MNI INTERVIEW: China Will Not Drop Tech Push, Advisor Says

By Iris Ouyang

     BOAO(MNI) - China will not allow itself to be pressured by the U.S. into

dropping its drive for technological advancement, and will resist giving up its

developing country status at the World Trade Organization, a government advisor

and economist at a think tank managed by the state economic planning body told

MNI.

     "The U.S. wants China to take on more responsibility. Due to the fact that

China is a large nation, questions on how much responsibility China should bear

and what treatment it should receive warrant discussion," Zhang Yansheng, chief

researcher for the China Center for International Economic Exchanges, said in an

interview on Wednesday. But, Zhang said: "China is certainly a developing

country."

     The U.S. says China should no longer benefit from WTO privileges which come

from developing nation status.

     Zhang, a former director of the international trade research office at the

NDRC Macro-economy Research Institute, said moves by officials to drop

references to the "Made In China 2025" plan, which has been criticised by the

U.S., do not mean that China will abandon its push into higher-tech industry.

     But, in separate remarks, he told a group of reporters he expected China's

trade dispute with the U.S. to cool during 2019, with both sides refraining from

additional punitive tariffs to avoid further economic damage.

     --G20 SUMMIT KEY

     Key developments were likely in the middle or second half of the year,

perhaps at the G20 summit in Japan in June. Frictions, though, are bound to

continue for many years before finally leading to a period of cooperation, said

Zhang, noting the parallels with the sometimes fractious trade relations between

the U.S. and Japan, which lasted until the 1980s.

     Meanwhile, greater demands on China from international trading rules,

together with global economic headwinds, can serve to foster reform, Zhang told

MNI, adding that the country needs to further open its financial sector to

foreign and private companies to help small- and medium-sized companies

struggling to obtain credit from lenders, which some say have favoured

state-owned enterprises.

     "We shouldn't let these pressures go to waste, but China should reform and

open up.

     "There are risks and opportunities -- it depends on us," he stressed.

     China could face five to seven years of challenges as it switches to

high-quality development from high-speed growth, he said. In recent months, as

growth has slowed, Chinese officials formerly calling for deleveraging have

instead begun emphasising the need to stabilise the pace of reduction in debt

levels, a stance with which Zhang agreed.

     "The pace should be stable while seeking for progress" even when economic

headwinds increase, he said. "When risks are relatively big, stabilising

leverage is more important than anything."

     Zhang also cautioned that People's Bank of China measures in recent months

to steer increased liquidity from looser monetary policy towards private and

smaller businesses and away from the financial and property markets, via what it

calls "accurate irrigation of liquidity," should not go on for too long.

     "If it's a long-term measure then it could cause some problems," he said.

     The greatest risk to China would be if it were to fail to continue on the

path of economic reform and opening up to global capital flows, the advisor said

in his remarks to reporters, noting that partial reform could be dangerous.

     "Opening up is to allow wolves into the house," he said. "You will be

tested on whether you have opened up sufficiently, and are willing to dance with

them and nurture the wolf spirit in yourself."

     Private and foreign companies account for less than 10% of the financial

sector, compared to more than 70% in manufacturing, he said.

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

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