REPEAT: MNI: Sino/US Trade War Could Escalate- China Advisor

Repeats Story Initially Transmitted at 06:46 GMT Mar 26/02:46 EST Mar 26

--If U.S. Increases Pressure On Beijing, China Ready To Act: Advisor

     BEIJING (MNI) - The current small-scale trade confrontation between China

and the U.S. is likely to escalate with China prepared to take a toughened

stance if the U.S. increases pressure on Beijing in the coming weeks, a Chinese

government trade advisor told MNI in an exclusive interview. 

     "I think it's still not the time for Trump to stop, he will likely

intensify the tension based on his style and extreme self-ego," said Yu Miaojie,

an American-educated trade expert who advises Chinese government departments

such as the Ministry of Commerce, Ministry of Finance and the State Council's

Counsellors' Office.

     "If the U.S. still insists on acting so unreasonably, China is well aware

that the U.S. will only stop when it feels real pain," Yu added, referring to a

situation where China scales up sanctions on American exports to the country,

hurting core interests and putting pressure on domestic U.S. inflation, thus

impairing the support of Americans for a trade war.

     The past weekend saw the world's two largest economies' trade confrontation

heat up. But it also saw the first formal talks between highest-ranked officials

from both sides since the conflict escalated last week.

     --WORK TOGETHER

     Liu He, China's newly-elected vice premier and senior economic advisor to

President Xi Jinping's, stressed Saturday during a phone call with U.S. Treasury

Secretary Steven Mnuchin that Beijing is ready to defend its national interests.

According to a report by the official Xinhua News Agency, Liu urged that both

countries remain rational and work together to maintain the stability of their

trade and economic relationship.

     "China has no reason to withdraw at this point," noted Yu, currently deputy

director of the National School of Development at Peking University.

     China was forced to respond in a trade war started by the Trump

administration as recent trade restrictions imposed by the U.S. placed hurdles

for China's strategic national development plan, not to mention the large volume

of related tariffs, he said.

     President Donald Trump unveiled tariffs totalling $50 billion on Chinese

imports last Friday and directed Mnuchin to consider further restrictions on

Chinese investment in the States. 

     The U.S. tariff package mainly targets China's higher-end manufacturing

sector which the country is aiming to grow as part of its "Made in China 2025"

plan.

     Hours after Trump's disclosure of the tariff package, China's Ministry of

Commerce announced import levies on U.S. products worth $3 billion in order to

offset China's losses due to the U.S. tariff hike.

     --MODERATE RESPONSE

     China's retaliation is seen as moderate compared to the U.S. trade

sanctions. Yu also viewed China's move as a "symbolic gesture", as the country

is restrained from a full-scale trade war which will weigh on economic growth

for both sides, bringing headwinds for global trade and economy.

     "It's still too early to say it's a trade war yet," Yu told MNI, saying

soybeans, American automobiles, aircrafts will be next round of targets for

China to increase sanctions.

     His comments echo with a suggestion by former China Finance Minister Lou

Jiwei over the weekend. At a forum in Beijing, Lou said China's retaliatory

measures so far are "weak" and if he was the government he would first target

the above three categories of American products.

     Though some said China may devalue its currency, Yu disagreed, saying the

People's Bank of China is seen trying to stabilize the yuan and let market

forces play a bigger role. Unless the U.S. intervene first to weaken the dollar,

China will not make such a move first, Yu added.

     However, China is likely to sell US. treasuries if the trade confrontation

is further to deteriorate, Yu said. "

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

--MNI Singapore Bureau; +65 8233 2326; email: Asia-Editor@marketnews.com

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