China, US will ‘come up with something’ to defuse trade war, Hong Kong scholar predicts

Beijing and Washington are expected to reach a “concrete” trade agreement before March’s deadline to de-escalate trade tensions between the world’s two biggest economies, according to a Hong Kong scholar with close ties to Beijing.

Lawrence J. Lau, an economics professor at the Chinese University of Hong Kong and former member of China’s top political advisory body, previously correctly predicted a “truce” would follow the meeting between Chinese President Xi Jinping and US President Donald Trump in Argentina last month.

Lau made the latest comments a day before China announced a vice-ministerial level delegation from the United States led by deputy US trade representative Jeffrey Gerrish would fly to Beijing for two days of face-to-face talks on Monday and Tuesday.

“I am pretty confident that they will come up with something,” Lau said, with the 90-day trade war truce agreed between Xi and Trump set to expire on March 1.

“There will be something concrete at the end … and if there’s a settlement, there shouldn’t be any [additional] tariffs.”

In addition to promises of buying more energy and agricultural products from the US, China may also make other commitments to soothe American concerns, Lau said.

These may include China reaffirming the agreement reached with the previous Obama administration that Beijing will prohibit state-sponsored cyber theft of intellectual property and trade secrets for commercial purposes.

‘Proactive and constructive’: China confirms US trade talks in Beijing

In late November, Lau predicted that Xi and Trump would agree to a truce in the form of a framework deal when they meet in Buenos Aires on December 1 on the sidelines of the G20 summit, and that proved to be largely in line with what followed.

China has since made a number of concessions, including rolling back additional tariffs on US car imports, resuming purchases of US soybeans, downplaying its “Made in China 2025” strategy, and proposing amendments to the foreign investment law that will make it illegal to force technology transfers to Chinese partners.

Lau said the US also may want to halt the trade war because imposing tariffs on products assembled in China, such as iPhones, may hurt Apple and US consumers more than China.

Therefore, the trade war that dampened confidence in China’s economic prospects and roiled markets in both countries in the second half of 2018 may no longer be a pressing issue for 2019, he said.

‘It could go either way’: China and US ready for trade war talks in Beijing

But the economic and technological competition between China and US was set to continue, he said.

At the same time, Lau, who also worked as the Hong Kong chairman of China’s sovereign wealth fund, said that the impact of the trade war on the Chinese economy was totally “manageable” for Beijing because China’s dependence on US exports was quite small.

“It will hurt the Chinese economy, but not by that much,” Lau said, who recently published a book, China-US Trade War and Their Future Economic Relations.