China, U.S. should resume timely communication on trade: China adviser

[June 11, 2020]  BEIJING (Reuters) - China and the United States should resume timely communication on trade and other issues, an adviser to the Chinese cabinet said on Thursday, stressing that the world's two biggest economies are too intertwined to be decoupled.

The coronavirus pandemic has worsened already poor relations between Beijing and Washington, with accusations from the Trump administration of a Chinese cover-up and delayed release of information about the outbreak.

"China and the United States should communicate on key issues, and the scope of communication should go back to normal, not just on trade issues," Zhu Guangyao, a cabinet adviser and former vice finance minister, told a briefing in Beijing. “We should resume strategic communication at various levels, including politics, diplomacy and economy.”

Liu Huan, another cabinet adviser, said he expected China's economy to rebound sharply in the third quarter of this year.

Liu told reporters after the briefing that he believed China's economic growth could be about 5% in the third quarter, and 3-4% in the whole of 2020.

The economy contracted 6.8% in the first quarter from a year earlier, shrinking for the first time in decades, as the coronavirus outbreak paralysed production and hit spending.

Reflecting the uncertain outlook, China set no annual growth target this year for the first time since 2002 and pledged more government spending. But expectations of a global recession are compounding the challenges.

Chinese and U.S. flags flutter near The Bund, before U.S. trade delegation meet their Chinese counterparts for talks in Shanghai, China July 30, 2019. REUTERS/Aly Song

The government has set a 2020 budget deficit of at least 3.6% of GDP, up from last year's 2.8%.

It has also fixed the quota on local government special bond issuance at 3.75 trillion yuan, up from 2.15 trillion yuan. The government will also issue 1 trillion yuan in special treasury bonds this year.

Liu said China may need to raise the budget deficit ratio beyond 3.6% if economic pressures increase.

China's net fiscal stimulus could be just over 4 trillion yuan ($566.09 billion), Liu said, in line with Reuters' calculations based on the fiscal measures announced, while Zhu estimated total fiscal funds could be 6.2 trillion yuan.

The room for China to support the economy through fiscal and monetary policies is "very big", said Wang Zhaoxing, a third cabinet adviser at the briefing.

Wang said China should prepare for a long battle to prevent and resolve financial risks and control shadow banking and financing to the property sector.

(Reporting by Kevin Yao; Writing by Yawen Chen; Editing by Mark Heinrich)

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