China economy

New big role for trade war negotiator Liu He on tech panel as China bids to strengthen its hand

Vice-premier named deputy head of revamped policy committee in latest evidence of the growing importance of technology to the Chinese government

PUBLISHED : Thursday, 09 August, 2018, 8:02pm
UPDATED : Friday, 10 August, 2018, 6:17am

China’s top trade negotiator Liu He has been given another potentially influential position, on the country’s technology development committee, showing the leadership’s growing trust in him despite escalating tensions with the US.

The State Council, China’s government cabinet, has reorganised a high-level policy group on science and technology and assigned its deputy leadership to Vice-Premier Liu He, one of Chinese President Xi Jinping’s most trusted advisers.

Mainland and Hong Kong tech shares rose on Thursday amid hopes that the revamping of the technology leading group will mean more support for the sector.

Liu now has four top economic management titles, including leading trade talks with the United States, heading the powerful Financial Stability and Development Committee that manages China’s financial and economic risks, and leading the long overdue reform of state-owned corporate enterprises.

The new position further increases Liu’s influence in the government, which could give him more leverage in any future talks with US President Donald Trump’s administration.

Trump’s escalating trade sanctions are aimed at the hi-tech industries that are the focus of the Chinese government’s “Made in China 2025” plan, which the US argues benefits from unfair government subsidies and non-financial support.

It is unclear what effect Liu’s appointment may have on China’s industrial policy in trade talks with the US, according to Ether Yin, an partner from Beijing-based research firm Trivium China.

“On one hand, Liu, as a technocrat, has always been involved in making industrial policies to support industrial growth. He is not going to sacrifice that for a deal with the US,” Yin said.

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“On the other hand, even if he wants to make some sort of concession as China’s point man on trade, it’s not totally up to him to decide and won’t easily win support from higher up.”

To some extent, Liu’s new role was anticipated by observers. On April 3, he visited the Ministry of Science and Technology, listening to reports from the top science and engineering academies and reminding Chinese scientists of the “extreme significance” of science and technology in China’s long-term strategic plan.

Over the past two decades, China’s technology sector has been of lesser importance in Communist Party politics. Liu’s presence has underlined the sector’s upgraded significance in the central government’s agenda.

The National Science, Technology and Education Leading Group in the State Council has traditionally taken charge of developing the country’s major policies on science, technology and education. An official statement released on Wednesday said education had been removed from its remit.

“The committee renaming shows that Beijing is attaching much importance to science and technology, particularly given the ongoing trade disputes between the US and China and the US’ restriction of China on hi-tech development,” said Hu Xingdou, a Beijing-based economic analyst.

“Under such circumstances, it was necessary to create a separate science and technology leadership group to better coordinate and improve innovation.”

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As the trade war continues, China is rethinking how to eliminate its technology gap with the US in a range of industries.

Some Chinese scholars argue that state media has oversold the country’s technological achievements and goals, and so fuelled concerns in the West. Beijing’s plan for industrial modernisation emphasising hi-tech industries, known as “Made in China 2025”, has become the primary target for Trump’s protectionist moves.

Lately, Beijing has begun to play down its technological ambitions in public, with muted references in Chinese media coverage. At a half-yearly briefing on the country’s industrial development late last month, Huang Libin, spokesman from the Ministry of Industry and Information Technology, said “Made in China 2025” was a long-term strategy that needed to be viewed “objectively” by the global community.

Beijing continues to play down ‘Made in China 2025’, saying world should take ‘objective’ view

Hu said it was vital for China to revamp its scientific and technological work to make the use of funds less wasteful and keep research more closely connected with real-life applications. “China’s science and technology research system has a series of problems,” Hu said. “Only by conducting a top-down reform can China manage to secure core technologies instead of leaving them to other countries.”

The National Science and Technology Leading Group was first set up in 1982 to discuss long-term plans for developing Chinese science and technology programmes, under the reform and opening up policy introduced by Chinese paramount leader Deng Xiaoping. The panel added education to its policy mandate in 1998.