Liu He has an unenviable task as China’s point man in trade talks with US – but he’s not leaving

Harvard-educated economist has already made two unsuccessful trips to Washington but will continue to lead the negotiations, source says

PUBLISHED : Tuesday, 26 June, 2018, 10:34pm
UPDATED : Wednesday, 27 June, 2018, 3:44pm

As it tries to head off a trade war with the United States, China is dealing with a long list of officials who don’t always see eye to eye, including US President Donald Trump, his trade adviser Peter Navarro, Treasury Secretary Steven Mnuchin and Commerce Secretary Wilbur Ross.

But no matter who is on the American side of the table, they are always sitting opposite Chinese Vice-Premier Liu He, a Harvard-educated economist and Beijing’s point man at the trade talks.

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After two unsuccessful trips to Washington in the past five months, Liu remains central to the negotiations. And as tensions escalate between the world’s two biggest economies, few would disagree that Liu has been handed a poisoned chalice.

At this stage, there is little sign he will be able to prevent the first round of US tariffs on US$34 billion of Chinese imports from taking effect next week.

But few doubt that Liu – who was once referred to by President Xi Jinping as “very important to me” – will have any trouble holding onto his job as China’s “economy tsar”.

The agency he heads – the General Office for the Central Financial and Economic Affairs Commission – is and will remain the sole body leading the talks, according to a source in Beijing with knowledge of the matter, who declined to be named because he is not authorised to speak publicly about it.

The powerful commission is directly headed by Xi, with Liu in charge of the general office that runs its daily operations.

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“Liu He puts together the team for the trade talks, choosing members from different ministries, and he leads those talks,” the source said. “It’s a kind of institutional arrangement” that will not change no matter whether the talks go well or badly, the source said.

It is not the only tough task handed to the vice-premier in the past two months. He was China’s top representative to meet European Commission Vice-President Jyrki Katainen in Beijing on Monday, when the two sides agreed to set up a working group to revamp the World Trade Organisation to counter US unilateralism.

Last week, Liu joined Xi at a meeting of foreign business executives – including from UPS, Pfizer, Cargill, Prologis and Goldman Sachs – at which the president urged the multinationals to help fight “protectionism”.

Liu also recently took the helm of a working group under the State Council, China’s cabinet, intended to steer the growth of small and medium-sized businesses.

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But as the game of economic chicken gets closer to a critical point, observers and the media have flagged the idea of China sending in Vice-President Wang Qishan – the former top graft-buster known as the president’s trusted “firefighter” – to negotiate with the US.

One of Xi’s close allies, Wang is known for his connections among political and business elites in America that were forged when he was Beijing’s point man during trade talks a decade ago.

The source in Beijing dismissed the suggestion, however, saying there was no plan to send Wang for further talks.

Asked on Friday whether Wang could be heading to Washington, foreign ministry spokesman Geng Shuang said he “had no knowledge of the matter”.

After the first round of talks in Washington in March, Liu told lawmakers that the two sides had agreed “not to fight a trade war”.

But two weeks later, Trump signed an executive memorandum to impose retaliatory tariffs on up to US$60 billion of Chinese imports.

Liu again returned with good news after meeting Trump during a second trip to the US in May, saying Beijing and Washington had agreed on a truce.

A month later, Trump confirmed his plan to slap punitive tariffs on Chinese products that “contain industrially significant technologies”, imposing 25 per cent duties on US$50 billion worth of imports from China.

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Economics professor Yuan Gangming from Tsinghua University said that although the negotiations had not been successful, it was not because of Liu.

“We’ve seen progress after each round of talks, but China cannot deal with Trump when he does not keep his word,” Yuan said.

“Liu has shown flexibility and a cooperative working style during the talks, which I think is the direction agreed on by China’s top leadership.”