US-China relations

China’s top economic adviser Liu He still doesn’t know who to talk to in US about trade

Instability in the Trump team meant it was unclear who Liu’s counterpart would be during his trip to Washington, source says

PUBLISHED : Wednesday, 07 March, 2018, 11:32pm
UPDATED : Monday, 19 March, 2018, 12:09pm

A key mission for China’s top economic adviser when he visited the United States last week was figuring out who to talk to in the US administration about a looming trade war, but sources said chaotic changes in the White House hampered those efforts.

Liu He, right-hand man of President Xi Jinping, went to Washington in late February aiming to contain rising trade tensions between the two nations, but no breakthrough was reached – and it was not even clear who his US counterpart would be.  

“China doesn’t know whom they can talk to in [Donald] Trump’s administration. Neither do we,” said a source familiar with Liu’s trip.

Liu met US Treasury Secretary Steven Mnuchin, US Trade Representative Robert Lighthizer and White House economic adviser Gary Cohn while he was in Washington. 

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The source said Beijing had previously attempted to establish various points of contact within the Trump administration. They include Trump’s son-in-law Jared Kushner, Commerce Secretary Wilbur Ross and Mnuchin. But Kushner’s fate in the White House is uncertain after he lost his security clearance for top secret information, Ross has been marginalised and Mnuchin is largely involved with domestic issues, the source said.

And with Lighthizer, a China hawk, less interested in engaging with China, Beijing had been looking to Cohn, who was seen as the only globalist close to Trump. But on Tuesday, Cohn resigned over Trump’s plan to impose tariffs on steel and aluminium imports.

He is tipped to be replaced by Peter Navarro, a fierce critic of China, triggering further uncertainty over where the trade tensions will lead.

Liu was the second member of the Communist Party’s powerful Politburo to visit the United States last month, following Yang Jiechi, China’s top diplomat, who also sought to defuse escalating tensions between the world’s two largest economies.

A diplomatic source said China also tried to engage with Secretary of State Rex Tillerson, but it seemed he did not have Trump’s full trust. 

“China doesn’t know who has the president’s ear in Washington,” the diplomatic source said. “The Trump team is so unstable, and we don’t know who we should talk to.”

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Beijing’s efforts to repair the rift with the United States over trade were stymied ahead of Liu’s trip. China had planned to send a delegation of 40 people for the talks but had to reduce the number to 10 after the US objected.

Yet Chinese media reports portrayed the visit positively. Beijing Youth Daily on Wednesday quoted Liu as saying that both China and the US did not want a trade war and would continue to communicate. He was speaking in a panel discussion on the sidelines of the National People’s Congress in Beijing. 

Also on Liu’s agenda was getting the comprehensive economic dialogue restarted, but that too unsuccessful. The high-level talks to resolve economic issues were suspended by the US last year.

Observers said Washington had run out of patience with Beijing and would not restart talks unless China made immediate and concrete moves to open up market access, a commitment Liu repeated during the trip.

“Liu didn’t achieve his goals – a promise to restart the CED, to identify who his counterpart would be, or be given a list of demands. The American side apparently mentioned some problems that have to be fixed, but they weren’t meant to be a list of demands,” said Scott Kennedy, a senior fellow with Washington-based think tank the Centre for Strategic and International Studies.

“In Washington there is no one point person in charge of China policy, and there is no ongoing official dialogue process. The office in the Treasury Department that managed the CED does not exist any more,” he said.

But Kennedy added that the US executive branch did not have a sufficiently clear policy process to discuss options, adjudicate differences and make choices on China trade policy.

China ‘doesn’t want a trade war’ with US, as sides agree to more talks in Beijing soon

The Trump administration has labelled China as a strategic competitor and has been considering a wide range of penalties – including tariffs on Chinese imports and restrictions on its technology investment in the US – based on the findings of its investigation into China’s alleged intellectual property theft that are expected to be released in the coming months.

“Both sides are very self-confident in their positions relative to each other, both think the other is a paper tiger. The chances of this spiralling into a larger conflict are high. If the US wants to win the trade war, it should be not tough but smart,” Kennedy said.