US, China can reach a deal on trade in 90 days, ex-Chinese central bank official says
- Zhu Min tells forum the two sides will ‘produce something’ during truce period that will pave the way for future negotiations
- But he warns that if they don’t, it will disrupt the global economy
A former top official at China’s central bank says he is optimistic Beijing and Washington can reach a deal by the end of their 90-day trade war truce that will pave the way for future talks.
But Zhu Min, who was deputy governor of the People’s Bank of China from 2009 to 2010, expected it would take at least six months to a year before the two countries could resolve their trade conflict.
“I think the 90 days will produce something, but the most important thing is that the deal will pave the way for the future negotiations … for the next six months or 12 months,” Zhu said on Monday at the Understanding China forum in Beijing.
Beijing and Washington agreed to a three-month ceasefire in their tariffs battle to allow for further talks when Chinese President Xi Jinping met his US counterpart Donald Trump in Argentina on December 1.
Zhu, now head of the National Institute of Financial Research at Tsinghua University, warned that if the two sides failed to reach a deal within the grace period it would bring disruption to the global economy.
“If the US imposes 25 per cent tariffs on US$200 billion of Chinese exports to the United States, it will shock the whole world,” said Zhu, who has also served as deputy managing director of the International Monetary Fund.
“It will really change the global supply chain and the financial market. The whole world will take it as a really serious signal of decoupling – and of the decline of the global trade system – so I think it’s absolutely important for the two countries to reach a deal within the 90 days to avoid the 25 per cent tariffs.”
He also said the impact of the US-China trade war on the world economy would be fully seen in the coming two years.
“The impact of trade friction on the real economy is still moderate, but on the capital flow and financial market it’s huge. But … the full impact on the whole economy and trade will peak in 2020.”
Zhu said China was willing to make compromises needed to address some US concerns and to work to reduce the trade imbalance – in particular opening up the service, manufacturing and financial sectors to foreign competition, and reforming state-owned enterprises (SOEs).
“Continuing to reform SOEs is in China’s own interests, it will make domestic competition more fair and equal – that’s also important,” he said, adding China would be more transparent in its practice of subsidising state-owned firms.
But he also expressed concern over Washington’s rivalry with Beijing in areas beyond trade, and the unpredictability of the US president.
“For China, trade is about trade issues. Let’s focus on trade, use trade measures to deal with trade friction, and not go beyond trade and expand it to political issues,” Zhu said. “[Also] particularly the US president, Mr Trump, is so unpredictable.”
Relations between China and the US have seen a sharp decline on multiple fronts, from trade to strategic issues over the South China Sea and Taiwan.
Why the arrest of Huawei’s CFO amid trade war tension should not push China to rely more on home-grown technology
Ongoing trade talks have also been complicated by the high-profile arrest of Huawei Technologies executive Sabrina Meng Wanzhou on December 1 in Canada at the behest of the US, accused of lying to banks that Huawei did not sell products to Iran in violation of US and EU sanctions.