Chinese Vice Premier Liu He, right, gestures as US Treasury Secretary Steven Mnuchin, center, chats with Trade Representative Robert Lighthizer before they proceed to their meeting at the Diaoyutai State Guesthouse in Beijing on May 1, 2019. Photo: Andy Wong / AFP

Vice-Premier Liu He will go to Washington this week in a bid to salvage trade talks and stop a new economic Cold War from breaking out between China and the United States.

President Xi Jinping’s confidant has been Beijing’s point man during a grueling series of negotiations.

But round 11 of discussions was thrown into chaos at the weekend when US President Donald Trump threatened to increase tariffs by 25% on Chinese imports worth US$200 billion if Beijing refused to sign up to a detailed “enforcement mechanism.”

At one point, there were reports that China’s team would pull out of talks, but they were later dismissed by the Ministry of Foreign Affairs on Monday. Now, Liu has been confirmed as heading the party for truncated discussions on Thursday and Friday.

“Vice-Premier Liu He will visit the United States on May 9 and May 10 for trade talks at the invitation of senior US officials,” the Ministry of Commerce said in a statement on Tuesday.

The negotiations appeared to be in danger of unraveling earlier this week after Trump’s time-bomb tweet triggered an angry backlash from China’s state-owned media.

The official Communist Party newspaper, the People’s Daily, led the charge, warning the US to “not even think about” concessions.

“Things that are unfavorable to us, no matter how you ask, we will not take any step back. Do not even think about it,” the People’s Daily said in a commentary on WeChat.


Still, this latest news is bound to buoy markets after a mini-meltdown on Monday. Shanghai jumped 0.69% and Shenzhen component added more than 1.6%. Hong Kong was also slightly up before news of Liu emerged.

“The fact that China [is sending] a delegation to the US shows it is still willing to solve the dispute by negotiations regardless of what the US is saying,” Lu Xiang, an expert on China-US relations at the Chinese Academy of Social Sciences in Beijing, said.

“If the Trump administration follows through with the tariffs threats on Friday, I think it means the talks fall apart. We then need to be prepared for worse than worst,” he added.

Yet this remarkable chain of events was set in motion by the White House when Trump tweeted:

“For 10 months, China has been paying Tariffs to the USA of 25% on 50 Billion Dollars of High Tech, and 10% on 200 Billion Dollars of other goods. These payments are partially responsible for our great economic results. The 10% will go up to 25% on Friday. 325 Billions Dollars … The United States has been losing, for many years, 600 to 800 Billion Dollars a year on Trade. With China, we lose 500 Billion Dollars. Sorry, we’re not going to be doing that anymore!”

At the heart of the problem is Washington’s fears that Xi’s administration will try to wriggle out of an agreement and fail to carry through with promises to further open up markets and curb excessive state subsidies to China’s corporate juggernauts.

Vital issues

Intellectual property rights and cyberspying are other vital issues, which have proved sticking points when it comes to an all-encompassing policing accord.

Robert Lighthizer, the US trade representative and a key player along with Treasury Secretary Steven Mnuchin in talks, underlined those fears.

“Over the course of the last week or so we have seen an erosion in commitments by China,” he told a media briefing. “That, in our view, is unacceptable.

“We’re not breaking off talks at this point. But for now. .. come Friday there will be tariffs in place,” Lighthizer added.

For Liu, what will be said behind closed doors will be as crucial as the message he is likely to carry from his friend and boss Xi. But how far Beijing will go to stop another round of tariffs, which so far have been imposed on imports worth $360 billion in two-way trade, is questionable.

“At some point, the president is going to figure out that they’re not going to give him everything he wants,” William Reinsch, a trade policy expert at the Center for Strategic and International Studies, said.

Before then a resumption of the trade war would have serious implications from the global economy.

“Clearly the tensions between the United States and China are the threat for the world economy,” Christine Lagarde, the head of the International Monetary Fund, said in Paris, adding that recent “rumors and tweets” made an agreement less likely.

Over to you Mr Liu.

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