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‘We should not expect a happy ending’ in US-China trade war: expert

China is vowing to crack down on intellectual property theft, aiming to address a major hurdle in trade negotiations with the U.S. But one expert contends investors shouldn’t give too much credence to Beijing’s latest olive branch. 

“We should not expect a happy ending, frankly, because I think structurally, both countries are now embarked on a confrontational approach, and that's not going to change,” Kim Catechis, head of strategy at Legg Mason’s Martin Currie affiliate, told “The Ticker” on Monday. 

According to guidelines released by the Chinese government Sunday, officials are working to curb IP violations by 2022 and call for “speeding up the introduction of a punitive compensation system for infringements of patents and copyrights, and strengthening the protection of trade secrets.”

President Trump shakes hands with China's President Xi Jinping before a bilateral meeting on the sidelines of the G20 Summit in Osaka on June 29. (Photo by Brendan Smialowski /AFP via Getty Images)

“The best thing we can hope for here is the Chinese are looking for a way to give the Trump administration face — to give them an exit, an off-ramp, that shows that they've won something. Which is especially important given that this is an election year coming up,” Catechis said. 

This comes as China’s Ministry of Commerce noted that China’s top trade negotiator, Liu He, spoke with Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin over the phone earlier. The two sides are still working to solidify an initial trade deal, as factors like protests in Hong Kong and looming tariffs in December weigh on discussions between the world’s two largest economies. 

Catechis argues that “hardcore people on both sides” of the negotiating table effectively results in “less people willing to argue against the line.”

“In Beijing, because of that hollowing out of the different voices, they're now convinced that this is not about trade. This is about China growing in importance and the U.S. not liking it,” he said.

McKenzie Stratigopoulos is a producer at Yahoo Finance. Follow her on Twitter: @mckenziestrat

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