MNI POLICY: China Should Expand Global Trade Links: Li Daokui

     BEIJING (MNI) - China should accelerate opening up its economy to the

European Union, Japan and the UK, offsetting business opportunities lost as the

trade war with the U.S. continues, whilst pressuring Washington into a greater

willingness to negotiate, Li Daokui, a former member of the People's Bank of

China Monetary Policy Committee member said Sunday.

     Li now a leading economist and dean of the Institute for China's Economic

Practice and Thinking of Tsinghua University, was speaking in Beijing as his

research team published its quarterly update on the economy.

     Here are the main points from the research note:

     -- China's economy will likely grow 6.9% in 2019, shrugging off the worst

effects of the Sino/U.S. trade war. Beijing could help fight off headwinds by

boosting returns on state-owned assets. By increasing the return by one

percentage point over three years, CNY2 trillion would be added to state

revenues, opening up opportunities for tax cuts.

     --Trade disputes have had only limited impact as of now, although some

international companies are relocating operations to other counties as tariffs

start to impact. Export growth for the year will likely be zero, with imports

down 0.4%, although the trend could see the current account move into deficit,

pressuring the yuan and triggering capital flows.

     --Cuts in taxes and fees should focus on private investment to help boost

confidence levels in the slowing economy, including targeted cuts on investments

such as R&D. Beijing should consider forming a 'bad bank' to deal with NPLs

coming from private corporate mergers and reorganisations.

     --There is a need for some fiscal restraint in H2 as tax cuts and increased

pushed the deficit higher. That means monetary policy must provide ample

liquidity, keeping rates low and helping support local government bond issuance.

Both consumer and producer prices are set to remain and low levels this year,

with CPI seen at 2.3% and producer prices at 0.2%. The authorities must take

measures to prevent the gap between the two from expanding further rand hitting

industrial profits.

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

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