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00:00BEIJING, BUT GREAT TO HAVE YOU IN SYDNEY. ONE OF THE THINGS YOU SAY IS A WARNING THAT CHINA SHOULD TAKE TRUMP SERIOUSLY ABOUT WHAT? >> ABOUT BILATERAL TRADE. WE CAN TALK ABOUT COMPLICATED SUPPLY CHAINS, VALUE ADDED, BUT IN THE END, THE TRUMP ADMINISTRATION IS TAKING SO-CALLED SURPLUS COUNTRIES VERY SERIOUSLY. CHINESE ARE ON THE TOP OF THE LIST, FOLLOWED BY GERMANY AND JAPAN. MORE IMPORTANTLY, SOME PEOPLE HAVE ATTRIBUTED A VERY LARGE BILATERAL TRADE SURPLUS TO CERTAIN STATES, VERY PROTRACTED JOB LOSSES AMONG BLUE-COLLAR WORKERS, SO CHINA SHOULD TAKE TRUMP SERIOUSLY. HAIDI: DO THINK ON THAT INDICATOR A LOAN THAT THEY WERE LABEL CHINA A CURRENCY MANIPULATOR? >> I DON'T THINK THAT IS THE CASE. I THINK EVERYONE KNOWS THAT CHINA IS TRYING REALLY HARD TO KEEP THE RENMINBI EXCHANGE RATE STABLE. OTHERWISE TODAY'S EXCHANGE RATE WOULD HAVE BEEN SEVEN AGAINST THE DOLLAR, SO TRY NOT CHINA IS TRYING VERY HARD, SO I DON'T THINK CURRENCY MANIPULATION IS AN ISSUE. I THINK MARKET ACCESS IS AN ISSUE. THIS CHART IS A CORRELATION BETWEEN FOREIGN RESERVES AND THE YUAN. WE ARE IN AN ERA WHERE IT IS DOMESTIC FACTORS DRIVING POLICY, NOT THIS NEED TO DEVALUE FOR COMPETITIVENESS OR GLOBAL TRADE COMPETITIVENESS. >> NO, IT IS NOT ABOUT COMPETITIVENESS. IF YOU LOOK AT, FOR EXAMPLE, THE DATA FROM THE WTO, ACTUALLY COMPELLING EVIDENCE SUGGESTING CHINA'S MARKET SHARE, AUSTRALIA AND NEW ZEALAND INCLUDED, IS STAYING REMARKABLY STABLE, SO THAT SUGGESTS CHINESE PRODUCTS STAY COMPETITIVE, BUT AT THE SAME TIME, I BELIEVE RENMINBI -DENOMINATED ASSETS ARE EXTREMELY EXPENSIVE, SO IF YOU LOOK AT REAL ESTATE IN SYDNEY AND MELBOURNE, COMPARED TO BEIJING AND SHANGHAI, IT IS NO COMPARISON. SO THERE IS THIS STRONG URGE FOR CONSUMERS TO DIVERSIFY. THAT IS NATURAL. THAT FORCE IN THE MEDIUM-TERM WILL DOMINATE THE TRADE SURPLUS. HAIDI: I WAS TALKING WITH OUR BLOOMBERG INTELLIGENCE ANALYSTS ABOUT THIS CODEPENDENT RELATIONSHIP. IF YOU LOOK AT THIS OUR CHART ON THE BLOOMBERG, WE ARE OFF HISTORIC HIGHS WHEN IT COMES TO THE AMOUNT OF TRADE THE U.S. THOSE WITH CHINA AS A PORTION OF TOTAL TRADE, GLOBAL TRADE, BUT STILL VERY HIGH, 17% IN 2016. WHO NEEDS THE OTHER MORE? THIS POINT WHICH I THINK IS LOST AMONG TRUMP SUPPORTERS WHO WANT HIM TO GET TOUGH ON CHINA, THAT IS THE PART OF THE AMERICAN CONSUMER THAT WILL BE MISSING OUT ON THESE CHEAPER CHINESE GOODS COME AND THAT WILL HAVE ITS OWN NEGATIVE IMPACT ON THE U.S. ECONOMY. >> IT IS DIFFICULT TO SAY WHO NEEDS MORE. WITHOUT CHINA TODAY, IF YOU LOOK AT SHORT-TERM INTEREST RATES GLOBALLY, WE WOULD BE AT VERY DIFFERENT LEVELS. WITHOUT CHINA, I DON'T THINK REAL ESTATE PRICES IN SYDNEY AND MELBOURNE CAN SUSTAIN TODAY'S TITRATION BECAUSE INTEREST RATES WOULD'VE BEEN HIGHER WITHOUT CHINA, SO IT IS DIFFICULT TO SAY, BUT I DO THINK AT THIS POINT THERE IS A VERY IMPORTANT WORK BEING HIGHLIGHTED BY POLICY WONKS IN WASHINGTON DC, RECIPROCAL. ACTUALLY THAT IS EXACTLY WHAT CHINA WANTS TO DO IN THE LONG RUN, BUT IN THE SHORT-TERM, I DON'T KNOW WHETHER IS THERE A SENSE OF URGENCY. OR EXAMPLE, FINANCIAL SERVICES, HEALTH CARE, EDUCATION, ENTERTAINMENT AND SO I THINK

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Deloitte China's Xu Says Xi Should Take Trump Seriously

Xu Sitao, chief economist at Deloitte China, discusses the meeting between President Xi and President Trump and U.S.-China trade relations. He speaks to Bloomberg's Haidi Lun on "Bloomberg Markets." (Source: Bloomberg)

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