'Intelligent reformer': China's Liu He seeks a trade deal

Chinese Vice-Premier Liu He has managed months of tricky negotiations with US officials in an attempt to hammer out a pact.
Chinese Vice-Premier Liu He has managed months of tricky negotiations with US officials in an attempt to hammer out a pact.PHOTO: AFP

BEIJING (AFP) - China's top trade negotiator and Vice-Premier Liu He, a Harvard-educated economist, is putting his reformer credentials to the test in months of fraught negotiations with American officials.

President Xi Jinping's right-hand man on economic issues has managed months of tricky negotiations with US officials in an attempt to hammer out a pact.

On his current trip, Beijing described him as the "leader in charge of the China-US comprehensive economic dialogue" - a change from his title of Mr Xi's "special envoy" on his last trip to Washington.

The omission could allow Mr Xi to avoid having his name tied to any failure in the talks.

His task was made harder on Friday (May 10) when the US once again raised tariffs on a large portion of the goods China ships across the Pacific, reigniting tensions that Mr Liu had worked hard to dampen.

Mr Liu admitted he was "under pressure" as he arrived for the talks in Washington on Thursday.

"Under the current circumstances, raising tariffs is not a good way to resolve the problems, it is harmful to China, harmful to the US, and harmful to the world," Mr Liu said.

 
 
 
 

The long-winded negotiations have been rocky from the start.

Last spring, Treasury Secretary Steven Mnuchin and Mr Liu thought they had struck a deal, with Mr Liu saying they had reached a "consensus" and there would not be a trade war or new tariffs.

Weeks later, US President Donald Trump moved ahead with new tariffs - eventually hitting US$250 billion (S$340.60 billion) worth of imports from China - leading many observers to say it damaged Mr Liu's political standing.

Beijing fired back with tariffs on most US imports.

Mr Liu is "intelligent and diligent and throws himself into his work", said Dr He Liping of Beijing Normal University, who collaborated with Mr Liu for nearly 20 years as a member of the Chinese Economists 50 Forum, a think-tank of liberal economists.

The negotiations have carried on for 11 rounds of high-level face-to-face talks, with the 67-year-old Mr Liu and his American counterparts following up on video calls.

Chinese Commerce Minister Zhong Shan described the talks as "very difficult and taxing" with both sides working "day and night".

But this week, Mr Trump accused Beijing of backtracking on already-agreed commitments.

Washington wants far-reaching changes to the Chinese economy, such as subjecting state-owned enterprises (SOEs) to market principles and reducing their massive subsidies.

While Mr Liu has indicated he favours such reforms, he likely faces deep resistance from entrenched interests in Beijing.

"Executives at state-owned enterprises are officials. Today you're manager of a central SOE, next year you're vice-governor of Shandong province," explained economist Sheng Hong.

"SOEs are their interests, they can move to one and make lots of money. Why would they want reform?"

KEYNES ADMIRER

Dr He Liping described Liu as a "liberal economist".

"I've heard him bring up Joseph Alois Schumpeter, Walt Whitman Rostow, John Maynard Keynes many times and I believe he admires them," said Dr He.

Schumpeter is best known for his theory of "creative destruction" and defence of capitalism for fostering entrepreneurship and innovation, Rostow for developing a model of economic growth, and Keynes for ideas about a proactive role of government in supporting the economy.

 

In the 1990s, Mr Liu was a visiting scholar at Seton Hall University in the US and subsequently earned a master's degree from Harvard's Kennedy School.

A former Harvard classmate remembered Mr Liu as "a fairly quiet, self-contained, hard-working student".

"Clearly, he enjoys the trust of General Secretary Xi," China expert Tony Saich of Harvard's Kennedy School said last year.

"Personal relations and trust are very important in Chinese politics," he said.

PUSHING REFORMS

In May last year, after he thought he had a deal to avoid tariff hikes, Mr Liu said "using opening up to push reform and development is a very important strategy for us".

Mr Sheng Hong, a fellow member of the Chinese Economists 50 Forum, said Mr Liu meant that external forces like the trade war can be used to push domestic reforms.

"He is a liberal economist, but he's in the government, so he is not outspoken like us," Mr Sheng said.

US Trade Representative Lighthizer initially agreed.

"I think you have to start with the proposition that there are people in China who believe that reform is a good idea. And you have to believe that those people are at a very senior level," Mr Lighthizer said to National Public Radio this spring, in an apparent reference to Mr Liu.

Dr He Liping said Mr Liu would be able to get a deal, noting "he has always been politically minded".