US-China trade deal impacted by coronavirus pandemic: Senior Chinese adviser

China logged a historic GDP contraction in the first three months. PHOTO: AFP

BEIJING (AFP) - The coronavirus epidemic "has an impact" on implementation of the phase one US-China trade deal, a senior Chinese government adviser said on Thursday (June 11), admitting the current relationship between the countries is "very unsatisfactory."

US-China tensions have been rising this year since signing of the partial deal in January, with officials trading barbs over the origin of the pandemic - which first surfaced in central China and has since ravaged the world economy.

Although both countries have committed to fulfilling the agreement's terms since the outbreak, analysts have flagged increasing uncertainty, a recent decline in Chinese purchases of US soybeans and a drop in US imports in the first few months of this year.

Zhu Guangyao, a State Council counsellor, told a press briefing on Thursday that "objectively speaking, the epidemic has an impact on the implementation of this deal."

"But even under such circumstances, China has been emphasising that both sides should work together," added Zhu, who is also a former vice finance minister.

Under the deal, Beijing agreed to import an additional US$200 billion (S$277 billion) in US products over two years, although economists question if this will happen with business activity hammered by the virus outbreak.

Officials said last month that "good progress" was being made on creating the conditions needed to make the agreement a success.

Zhu said he expects the second stage of trade negotiations to touch on structural issues, stressing that the close connection between both economies comes from decades of hard work, and "decoupling will not happen just because some people say it will".

But he acknowledged that the current status of the US-China relationship is "very unsatisfactory because channels of communication have been in a standstill".

State Council counsellors, however, remain bullish over China's economic recovery.

Liu Huan, also former deputy director of the Central University of Finance and Economics' school of taxation, said on Thursday that he expects a bounce-back in the second quarter and for consumption to spike in the third if the epidemic situation stabilises.

China logged a historic GDP contraction in the first three months.

On whether current levels of financial support are enough to boost the economy, Liu added he believes China "does not rule out the possibility of a larger fiscal deficit or stimulus", but this depends on the effectiveness of existing policies.

But he said ensuring employment was the priority, and China was unlikely to engage in "irresponsible quantitative easing".

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