MNI Interview: China-US Trade War Possible: Advisors (Update)

--Update with Foreign Ministry's Denial  

--China-U.S. Talk Unlikely to Resolve Broad Differences

--Reports China Caving in to U.S. Demand With $200 Billion Offer Untrue

     BEIJING (MNI) - China and the U.S. are not likely to reach a quick

agreement given the widely divergent terms of demand made by the two sides, so

an escalating trade war remains a possibility, two advisors to China's

ministries told MNI in exclusive interviews.

     China needs a few years to further expand its imports and deepen

opening-up, and it could take China a decade to reach a balanced trade, said

Wang Haifeng, director of the international trade and investment research office

at the Chinese Academy of Macroeconomic Research, which is affiliated with the

National Development and Reform Commission.

     Wang spoke as Chinese Vice Premier Liu He is in Washington leading a

delegation of top officials seeking to expand on a largely fruitless talk with

U.S. counterparts which took place earlier this month when U.S. officials led by

Treasury Secretary Steven Mnuchin visited Beijing.

     "These issues have been in place for some time; it's not something that can

be resolved through a few days of talks," Wang said on Friday.

     --"SMOKESCREEN, PSYCHOLOGICAL TACTIC"

     Earlier Friday, media cited unidentified U.S. officials as saying that

China is offering President Donald Trump a package of trade concessions and

increased purchases of American goods aimed at cutting the U.S. trade deficit

with China by up to $200 billion a year.

     Wang said "that's not likely" and it may be "a smokescreen and

psychological tactic by the U.S. to cloud the talks." 

     Mei Xinyu, a researcher at the Chinese Academy of International Trade and

Economic Cooperation under the Ministry of Commerce, also said the reports as

presented by foreign media are inaccurate. China cannot possibly force a target

upon itself that it must achieve within a couple of years, nor will China agree

to do that by cutting its export," Mei said. 

     The media reports were untrue and relevant trade talks are constructive and

proceeding, Global Times cited a spokesman at China's Ministry of Foreign

Affairs as saying at a regular briefing Friday.

     It may be a goal that China has agreed to set for the next few years, given

a possible shrinking U.S. demand or increased purchases of U.S. oil and gas by

China, Mei said.

     --AGAINST PRINCIPLES

     For the U.S. to ask China to cut annual trade deficit by $200 billion by

2020 is a "farce" to begin with, Wang said. "It goes against economic

principles," he noted.

     China has taken measures to boost imports starting with the 2011-2015

Five-Year Plan, but not appeasing to the U.S., Wang said.

     Nevertheless, Wang said he is "cautiously optimistic" that Liu He's trip to

Washington may lead to at least further easing of tensions.

     Wang expects the talk to be on more substantive issues, including boosting

purchases of U.S. agricultural products and negotiations on technology trade

given the Chinese delegation includes vice ministers from the respective

ministries. 

     --"NOT ACCEPTABLE"

     U.S. arguments that China should accelerate opening up its financial and

service sectors with the same requirements for developed countries are "not

acceptable" for China, Wang said.

     While the U.S. urges China to speed up its opening-up, the Chinese

government iterated it will "actively, steadily and orderly" open up based on

its own pace.

     More measures from China to further open its financial sector may not occur

from this time's Washington trade negotiations, Wang told MNI, as Chinese

regulators are concerning about potential financial risks amid the country's

campaign to forestall a financial crisis and various movements to seek for

high-quality growth.

     But he stressed the financial sector liberalization would continue to be

the key of China's opening in the next five years.

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

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

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