Will China’s top economic aide Liu He arrive for US trade talks bearing gifts?

After US President Donald Trump concedes ground on ZTE ban, observers consider what Beijing has to offer in return

PUBLISHED : Monday, 14 May, 2018, 3:55pm
UPDATED : Tuesday, 15 May, 2018, 12:27pm

Beijing on Monday confirmed that its top economic official Liu He will arrive in Washington on Tuesday for five days of trade talks, with observers suggesting that he might be ready to offer US companies easier access to Chinese markets.

Vice-premier Liu, who is a trusted adviser to President Xi Jinping, will hold talks with US Treasury Secretary Steven Mnuchin during his visit, which runs until Saturday, Xinhua quoted foreign ministry spokesman Lu Kang as saying, confirming an earlier report by the South China Morning Post.

Confirmation of Liu’s visit came soon after an announcement made by US President Donald Trump on Twitter that he was working with Xi to help get Chinese telecoms company ZTE “back into business”. Washington last month banned all US companies from selling components to ZTE for seven years as punishment for it breaking an agreement on selling US goods to Iran.

The move by Trump was seen by observers as a concession that could generate good momentum for this week’s talks.

Spokesman Lu said Beijing “highly commends” the move and was “working closely with the US side on specific details” of easing the ban.

Wu Xinbo, director of the Centre for American Studies at Fudan University in Shanghai, said that by conceding ground on the ZTE issue, the US was showing its openness to finding a solution to the recent trade tensions.

“This is the US side showing its goodwill and hopes for some progress during Liu He’s visit,” he said.

For its part, the Chinese delegation was likely to offer ways to help reduce China’s trade surplus with the US, and provide easier access for American companies to its services, financial and technology markets, he said.

Lu Feng, director of the China Macroeconomic Research Centre at Peking University, said Beijing could even go so far as to give US companies the same rights on market access as domestic firms, and ease its rules on forced technology transfers.

“[But] In terms of the 2025 plan, the US must concede and recognise that China is going to continue with its industrial upgrading,” he said, in reference to Beijing’s “Made in China 2025” plan, a strategy for industrial modernisation launched in 2015.

ZTE could resume operations ‘within weeks’ following Trump’s pledge to help the company

During a visit to China earlier this month, as well as demanding a US$200 billion reduction in China’s trade surplus by the end of 2020, a seven-man US delegation led by Mnuchin asked Beijing to stop subsidising its Made in China plan.

While that visit failed to produce any concrete results, mostly because of divergent views on China’s industrial policy and exactly how to go about achieving a more even bilateral trade balance, hopes are high that Liu’s trip to Washington can bear fruit.

China may send ‘firefighter’ Wang Qishan to negotiate with US on trade

He will be accompanied on his visit by Minister of Commerce Zhong Shan, several deputy ministers from the commerce, finance and foreign affairs ministries, and representatives from the central bank, according to an anonymous source quoted in a Bloomberg report.

Beijing and Washington are facing a rapidly approaching deadline on a US plan to impose 25 per cent tariffs on US$50 billion worth of Chinese goods sold to America.

The Office of the US Trade Representative will hold public hearings on the proposal on Wednesday and Thursday, and the tariffs could come into force as early as May 22. That is also the date the US Treasury is expected to unveil its proposals for restricting Chinese investments in US high technology.

With Trump in the White House, don’t count on the US and China finding common ground 

Besides the trade angle, a report by US political media company Politico, quoting two people familiar with the issue, said Trump might have softened his stance on the ZTE ban because he sees Xi as a key player on North Korean affairs and wants the Chinese president’s support ahead of his upcoming summit with North Korean leader Kim Jong-un.

However, Shi Yinhong, director of the Centre for American Studies at Renmin University of China and an adviser to the State Council, said Trump might have overestimated the leverage Beijing has over Pyongyang.

“China doesn’t have much leverage over Trump in regards to the North Korea issue, especially when Kim Jong-un is just as eager to meet Trump,” he said.

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Nick Marro, an Asia analyst with The Economist Intelligence Unit, said Trump’s change of heart on the ZTE issue undermined his administration’s earlier position that the case was a violation of US export law.

That could, in turn, affect the credibility of future inquiries by US officials into Chinese investments, such as the US Department of Justice’s investigation into Chinese tech giant Huawei’s alleged violation of the Iran sanctions.