Ken Jarrett on China's trade tactics
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SHANGHAI—China’s point man on trade talks with the U.S., Vice Premier Liu He, said external pressure serves his nation’s long-term interests, providing rare insight into how he frames the high-stakes tussle between the world’s two biggest economies.
Mr. Liu told a financial forum Thursday that such pressures, which he didn’t specify, are spurring China to create stronger domestic capital markets and more innovative industrial supply chains while making financial risks and domestic consumption high priorities. He described those as welcome trends in China’s transition “from being big to being strong” and said they would make for a “steady and balanced economy.”
During his presentation at Shanghai’s Lujiazui Forum, the 67-year-old technocrat didn’t refer directly to the U.S. or the trade talks that he has led. His arguments about China’s economic wherewithal dovetailed with Chinese officialdom’s assertion that Beijing can weather a trade fight it sees as having been started by the U.S.
Known for pro-market economic viewpoints, Mr. Liu has spent his career in the background of internal debates over China’s direction. That profile made him at times seem an odd choice as frontman for the highly politicized trade talks, though he is trusted by President Xi Jinping, a boyhood friend.
During the trade talks, Mr. Liu has occasionally delivered sound bites to China’s state-run media, but the fluent English speaker has said little publicly. After talks appeared to reach an impasse a month ago, Mr. Liu gave an interview to Chinese media, denying U.S. accusations that China scuttled the talks by backtracking on previously agreed terms. Since then, he has resumed his usual low profile.
Mr. Liu is no doubt smart and well-positioned to engage with Americans, said Kenneth Jarrett, senior adviser at Albright Stonebridge Group in Shanghai: “The question is whether he is sufficiently a political animal” to do a deal acceptable to President Xi and other top leaders.
From the stage Thursday, facing China’s chief banking, securities and currency regulators, Mr. Liu spoke confidently as he aimed a laser pointer at complex economic charts. “We can clearly see that structural changes are taking place,” he said, sounding professorial.
China is no longer a nation dependent on exports, he said, but a domestically driven economy featuring a sizable middle class and what he called the largest growth market in the world, presenting “huge opportunity for companies around the world.”
He lingered on a chart that showed how in the past decade China’s balance of payments—the difference between payments going out and coming into the country—slid to 0.4% of gross domestic product from around 10%. The decrease means China is buying nearly as much abroad as it is selling, a counterpoint to President Trump’s view that the country has little appetite for imports.
“The green line is on a steady decline,” he said. “Our imports are rising.”
The talk displayed Mr. Liu’s analytical style, a retired Asian central banker said. “It’s from here,” he said, pointing to his head. “It’s him, not the party line.” Albright Stonebridge’s Mr. Jarrett, who wasn’t at Thursday’s talk, said several friends forwarded photos of Mr. Liu’s slide presentation by WeChat .
Mr. Liu urged economists to ignore China’s monthly economic indicators, which have deteriorated during the trade fight, and consider how the transition would ultimately force the nation onto a stronger footing. “We must set our eyes on the big picture, the dominant trend,” Mr. Liu instructed with another wave of the laser.