IMPOSING conditions on the renewal of China's Most Favoured Nation (MFN) trading status could trigger a trade war between Beijing and Washington, pro-China businessman Philip Wong Yu-hong has warned. The vice-chairman of the Chinese General Chamber of Commerce yesterday spoke strongly against the United States attaching conditions to MFN renewal, which is to be decided by President Bill Clinton in about two weeks. ''My understanding is that China will not accept any conditions on the issue,'' said Mr Wong. If there were conditions, a Sino-US trade war was possible, he said. He reckoned that the re-export industry, the banking sector and tourism in Hongkong would be among the hardest hit by such a trade war. China's market economy would also be hit and the US would lose the huge China market, he said. Although the US has yet to make a decision, it is generally believed that renewal is ''very likely'' to have conditions attached to put pressure on China to improve its human rights record. Mr Wong, who is also a legislative councillor, said it was unreasonable that MFN renewal should be linked to the issues of human rights, arms sales, prisoner-made goods and the Tibet problem. He said linking such issues constituted an interference into a country's internal affairs. According to Mr Wong, China has been actively revamping its foreign trade system in recent years and promoting Sino-US trade as part of a programme to gain re-entry into General Agreement on Tariffs and Trade. He said US consumers, suffering from the economic recession, were happy to use cheap and good China-made products, and the modernisation of China gave rise to stronger demand for US advanced technology. ''Renewal of MFN status to China is beneficial to both China and the US, as well as Hongkong and Southeast Asia,'' he said. Mr Wong said Mr Clinton should understand the situation and the potential problems. In the long term, however, he urged Hongkong companies to diversify their market exposure so as to reduce dependence on the US. Meanwhile, Secretary for Trade and Industry Brian Chau Tak-hay said trade issues should not be politicised and the MFN status was the wrong tool to achieve other policy objectives. Speaking at the Dallas Committee on Foreign Relations in the US, he said MFN was, after all, the normal condition for international trade and not a preferential treatment. The US awards MFN status to most countries. ''We believe that it would be counter-productive to stop or reverse the progress of China's economic reform or to isolate China,'' he said. Mr Chau said Hongkong would stand to lose a sizeable chunk of re-export trade if China lost MFN, as 70 per cent of China's exports to the US were routed through Hongkong. ''And our manufacturing investments in China, many of which are producing for the US market, would be hard hit,'' he said. ''There would be knock-on effects on other parts of our economy and business confidence generally would be hard hit. ''Moreover, businesses in the US itself would also be hurt if China retaliated and cut back on US imports.''