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China strives to reach ‘phase one’ trade deal with U.S.

China says it will strive to reach an initial trade agreement with the U.S. as both sides keep communication channels open.

Gao Feng, spokesman for the Chinese commerce ministry said it is an attempt to allay fears that talks might be unraveling.

According to Gao, China is willing to work with the U.S. to resolve each other’s core concerns on the basis of equality and mutual respect, and will try hard to reach a “phase one” deal.

“This is in line with the interests of both China and the U.S., and of the world,” he said.

Economists warn that the prolonged trade dispute between China and the U.S. is escalating risks to the global economy by disrupting supply chains, discouraging investment and dampening business confidence.

Completion of a phase one deal could slide into 2020, trade experts and people close to the White House said, as Beijing presses for more extensive tariff rollbacks and the U.S. administration counters with heightened demands of its own.

Global equities retreated on Thursday due to concerns that the ‘phase one’ deal would be delayed.

The trade jitters also sent the 10-year U.S. Treasury yield down to near its lowest levels in three weeks.

The Chinese yuan also softened against the dollar.

Officials from Beijing had suggested that Chinese President Xi Jinping and U.S. counterpart Donald Trump might sign a deal in early December.

Some experts said the next date to watch was Dec. 15, when U.S. tariffs on about 156 billion dollars in Chinese goods are set to take effect, including holiday gift items such as electronics and Christmas decorations.

In a dinner speech in Beijing on Wednesday, Chinese Vice Premier Liu He said he was “cautiously optimistic” on a phase one deal, Bloomberg News said, citing people who attended the event ahead of a forum organised by Bloomberg LP.

Liu, China’s chief negotiator at the trade talks, separately told one of the attendees that he was “confused” about the U.S. demands, but was confident the first phase of a deal could be completed nevertheless, Bloomberg added.

Gaosaid he did not have more information to disclose beyond the fact that both parties would continue to communicate, and “outside rumors are not accurate.”

A former Chinese commerce minister said that both sides should return to the time when the trade war first started.

“We should return to the point of origin and cancel all tariffs,” Wei Jianguo said on the sidelines of the Bloomberg forum.

Wei said he was hopeful for a phase one pact, in light of the pressure on both the U.S. and Chinese economies as the trade war dragged on.

“Now, Trump himself is cognizant about the needs of the (upcoming U.S.) elections, and the U.S. economy has also suffered great losses,” he said.

“Under such circumstances, it is entirely possible to reach a phased agreement.”

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