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China economy

No winners – only catastrophe – in a China-US trade war, Beijing says

But if things do get nasty, Beijing is more than ready to face the challenge, Commerce Minister Zhong Shan says

PUBLISHED : Sunday, 11 March, 2018, 1:01pm
UPDATED : Friday, 23 March, 2018, 1:07pm

A trade war between China and the United States would be disastrous not only for the two countries involved, but also the rest of the world, Beijing warned on Sunday.

“There will be no winner,” Commerce Minister Zhong Shan said on the sidelines of the National People’s Congress.

“A trade war will be catastrophic for China, the US, and the rest of the world,” he said.

While he declined to say how Beijing planned to respond to the tariffs imposed by Washington on aluminium and steel imports, he said the two sides remained in talks on the issue.

“We are not only talking for now, we will continue to talk in the future,” he said.

China ‘doesn’t want a trade war’ with US, as sides agree to more talks in Beijing soon

Zhong said China’s business environment remained good for foreign investors, and complaints from some suggested they still had high hopes for the Chinese market.

“Foreign companies have new complaints and demands about China’s investment environment ... because they still care about China and they still have confidence in the Chinese market,” Zhong said. “If they’re not even complaining, then they have no confidence.”

He also defended the slump in China’s outbound investment as an intended result of Beijing’s war against “irrational overseas investments”. Direct outbound investment plunged by about 30 per cent to US$124.6 billion last year from 2016, after China tightened control of outflows and blacklisted investments in sports clubs, real estate and entertainment.

“China’s overseas investment has become more prudent and rational,” he said.

He added that the authorities would continue to curb unwanted overseas spending and strengthen scrutiny of investments.

On trade relations with the US, Zhong said that should the situation worsen, China was more than ready.

“China doesn’t want to fight a trade war, nor would we take initiatives to ignite a trade war,” he said. “But we can handle any challenges and are determined to protect the interests of our country and its people.”

US President Donald Trump last week delivered on his campaign promises to get tough on trade by imposing 25 per cent tariffs on steel and 10 per cent on aluminium imports.

He also singled out China in a speech about unfair trading practices that he described as “an assault on our country”.

Five reasons Trump is not ready for a trade war, and China could emerge stronger from the contest

Trade tensions between the world’s two largest economies are widely expected to intensify this year as Washington’s trade policy with Beijing is influenced by hardliners such as White House trade adviser Peter Navarro and US Trade Representative Robert Lighthizer.

China’s persistently high trade surplus with the US is the root of the tension, and Trump has said he plans to trim it by US$100 billion. The figure for February fell slightly from the previous month to US$21 billion, according to Chinese customs data.

Zhong said part of the reason for the trade gap was that the US had restricted hi-tech exports to China. If it allowed its firms to freely sell such goods, the surplus would fall by 35 per cent, he said, without providing a source.

He said also that the United States had overestimated its trade deficit with China by 20 per cent, citing the opinions of unnamed experts.