MNI POLICY: China-US Should Solve Structural Issues: Ex-Offc'l

     BEIJING (MNI) - China and the U.S. should address "structural issues" in

'Phase 2' trade talks, with negotiations carried out under the framework of

globalization and multilateralism, with both sides striving to implement the

'Phase 1' deal despite the impact of the Covid-19 pandemic, said Zhu Guangyao, a

former Minister of Finance and now an advisor to the State Council.

     The "undesirable" current relations between the two economic giants is a

result of lack of communication, and there should be more discussion of policies

by the two sides, Zhu said, noting more than 100 previously active communication

channels between the two countries have been severed. "G20 should play a better

role," he added.

     Here are other key points from a briefing by Zhu and his fellow Counsellors

to China's cabinet:

     - China's economy may see an "explosive growth" in Q3 following the

recovery in Q2, said Counsellor Liu Huan. The service sector will continue to

face difficulties, though more measures including encouraging street-vending and

issuing more vouchers will kick in, he said. "We are also considering cash

transfers adopted by other countries," Liu added.

     - China remains vigilant towards expanding the fiscal deficit as it could

force the central bank to print money and lead to inflation eventually, said

Liu, when asked to comment whether China's fiscal expansion this year is too

small. Liu said, however, he does not rule out the possibility of a larger

deficit.

     - Local government can be allowed to issue more debt to ease their fiscal

pressure, and local authorities are not only facing reduced fiscal revenues, but

also increased pension burden," Liu said.

     - While current measures boosting spending focus on the 300 million

middle-class consumers, China also has 1.1 billion in the lower-income group,

representing a large untapped potential with however different needs and

preferences, said Counsellor Tang Min.

     - "The government should use fiscal stimulus to boost the spending power of

lower-income groups, including retired people," said Wang Zhaoxing, a former

chairman of the securities regulator.

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

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

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

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