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    Yuan banknotes and US dollars are seen on a table in Yichang, central China's Hubei province on August 14, 2015

    Elevation of Reformist Chinese Official May Help Ease China-US Trade Friction

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    MOSCOW (Sputnik), Tommy Yang - The widely expected elevation of a reform-minded top Chinese official, who started a week-long visit to the United States Tuesday to discuss bilateral trade and economic relations, could help push forward market-oriented reforms in China further and help resolve economic discord with Washington, experts told Sputnik.

    Liu He, one of Chinese president Xi Jinping's top economic advisers, is expected to be tapped to take over the nation's key economic policy-making positions, including the vice premier overseeing the economy and the head of the People's Bank of China, US media reported citing unnamed sources. Liu is likely to be promoted during the upcoming key political meeting of the National People's Congress (NPC), China's annual legislative session, which begins on March 5.

    Liu, an economist who received a master's degree in public administration at Harvard's Kennedy School of Government in 1995, is widely viewed a trusted confidant of Xi, as both of them went to the same high school and their fathers were both purged during the Cultural Revolution.

    The Chinese Foreign Ministry confirmed on Monday that Liu was expected to visit the United States from Feb 27 to March 3 to discuss bilateral trade and economic issues.

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    Market-Oriented Reform

    The elevation of a reform-minded official like Liu, who also has a deep understanding of Western economic theories, could help pave the way for further market-oriented reforms in the country and address a key concern of Western nations such as the United States, which refused to recognize China's market economy status, Chinese experts suggested.

    "Liu He is a reformist official, who is good at putting economic theories into practice. He has done a lot of research and obtained rich knowledge on China's economic reforms. He understands macroeconomic theories and has a clear understanding of the current state of the nation's economic reforms. I believe he will unveil a lot of new economic reform measures once he is elevated. If he can become the vice premier, the key for him will be how to push China toward the true market-oriented economy," Hu Xingdou, a professor of economics at the Beijing Institute of Technology, told Sputnik.

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    The Beijing-based expert explained that whether China's economy is truly decided by the market has become a key concern from China's key trading partners in the West.

    "As of now, the United States, the European Union and Japan all refuse to recognize China's market economy status. Some even argued that China's economy is going backward toward 'planned economy.' How to change this situation? I believe Liu He has a lot of things he can do. For example, he could unveil measures to better protect private enterprises, allow the market to be the decisive factor and continue to promote free trade. He could also work to ensure foreign enterprises receive equal status as domestic companies and encourage more foreign investments in China," Hu said.

    In November 2017, the United States formally opposed the World Trade Organization's recognition of the Chinese economy as a market economy, in support of the EU in a dispute with China. Recognition as a market economy could help China avoid excessive anti-dumping duties on Chinese goods by prohibiting the use of third-country price comparisons.

    Liu's expected promotion came amid speculations that Chinese president Xi may seek to stay in power after his second term, after the Communist Party of China Central Committee proposed to remove restrictions in the Chinese constitution limiting each president to serve no more than two consecutive terms.

    The Chinese economist added that maintaining policy consistency in China can be helpful as long as the policy goes toward the right direction.

    "Consistency in policy, law and regulation could help create a good investment environment in China for continued economic growth. But it also depends on which direction the economic policy moves toward. If it goes backward toward a planned economic system and becomes more authoritarian, it's definitely something no one wants to see. If it moves toward a free market economy supported by democracy and the rule of law, the West and investors would also welcome such moves," he said.

    Structural Issue

    Despite Liu's rich knowledge in Western economic theories, there is little he could do to resolve the trade imbalance between China and the United States, which has been a major concern of Washington, the Chinese economist suggested.

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    "The trade imbalance between China and the United States is a structural problem. Developed countries like the United States mainly export their capital. Developing countries like China primarily export manufactured products. It's difficult to change this structure at once. I don't think Liu He has a solution to reduce the trade imbalances between the two nations," Hu said.

    The Chinese scholar argued that a trade deficit may not be completely a bad thing for the United States.

    "Under the current conditions, a trade deficit may not only bring negative impact on the United States. A trade deficit doesn't mean a total loss for Washington. After the United States exports its capital to China, it can take advantage of the country's natural resources and cheap labor, or even diverting the environmental pollution to developing countries like China. Over half of China's trade surplus against the United States comes from exports of products of US companies. The profit still goes to those US companies that invested in China for manufacturing. The United States benefited a lot from this, as it preserved both its natural resources and its environment," Hu said.

    The Beijing-based economist added that the foreign currency China accumulated from its trade surplus was mostly used to invest in US Treasuries.

    Policy Consistency

    After a brief honeymoon period in bilateral economic relations following Xi's first meeting with US President Donald Trump in Florida last April, Washington turned toward more hostile trade policies against Beijing, introducing steep tariffs on products China exports, including solar panels and washing machines. The Trump administration is also considering harsh tariffs on aluminum and steel, which China threatened to retaliate against.

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    Chinese scholars argued that escalating trade tensions between China and the United States came as a result of policy inconsistency from the US side.

    "China's economic growth model has not changed. But why it appears that trade relations between China and the United States started to change? That's because the US side changed. After Trump took office, US trade policies continued to fluctuate and have not had a clear direction even until today. For example, Trump initially cleared stated he wanted to withdraw from the Trans-Pacific Partnership (TPP) and the North American Free Trade Agreement (NAFTA). But recently, he expressed willingness to reconsider. His constant change of positions also happens in China-US trade relations," Zhao Xijun, a finance professor with the Renmin University of China in Beijing, told Sputnik.

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    The finance professor pointed out that he has not seen a similar official in the Trump administration like Liu, who has the rich knowledge of economic situations in both nations.

    "During the bilateral dialogue between China and the United States, if you have someone who is familiar with the direction of China's reform while having a deep understanding of the United States, it could lead to effective and smooth communication. Liu He is an official who has such experiences. It seems there's no official in the Trump administration with matching experiences about China," Zhao said.

    The Chinese expert stressed that when dealing with bilateral trade relations, both China and the United States need to follow the principle of reciprocity.

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    visit, tensions, trade, National People’s Congress, Xi Jinping, Liu He, United States, China
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