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Apple Daily: China’s Vice Premier Liu He and His Negotiation Position

Major Hong Kong newspaper Apple Daily recently published an analysis which senior Chinese journalist Lu Yue authored on China’s Vice Premier Liu He and his position on trade. Liu is currently the Special Envoy of President Xi Jinping and China’s Chief Negotiator for trade negotiations with the United States. Liu was a two-time student (1994 and 2002) at the Harvard Kennedy School, where he obtained his Master’s degree in Public Administration. Liu was also Xi’s economic adviser for ten years when Xi was the government official in Fujian Province. This background gives Liu the unquestionable justification to take the lead position in the on-going US-China trade negotiation. In the Chinese leadership domain, he is regarded as “half a Standing Committee Member” of the Communist Party’s Politburo.

In the current “trade war” with the United States, China’s top leadership did not step out and make any direct comment on any tactics. The ones making noise are the Ministry of Foreign Affairs, the Ministry of Commerce, Customs, and the Chinese media. A careful examination reveals that not all of these entities are in the domain that reports to Liu. Liu is essentially against taking on a full-blown trade war with the U.S. because it might result in a loss that could trigger a total collapse of the Chinese economy. Liu built his judgment on three factors: First is the fact that China did not fulfill the promises it made to the World Trade Organization (WTO). Second, China can sustain the trade war only to US$150 billion, which is the total amount that China imports from the U.S. The third factor is that the United States can find a substitute elsewhere for all goods that the U.S. imports from China, while most of the goods that China imports from the U.S. are critical at the life-line level. This is especially so in the high-tech product category. China, as an information society, may cease to function if the U.S. expands its export ban on ZTE to all Chinese buyers. It would be a better situation for China to accept Trump’s conditions and then use those as a driver to push much needed internal reforms.

Liu’s current negotiation strategy is “overall compromise coupled with partial discussions.” He is extremely good at working out convincing details in the numbers, which was the reason his 15-minute meeting with Trump got extended to 45 minutes. As an example, Liu offered US$60 billion worth of agricultural purchases when the U.S “ask price” was US$30 billion. China’s refusal to commit to $200 billion in trade deficit reduction was largely a PR show.

Source: Apple Daily, May 31, 2018