Economist warns against Sino-US trade war

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Last updated at: (Beijing Time) Thursday, November 27, 2003

Economist warns against Sino-US trade war

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An economist from the MeesPierson Asia, a private bank of the leading bank insurance group Fortis, Wednesday warned against a trade war between the United States and China, saying that it would be most damaging forAsia.

A trade war might be beneficial for the sentiment in the US in a short term, however, a large part of the benefit of global tradeis reaped by US companies, said Harmen Overdijk, chief investment officer of MeesPierson Asia, at a luncheon held by the Hong Kong General Chamber of Commerce.

The US Department of Commerce Monday imposed tariffs ranging from 27.94 percent to 78.45 percent on color television sets imported from China. The new duties follow last week's decision bythe Bush administration's to impose quotas on some textile importsfrom China.

Overdijk said the best solution to the problem would be slowly balancing the trade imbalance as the Chinese government is trying to do at the moment.

He also said that a "forced" revaluation of the Chinese currency renminbi is not good either for the United States or China.

China is one of the biggest buyers of US Treasuries, said Overdijk. If China and Japan stop buying treasuries, yields might shoot up and this will affect corporate earnings, consumer debt and the housing market, although US manufacturing jobs will increase in the short term.

The Chinese government should not and probably will not revaluethe renminbi in the short term, he said. China has a huge trade surplus with the United States but not with the rest of the world.

He quoted Chinese Premier Wen Jiabao, who was recently interviewed by the Washington Post, as saying that: "I don't thinkthe exchange rate of the renminbi is an important contributor to the trade imbalance. I think it is the abundant supply of competitive labor in China."

As for the outlook for US economy in 2004, Overdijk said that the economic recovery will continue, driven by productivity gains and strong corporate earnings. In addition, the US economic recovery will pull global economic growth.

He said that threats to the US economy will be high consumer debt, large current account deficit and weak employment.

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