[301118.En.BIZ] China is Set to Block US at G20 From Winning Allies in Trade War

CHINA is expected to use the G20 summit in Buenos Aires today and tomorrow to prevent the US from winning allies in the trade war by emphasising that it is reducing its reliance on export-led economic growth, reported London's Financial Times.

The declaration last week by US Trade Representative Robert Lighthizer that "China fundamentally has not altered its acts, policies and practices" has dashed hopes of the US and Chinese presidents finding common ground to resolve their differences when they meet.

China has rejected the US report, maintaining it is "totally unacceptable," and accused Washington of reneging on its commitment to World Trade Organisation members.

Rather than seek a grand bargain, analysts believe Beijing will attempt to block the US from gaining allies by pointing to China's shrinking current account surplus.

The surplus, which ballooned to US$421 billion in 2008, entered into a deficit in the first three quarters of this year. Oxford Economics predicts that the full-year surplus will be "close to zero", given that commodity imports and foreign tourism have counteracted China's surplus in manufactured goods.

The exception among China's trade partners is the US, which clocked up a $176 billion current account deficit with China in the first half, according to US data - on track for the largest annual gap.

"China's falling current account surplus is winning it no points in Washington, where the rising US bilateral trade deficit with China continues to fuel trade tensions," said Cornell University economics professor Eswar Prasad.

Despite China's slowing economy and weak stock market, which the White House cites as evidence that the tariffs are biting, analysts say Beijing is still unwilling to offer major concessions. Trade data indicate that Chinese exports continue to grow strongly in spite of the tariffs.

"China sees an opportunity to stop an escalation but I don't think it's desperate," said policy analyst Yanmei Xie at GaveKal-Dragonomics in Beijing. "The most they are likely to offer is tactical concessions."

Source : HKSG.