(Yicai Global) May 21 -- Avoiding a trade war with the United States should be China's top priority in its efforts to prevent financial risks due to the role of the financial sector in the real economy, said Shen Jianguang, chief economist and managing director at Mizuho Securities Co.'s Asian unit, during the Tsinghua PBCSF Global Finance Forum 2018 held on May 20.
Organized by Tsinghua University PBC School of Finance (PBCSF), the forum focuses on new thinking, trends, practices, and dynamics of China's financial reforms, and seeks to address pressing issues.
China's Vice Premier Liu He has announced that China and US have reached a consensus that the two will not fight a trade war. The agreement is hard-won and very critical as it averts the US' levying of tariffs according to the Section 301 investigation. It has not been easy for the two countries to reach the agreement, Shen said. Two weeks ago, a US delegation came to China for negotiations and made multiple requests many of which have not been included in the final agreement reached in Washington, meaning that the US has also made some concessions.
In terms of China, it has nothing to lose by increasing imports from America, because China would import energy, agricultural products anyway. At worst, the country would import fewer products from other countries to import more from the US. Besides, China's annual increase in imports stands at around USD200 billion, indicating that there is enormous room for expansion. China is also the world's largest retailer. The agreement actually creates good conditions for economic development and financial stability and of course that is good news, Shen noted.
Shen also pointed out other issues, especially those related to ZTE Corp. were not included in the agreement, in particular subsidies and the Made in China 2025 smart manufacturing strategy. China therefore still needs to make extra preparations in the medium-term.
Editor: William Clegg