Washington, Dec 9 (PTI) Flexible intellectual property and opening up more to foreign investment will help China to diffuse trade tension and enhance its economic stability, IMF's Chief Economist Maury Obstfeld on Sunday said.

China and the US are currently engaged in a trade conflict and have slapped tit-for-tat tariffs of hundreds of billions of dollars on each other's goods. The tariffs stem from the Trump administration's demands that China make sweeping changes to its intellectual property practices, rein in high-technology industrial subsidies, open its markets to more foreign competition and take steps to cut a USD 375 billion US goods trade surplus.

"One of the big issues in the trade disputes between China and trading partners is this area of intellectual property. And reforming that regime is a big to-do for the global multilateral order," Obstfeld told a group of journalists here.

Noting that China is increasingly a producer of new technologies, he said it is really important that this does not play out in a conflicting way as it will destabilise the entire global economy as well as the global politics.

As such, the IMF's top economist said, it is important "to entice China into a sort of global framework" by entering into multilateral negotiations in which Beijing changes some of its trading practices and there is also accommodation to some of its legitimate economic goals.

"Opening up more to foreign investment could benefit China greatly," he said.

Responding to a question, he said, it is a matter of algebra for China to overtake the US as the largest world economy if it keeps growing at the same rate.

The opening up of the Chinese economy in the late 70s had remarkable positive effects on China's standard of living, Obstfeld said, adding, "there is significant room for China to open up further" and play bigger role in ways that "might enhance not only growth, but also economic stability".

China, he said, should also move towards a more flexible currency. "It will be very important in helping the economy adjust and also to ultimately diffusing some of the trade tensions," he said.

After serving as IMF's Chief Economist for more than three years, 66-year-old Obstfeld is set to retire this month-end. Gita Gopinath, Indian American economist from the Harvard University, would replace him from the first week of January.

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