Business Maverick

Quick U.S. Trade Deal Is Unlikely, Former Chinese Minister Says

Chen Deming Photographer: Qilai Shen/Bloomberg
By Bloomberg
07 Jun 2019 0

Don’t bet on a quick trade deal between the world’s two largest economies, according to a former top trade official for China.

Presidents Donald Trump and Xi Jinping are scheduled to join other world leaders at the Group of Twenty summit in Osaka in late June. The world will be watching if the event paves the way for breaking the current trade talk deadlock. Chen Deming, China’s commerce minister from 2007 to 2013, told Bloomberg Television in an interview Thursday that he sees the chances being low.

“If the U.S doesn’t want to go to the WTO and they talk with China with the current attitude, things will drag on,” said Chen, now serving as the head of the China Association of Enterprises with Foreign Investment. “In that case, we’ll see who can take it on the chin. China will have to endure that, the U.S. will have to endure that, and the whole world will have to endure that, and the global economy will go backwards.”

The trade tensions between the U.S. and China escalated last month, with the nations now exchanging barbs over who wrecked negotiations. The last time Trump and Xi met face-to-face was at the previous G-20 summit in Argentina. That meeting yielded a months-long truce.

Economists at Morgan Stanley and JPMorgan are among those who have warned that deteriorating U.S.-China relations threatens to take the world into a recession. The World Bank also dialed back its global outlook this week, citing trade.

Chinese officials, meanwhile, have emphasized the resilience of their economy, with Xi giving an upbeat assessment this week. Domestic consumption accounted for 76% of Chinese growth last year as the country becomes less dependent on exports, according to Xi’s comments published in the People’s Daily newspaper.

Chen echoed that sentiment. The trade conflict with the U.S. will have an adverse effect on China, but will be controllable, he said. And the country should hit its growth target of 6%-to-6.5% this year, according to Chen.

Aside from tariffs, the Trump administration has also moved to curb Huawei Technologies Co.’s ability to sell equipment in the U.S. and buy parts from American suppliers, potentially crippling one of China’s national technology champions. But that blockade won’t stop China’s technological advance, Chen said. It will instead make China stronger.

Many Chinese students have gone overseas to study and in a few years they can help China close the technology gap, according to Chen. “If you go forward to that time, we will thank President Trump, because it was his policies that led us to be able to make for ourselves all the things we used to purchase from around the world.”

In the long run, however, Chen still believes that the U.S. and China will find a way to reconcile their differences because their economies are complimentary. Estimates for how long that will take have varied. Jack Ma, China’s richest man, has said he thinks the trade war will last two decades. Chen is more optimistic.

“So I think it will be shorter – three to five years,” he said. “Both sides will already be in a lot of pain by then and change course. It’ll be time to wake up and sit down.”