China's Xi says he wants to work out initial trade deal with U.S.

TRADE WAR - BEIJING. China wants to work out an initial trade pact with the United States and has been trying to avoid a trade war, President Xi Jinping said on Friday, but is not afraid to retaliate when necessary.

Economists warn that a prolonged dispute between the world's two largest economies is elevating risks to the global economy by disrupting supply chains, curtailing investment and curbing business confidence.

"We want to work for a 'phase one' agreement on the basis of mutual respect and equality," Xi told representatives of an international forum, according to a pool report.

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"When necessary we will fight back, but we have been working actively to try not to have a trade war. We did not initiate this trade war and this is not something we want."

Xi was responding to questions from representatives of the New Economy Forum organised by Bloomberg LP at the Great Hall of the People in Beijing.

Global financial markets retreated this week on fresh fears that the trade talks could flounder, with U.S. President Donald Trump expected to sign into law two bills backing protesters in the Chinese-ruled city of Hong Kong.

Completion of a phase one deal could slide into next year, trade experts and people close to the White House have told Reuters, with Beijing asking for more extensive tariff rollbacks and Washington countering with increased demands of its own.

Delays would only bring more trouble, said Fred Hu, founder of China-based global investment firm Primavera Capital Group.

"The longer the time it takes, the more variables are there, such as the Hong Kong issue," Hu told Reuters on the sidelines of the Bloomberg forum.