China reform promise set for cool Washington responseHeat Profit
One of Xi Jinping’s top economic advisers will be coming to Washington on Tuesday bearing promises of accelerating economic reforms in an effort to forestall a possible trade war with the US.
But Liu He, a politburo member who is set to assume responsibility for economic affairs next month, is likely to meet a frosty reception from a Trump administration preparing for a trade crackdown on China and increasingly sceptical of the value of economic dialogue with Beijing.
Mr Liu took a similar reform message to the World Economic Forum in Davos earlier this year at which he promised a series of “reform and opening surprises” that would exceed “international expectations”.
Among the measures Chinese officials are quietly touting is the further liberalisation of the banking, services and manufacturing industries and a significant loosening of foreign shareholding limits.
Chinese officials, who confirmed on Monday that Mr Liu would be in the US for discussions on trade and the economic relationship until Saturday, are also keen to stress that President Xi is eager to maintain positive relations with Washington.
The promises of reforms out of China have been made for a long time . . . and we haven’t seen China ready to embrace those reforms in any meaningful way
President Donald Trump has made it clear that he feels the same way but he sees the US’s trade deficit with China as an impediment to better relations.
“We’ve developed a great relationship with China, other than the fact that they’ve been killing us on trade for the last long period of time — killing us, absolutely killing the United States on trade,” Mr Trump told reporters on Friday. “As much as I like and respect — really respect — President Xi, we have to straighten out the trade imbalance.”
His administration, which includes longtime China hawks like US trade representative Robert Lighthizer, is now expected to roll out a series of actions in the coming months that some fear could provoke a trade war with Beijing. Those include proposed tariffs on steel and aluminium imports and an Investigation into China’s intellectual property practices that is widely expected to lead to tariffs and Investment measures.
The fear among some in the US agricultural and business community is that those measures could lead to retaliation by Beijing against companies operating in China or imports of agricultural products such as US soyabeans, which last year were worth some $14bn.
Mr Liu is considered one of China’s most able and ascendant economic emissaries.
At the annual session of China’s parliament, which opens on March 5, Mr Liu will replace Ma Kai as vice-premier with responsibility for financial and economic affairs, according to two people briefed on the upcoming leadership changes. Unlike Mr Ma, a conservative apparatchik who spent his entire career in China, Mr Liu studied at Seton Hall University and Harvard in the 1990s and speaks fluent English.
In addition to his financial and economic portfolio, people close to Chinese policymaking circles say that Mr Liu will also play a key role in Sino-US relations, potentially replacing Wang Yang as head of China’s team for its “strategic and economic dialogue” meetings with the Trump administration.
Despite Mr Liu’s reputation as both a reformer and one of Mr Xi’s most trusted economic advisers, the two men have delivered on very few of the bold economic and financial reform measures outlined by Beijing five years ago.
Mr Liu will be meeting with Trump administration officials like Mr Lighthizer who are increasingly sceptical dialogue with Beijing and are dismissive of past attempts at diplomacy.
The administration last year quietly suspended the annual Comprehensive Economic Dialogue with China.
In a report to Congress last month Mr Lighthizer declared that the US had “erred” in allowing China to join the World Trade Organization. “Since China’s accession to the WTO, the United States has repeatedly attempted to work with China,” his staff wrote in that report. “These bilateral efforts largely have been unsuccessful — not because of failures by US policymakers, but because Chinese policymakers were not interested in moving toward a true Market economy.”
Robert Holleyman, who oversaw trade discussions with China as deputy US trade representative in the Obama administration, said Mr Liu would likely face an uphill battle in his visit to Washington this week.
“The promises of reforms out of China have been made for a long time . . . and we haven’t seen China ready to embrace those reforms in any meaningful way,” he said. “I would be surprised if the Trump administration would accept that without having the Chinese actually deliver.”
Additional reporting by Sam Fleming in Washington