UPDATE 2-Still hope for U.S.-China deal this year - U.S. official

(Adds comment and background on timing of Hong Kong bill)
By Steve Scherer
HALIFAX, Nova Scotia, Nov 23 (Reuters) - United States
national security adviser Robert O'Brien said on Saturday that
an initial trade agreement with China is still possible by the
end of the year, but warned Washington would not turn a blind
eye to what happens in Hong Kong.
The comments add to growing worries that a Chinese crackdown
on anti-government protests in Hong Kong could further
complicate the efforts by the United States and China to end a
prolonged trade war that has roiled global markets and undercut
global economic growth forecasts.
"We were hoping to have (a phase one) deal done by the end
of the year. I still think that's possible," O'Brien told
reporters at a security conference in Halifax.
"At the same time, we're not going to turn a blind eye to
what's happening in Hong Kong or what's happening in the South
China Sea, or other areas of the world where we're concerned
about China's activity," he said.
He said that he hoped district elections in Hong Kong would
proceed without violence. "That would be a good sign," he said.
President Donald Trump on Friday said he had told Chinese
President Xi Jinping that crushing the Hong Kong protesters
would have "a tremendous negative impact" on efforts to reach an
accord to end a 16-month trade war.
He has been vague about whether he would sign or veto U.S.
legislation to back protesters in Hong Kong, and boasted that he
alone had prevented Beijing from crushing the demonstrations
with a million soldiers. O'Brien said he had not spoken to Trump on Saturday about
his decision on whether to sign the Hong Kong human rights bill
and did not know what he would do, but noted that the president
had until early December to decide. The legislation will
automatically become law on Dec. 3 if Trump opts to do nothing.
"I think the bill passed with a pretty significant majority,
so I'm sure that's something the president is taking into
consideration," O'Brien said.
Asked what would be the reaction of the United States if
China cracked down hard on the protests, O'Brien said on
Saturday: "I'm hoping that doesn't happen. We've already seen
too much violence in Hong Kong."
"The real question is what is the world prepared to do about
China if there is that sort of a crackdown? The United States
will do its part," he said.
U.S. Treasury Secretary Steven Mnuchin had said in October
that U.S. and Chinese trade negotiators were working on nailing
down a "phase one" trade deal text for their presidents to sign
in November. But the deal's completion could slide into next year, trade
experts and people close to the White House said this week, as
Beijing presses for more extensive tariff rollbacks, and
Washington counters with heightened demands of its own.