‘Fight’ with US will continue to spread for years even with trade war tariffs deal, China economist Lian Ping warns
- Disputes in non-tariff and in non-trade areas such will continue regardless of talks between President Xi Jinping and American counterpart Donald Trump
- Competition in a wide range of sectors highlighted by arrest of Huawei Technology chief financial officer Sabrina Meng Wanzhou in Canada
The ongoing trade war between China and the United States will continue to exist in non-tariff form and also break out into non-trade areas even if President Xi Jinping and American counterpart Donald Trump reach a deal by March’s deadline, a prominent Chinese economist warned on Wednesday.
“It’s not a matter whether there will be a fight between the two countries, but how they will fight,” said Lian Ping, chief economist of the Bank of Communications (BOCOM), the country’s fifth largest lender.
“No matter if [relations] are tense or not, their struggles will continue over the long run.”
Lian is one of a growing number of voices in Chinese academia and Beijing policymaking circles saying that there is a fundamental competition between the two powers in a wide range of sectors.
This has been highlighted by the recent arrest of Huawei Technology chief financial officer Sabrina Meng Wanzhou in Canada at the request of US for allegedly violating sanctions against Iran.
After Xi and US Trump agreed to a 90-day trade truce at the start of December, talks have started to address US complaints about topics including China’s intellectual property protection, state-owned enterprise subsidies, market access, state-led industrial policies.
On Tuesday, Vice-Premier Liu He, Xi’s top economic adviser, had a telephone conversation with US Treasury Secretary Steven Mnuchin and US trade representative Robert Lighthizer about a timetable and road map for negotiations.
“The ongoing bilateral trade talks will be very hard because of the fundamental differences [between China and the US] in many areas, so there are huge uncertainties,” Lian warned.
Even if the trade dispute eases next year, with Washington seeking to improve the US economic outlook ahead of the 2020 presidential election, there is not expected to be a cease fire in other sectors like high technology.
“Restrictions on or even containment of non-trade sectors could be announced [by the US] one after another,” Lian said.
The Chinese economy is widely projected to slow further in 2019, mainly because of trade uncertainties, after growth slowed to a decade low of 6.5 per cent in the third quarter.
The trade war is widely expected to bite further into the world’s second largest economy in the first half of 2019 as China feels the full effect of the US tariffs, and some analysts have warned that growth could drop below 6 per cent.
China’s lowest first quarter growth rate was 6.4 per cent in 2009, meaning a drop below 6 per cent would represent a record low since the National Bureau of Statistics started publishing quarterly figures in 1992.
“Export orders already began to decline in the third quarter,” Lian noted, citing the 30-40 per cent drop in US orders at the Canton Fair and Yiwu Fair, the country’s two major export promotion platforms.
The government is urging domestic banks to lend more to support the real economy, in particular to private exporters, which have been hit the hardest by the trade war.
The government’s upcoming Central Economic Work Conference, which will set the economic policy direction for next year, is expected to recommend further easing of fiscal and monetary policies to support growth.
Commercial banks should make use of the trade truce to fully evaluate their risk exposure, while overseas financial subsidies should enhance their compliance and cautiously handle loans for cross-border mergers and acquisitions, BOCOM said.