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Liu He

Liu He seeks European backup to help China weather US trade war

  • China’s top trade negotiator to visit Germany next week before Xi-Trump meeting at G20
  • Germany likely to be hit hard if US put tariffs on auto exports and, like China, has trade surplus with the US – but it shares some US concerns on China
PUBLISHED : Wednesday, 21 November, 2018, 6:02pm
UPDATED : Wednesday, 21 November, 2018, 9:19pm

China will be seeking to step up trade policy coordination with European nations when Vice-Premier Liu He visits Germany next week for financial talks, to help protect it as the trade war with the United States continues.

Liu, President Xi Jinping’s right-hand man in charge of economic policy and China’s top trade negotiator, will visit Germany from Sunday to Wednesday for the Hamburg Summit of China-Europe Forum.

Liu will meet Germany’s Vice-Chancellor and Finance Minister Olaf Scholz, the Chinese foreign ministry said. His three-day trip takes place days before an expected face-to-face talk between Xi and his US counterpart Donald Trump at the G20 summit in Argentina on December 1.

The Hamburg summit is a biennial high-level business conference to advance Chinese-European relations that began in 2004. China usually sends officials of vice-premier level or above to lead the delegation.

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This year, at a time of growing tensions between China and the US and uncertainty surrounding their trade war negotiations, China has moved to foster stronger relations with European countries in an attempt to counter US pressure.

Officials from China and the US are preparing for Xi and Trump to meet. The South China Morning Post reported on Sunday that the two countries’ trade war negotiation teams had decided to bypass planned talks in Washington and make Buenos Aires, which will host the G20, their location for discussions.

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Lu Xiang, a specialist on US issues with the Chinese Academy of Social Sciences, said China and the European Union were “sailing in the same boat” in the face of the Trump administration’s unilateralism and protectionism.

“It is very important for China to have policy coordination with the European Union and the bloc’s major members to defend the multilateral trading system,” said Lu.

“If China fails to resist US pressure, the EU will be the next one to fall.”

Trump has lashed out against Germany for its long-term surplus with the US, and Germany would be expected to be particularly seriously hit if the US imposed punitive tariffs on auto exports to the American market.

But Germany shares the US’ discontent over China’s market access restrictions and defects in intellectual property protection, and will avoid taking sides in the US-China trade war.

The open hostility – rarely seen at a global event – between Xi and US Vice-President Mike Pence over the weekend, during the Asia-Pacific Economic Cooperation (Apec) summit in Papua New Guinea, raised doubts over the prospect of any significant outcome from China-US trade talks in the short term.

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The US Trade Representative Office criticised China in an updated report on Wednesday from its 301 investigation – to determine whether Chinese practices on technology transfer, intellectual property and innovation unfairly impacted US commerce – saying China had not changed its “unfair, unreasonable and market-distorting practices”.

“The US may push for unfair Chinese trade practices to be the theme of the G20 summit and the confrontation may become more severe than what we saw at Apec,” said Shi Yinhong, a professor on international relations at Renmin University in Beijing.

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“With this all-out rivalry with the US, it is increasingly important for China to cement relations with other developed countries. It is necessary for China to talk to them.”

In the past two years, China has overtaken the US as Germany’s largest trading partner, German and Chinese statistics show. Germany has long been China’s biggest trading partner in the European Union, with a trade volume equivalent to China’s combined trade volume with Britain, France and Italy.

Beijing began to move closer to the EU and its core members when trade tensions with the US escalated in the summer. It allowed German chemical giant BASF to build and fully own a factory plant costing US$10 billion in southern China in the hope of enlisting Berlin’s support against Washington.