MNI Interview: Trade War With U.S. Possible:China Gov Advisors

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

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

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

agreement given the divergent demands 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.

     Earlier Friday, media cited unidentified U.S. officials 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.

     --"SMOKESCREEN, PSYCHOLOGICAL TACTIC"

     "That's not likely," Wang said, dismissing the credibility of the reports.

It may be "a smokescreen and psychological tactic by the U.S. to cloud the

talks," he said.

     Another state researcher, Mei Xinyu, 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. 

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

coupled with shrinking U.S. demand or increased purchases of U.S. oil and gas,

Mei said.

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

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

noted.

     --NO APPEASEMENT

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

Plan, but not as appeasement 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.

     The 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.

     --ON OWN PACE

     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: william.bi@mni-news.com

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

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