove fees for customs clearance, loading and
unloading at port," he said. "Or the government could even take on the cost of
inspection and quarantine for companies."
     More importantly, the government should continue to promote its Belt And
Road initiative, to develop new markets, and to boost domestic demand, said
Zhao, urging the acceleration of economic reforms.
     Companies may also expand overseas investment to bypass U.S. tariff
restrictions, Zhao said, pointing to Japan's past experience as an example. A
danger, though, is that this could begin to hollow out Chinese industry,
pressuring domestic employment and tax revenues.
     In a white paper outlining China's position on the trade negotiations
published on Sunday, officials said an agreement can only be reached if
Washington removes all punitive tariffs.
     "Otherwise China should put off the negotiation for the time being," said
Zhao, adding that a deal would be impossible in the near term if the U.S. does
not drop its demands that impinge on China's sovereignty.
     "The requirement is not in line with China's decision-making process," said
Zhao, "the State Council has been authorised to make decisions in trade
negotiations."
     "The U.S. requirement is very demanding," he said.
     China's dispute with the U.S could drag down its foreign trade growth by 3
to 5 percentage points this year, but Beijing should be cautious about hitting
back at Washington in way that puts American companies on a blacklist, a
government advisor told MNI in an interview.
     While the Chinese economy is feeling the effects of the trade dispute with
the U.S., Beijing still has room to help its companies through difficult times,
said Zhao Jinping, former Director-General of the Research Department of Foreign
Economic Relations, affiliated with the Development Research Center of the State
Council (DRC).
     Zhao, a research fellow at the DRC, saw little chance of an agreement to
end the dispute by the G20 summit in Tokyo later this month, barring a
significant gesture from Washington, but insisted that China should be measured
in its response to the U.S. use of "extreme pressure." Particular care should be
taken with regards to drawing up the list of "non-reliable entities" damaging to
the interests of China or Chinese companies, which Vice Minister of Commerce
Wang Shouwen has said would be released soon, he explained, noting this
cautiousness is necessary considering to remain an opening-up environment.
     "China should minimize the use of such a blacklist," Zhao said, adding that
American companies are also "victims" of the U.S. policies.
     The best outcome would be for China to use the list as a deterrent, without
reaching the point of having to name any company, he said.
     In the meantime, China could consider further tax and fee reductions to
support its own firms which are suffering as a result of the dispute, in
addition to increasing financial and credit supports, said Zhao.
     "It would be possible to remove fees for customs clearance, loading and
unloading at port," he said. "Or the government could even take on the cost of
inspection and quarantine for companies."
     More importantly, the government should continue to promote its Belt And
Road initiative, to develop new markets, and to boost domestic demand, said
Zhao, urging the acceleration of economic reforms.
     Companies may also expand overseas investment to bypass U.S. tariff
restrictions, Zhao said, pointing to Japan's past experience as an example. A
danger, though, is that this could begin to hollow out Chinese industry,
pressuring domestic employment and tax revenues.
     In a white paper outlining China's position on the trade negotiations
published on Sunday, officials said an agreement can only be reached if
Washington removes all punitive tariffs.
     "Otherwise China should put off the negotiation for the time being," said
Zhao, adding that a deal would be impossible in the near term if the U.S. does
not drop its unreasonable demand violating China's sovereignty.
     "The requirement is not in line with China's decision-making process," said
Zhao, "the State Council has been authorised to make decisions in trade
negotiations."
     "The U.S. requirement is very demanding," he said.
--MNI Beijing Bureau; +86 (10) 8532-5998; email: wanxia.lin@marketnews.com
--MNI Beijing Bureau; +86 (10) 8532 5998; email: marissa.wang@marketnews.com
--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com
[TOPICS: M$A$$$,M$Q$$$,MT$$$$,MX$$$$,MGQ$$$]
MNI London Bureau | +44 203-865-3812 | les.commons@marketnews.com

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