MNI INTERVIEW: China Trade Growth To Be Hit By Dispute With US

     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.

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

--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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