REPEAT: MNI: China Won't Use FX, USTs In Trade War: Advisor

--Steering Clear Of Financial Weapons, Could Target Supply Chain: Advisor

     BEIJING (MNI) - China is unlikely to use its currency or its stockpile of

U.S. financial assets as weapons in retaliation against U.S. tariffs as the

trade war escalates, but it may restrict exports of certain supply chain

components, an advisor to the authorities told MNI in an interview.

     There is little room for China to use its currency as a weapon or to dump

U.S Treasuries, Zhu Ning, professor at the People's Bank of China School of

Finance(PBCSF), said.

     "As the U.S has warned it would mark China as a forex manipulator and there

are no other assets, big and stable enough, for China's large pile of forex

reserves, the two options have slim chances (of being enacted)," Zhang said.

     However, he did predict the yuan will remain weak in the long run.

     --SUPPLY CHAINS

     Zhu did, however, target one area where China could perhaps retaliate

against the U.S. as the dispute escalates; stopping the export of manufacturing

components, disrupting U.S. company supply chains. 

     "A large amount of components, including those for mobile phones and

aircrafts, are made in China, so it is an option for a future reaction against

fresh tariffs," Zhu said.  

     "But the move will also hurt China's economy, particularly if it made

international companies relocate businesses out of the country to avoid risks,"

he added.

     "It is concerning that unemployment would increase since export-led

manufacturing is still labor intensive," Zhan noted.

     And Zhu noted the particular risks for China as it is at a stage of

economic slowdown, while the U.S economy is showing upward momentum.

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

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

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